It is never a good idea to try to hide assets when you file for bankruptcy. In exchange for having your debts “discharged” or wiped out, you must list on your bankruptcy papers everything you own and all your debts. If you do not fully disclose your assets, you won’t be entitled to a discharge. But this is just the tip of the iceberg – you might also be subject to criminal penalties, and won’t be able to discharge those debts in subsequent bankruptcies.
(To learn more about issues to consider when filing for bankruptcy, see our Filing for Bankruptcy area.)
If you fail to list some of your assets or property on your bankruptcy papers, and the trustee finds out, here’s what might happen.
You won’t be able to discharge your debts. If you hide assets from the bankruptcy court, you are not entitled to receive a discharge. If you don’t receive a discharge, you will continue to owe all of the debt that you were trying to get rid of by filing for bankruptcy.
This does not mean that your bankruptcy case will be dismissed. You will still be in bankruptcy. The property you are not allowed to keep under the law will still have to be turned over to the trustee and sold to pay your creditors. The only difference is that you will continue to owe any amounts that are not paid in full through the bankruptcy.
The trustee can revoke your discharge. If the trustee finds the hidden assets after you receive your discharge, the trustee can ask the court to “revoke” or take back your discharge. The trustee can do this at any time before the case is closed or, even after the case is closed, up to one year after the date your debts were discharged.
You cannot discharge those debts in subsequent bankruptcies. The debts that you list in any bankruptcy where your discharge was denied or revoked for hiding assets will also not be discharged in any subsequent bankruptcy filing.
You could face criminal charges. Even worse, you could be charged criminally. You sign your bankruptcy schedules listing your assets under penalty of perjury, representing that they are true and accurate. The penalty for making a false statement or concealing property is a fine of up to $500,000 or imprisonment for up to five years, or both.
If the bankruptcy trustee discovers that you have hidden assets, the trustee will file a lawsuit (called an adversary proceeding) in the bankruptcy court. If the court finds you have failed to list or have concealed assets with the intent to hinder, delay or defraud creditors, it will deny your discharge.
To learn more, see our page on how the bankruptcy trustee will find hidden assets.
There are many ways people try to hide assets in bankruptcy proceedings. These include:
Being completely careless about how the schedules are filled out (signing the schedules in blank, for example, so that someone else can fill them out afterward) or not disclosing a transfer of assets which took place within the year prior to the bankruptcy filing may also be considered hiding assets.
There are some assets which might be easy to forget about when you are filling out your bankruptcy schedules. These include assets which you have not yet received, or assets which you might be entitled to keep under the law. If you don’t list assets that the law allows you to keep, you might not be allowed to claim your right to keep those assets once they have been discovered. Some examples of assets you might forget to list are:
The bankruptcy trustee appointed to review your case is skilled at looking for any sign of hidden assets. The trustee might find hidden assets by any of the following:
If you do make an honest mistake and inadvertently leave something out of the bankruptcy schedules, as soon as you realize the mistake, immediately file papers to correct the mistake and disclose the asset. The court will not deny or revoke your discharge if the circumstances show that your failure to disclose the asset was not done with the intent to hinder, delay or defraud creditors. Taking corrective action before the omission is discovered by others will show that there was no intent to hinder, delay or defraud.