Properly listing your assets in bankruptcy is critical.  A debtor’s failure to disclose or significantly undervalue assets in the bankruptcy Petition and Schedules can have serious consequences. Courts have consistently held that debtors have an absolute duty to report whatever interest they have in property even if they believe their assets are worthless or are unavailable to the bankruptcy estate. At a minimum, a failure to report an asset may mean the filer loses the asset but this isn’t a worst case scenario. In some cases, the court may outright deny a discharge and dismiss the bankruptcy case. If a bankruptcy discharge is denied, the debtor will never be allowed to file again and discharge the listed debts.

Here are some real life examples of failures to properly list assets and the consequences.

• A debtor failed to list a potential lawsuit. The debtor lost the cause of action and was unable to sue after the bankruptcy.
• A Chapter 7 petitioner didn’t report an insurance claim he had against his insurance company.  He lost the right to collect the insurance proceeds.
• The debtor didn’t list assets and, consequently, didn’t exempt them. The non-exempt assets were turned over to the trustee.
• A bankruptcy filer didn’t list money owed to him by corporations that he owned. The debtor’s case was dismissed and he was denied a discharge.
• Where a Chapter 13 debtor failed to properly explain why he had $72,000 deposited into his bank account eight days after filing for bankruptcy, a discharge was denied.
• A debtor undervalued his interest in a corporation and the court found that he purposefully hid assets. The case was dismissed and a discharge was denied.
• A petitioner failed to list significant assets in his bankruptcy petition. The debtor sought to dismiss the case. The court denied his request to dismiss the case and ordered the seizure of the undisclosed assets for liquidation and distribution to his creditors.

As you can see, there are serious consequences for concealing, undervaluing or failing to list assets. In an absolute worst case scenario, a debtor can be prosecuted for bankruptcy fraud and, if convicted, may face fines and prison. When you disclose your assets to your attorney, think as expansively as possible about all property rights you may have. If your grandma put your name on her house to avoid probate, then you have an interest in real estate that must be disclosed. Just because you don’t feel like you own it, if your name is on the deed, you do. If your assets don’t make you a good candidate for bankruptcy, then don’t file. But when in doubt, disclose, disclose, disclose.

“U” also stands for:

• U.S. Trustee
• Unauthorized practice of law 
• Underwater
• Underwater
• United States Trustee
• Unsecured
• Upside down vehicles

Chris McAvoy is a Taylor, Michigan attorney and consumer bankruptcy lawyer who helps people file Chapter 7 and Chapter 13 Bankruptcy. To find out more about bankruptcy, click here for contact info. We help people in Taylor, Allen Park, Southgate, Lincoln Park, Riverview, Trenton, Flat Rock, Wyandotte, Brownstown, Belleville, Dearborn, Dearborn Heights, and the Downriver, Michigan area.