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Failing To Disclose Financial Windfalls Could Land You In Trouble

Posted By admin || 10-Apr-2009

There seems to be a never ending stream of these types of cases, a debtor in a Chapter 7 Bankruptcy case (Hendricks, Susan D.; In re) hides a life insurance windfall and may face sanctions and contempt of court.

The details of the bankruptcy case:

The Chapter 7 debtor's schedules indicated that she owned minimal assets. However, her schedules did not disclose that her father had died a few weeks earlier and that she received $115,280 from his life insurance policies. The debtor disclosed this information at the Section 341 meeting and promised to amend her schedules to disclose this asset. The trustee also declared that the case was an asset case. Despite the debtor's promise, she never amended her schedules. The trustee responded by asking the court to deny the debtor's discharge.

The trustee filed a pro se answer and asked the court to dismiss her case. Although she eventually attended a deposition, the debtor continu¬ally refused to provide full information regarding the life insurance. Finally, after the debtor's discharge was denied, she testified about what happened to the money. The court noted that two years had passed since the debtor filed for bankruptcy and cashed the checks to collect the insurance money. If she had complied with the law initially, she could have paid all her bills and had some money left over. Instead, the debtor hid the money and failed to account for it.

It is actions such as this debtor's that can land a person in deep trouble with the bankruptcy court. Not to mention the amount of leverage this type of action could possibly give creditors if they decided to file a lawsuit against her. If you are filing for bankruptcy you MUST disclose all assets including windfalls such as a life insurance payout, lottery win or lawsuit judgment in your favor.

Disclosing asset information will only work in your favor, especially if you are working with an experienced bankruptcy attorney who can utilize bankruptcy exemptions to protect your assets to the fullest extent of the law. Do not make the mistake of this debtor by putting yourself into deeper trouble by not fully disclosing your assets during bankruptcy.

Categories: Bankruptcy
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