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When Are Changes To The Bankruptcy Petition Prohibited?

Posted By admin || 24-Sep-2010

When Are Changes To The Bankruptcy Petition Prohibited?Federal Rule of Bankruptcy Procedure 1009 typically gives a debtor the right to amend their schedules any time before the bankruptcy case is closed. The bankruptcy rule reads "a voluntary petition, list, schedule, or statement may be amended by the debtor as a matter of course at any time before the case is closed. The debtor shall give notice of the amendment to the trustee and any entity affected thereby." However, the exception to this rule is when the amendment of the bankruptcy petition is done in the bad faith.

Below a couple of examples of when an amendment to your bankruptcy petition may be disallowed by the bankruptcy trustee:

  • If the debtor failed to disclose some assets in the initial bankruptcy petition and only decided to disclose the assets when it became apparent that it would benefit them.  For example, if the debtor had a fully paid for vehicle and failed to disclose this in their initial bankruptcy filing, they may want to amend their bankruptcy to include the vehicle.  But if they attempt to amend their bankruptcy schedules and claim the vehicle as an exempt asset after it becomes clear that the asset was going to be discovered and seized, the bankruptcy trustee may decide to disallow the amendment of the bankruptcy petition to include the vehicle.
  • Another example of a change a debtor might attempt to make to their bankruptcy schedules that could be disallowed if done is bad faith is the illegal pre-bankruptcy asset transfer. If the debtor has made an asset transfer to a friend or family member before filing bankruptcy and failed to disclose it initially but decides to disclose it once a creditor discovers the transfer, the bankruptcy trustee may disallow the amendment.  While the debtor's illegal asset transfer will definitely be revealed, the debtor will not be allowed to escape the consequences of their illegal pre-bankruptcy transfer by hurriedly amending their bankruptcy filing simply because it was discovered by a creditor.
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