We've talked quite a lot about hiding assets in bankruptcy and how doing so can end with the denial of a debtor's bankruptcy discharge. However, it is important to note that simply hiding assets is not enough to compel the bankruptcy court to deny a discharge. When denying a debtor's bankruptcy discharge there must be evidence of fraudulent intent.
What Does Denial Of Bankruptcy Discharge Mean Exactly?
Well let's give a few examples:
If a debtor filing bankruptcy decides to withdraw cash from their bank account in the months before their bankruptcy filing with the intent of hiding the money from creditors then there is fraudulent intent. On the other hand, if that same debtor withdrew the money because this is what they always do because they like to keep cash on hand just in case of an emergency, then there is no fraudulent intent. In one case the debtor has an intention to cheat creditors and in the other, the debtor simply is doing what they always do with some other intention which is not malicious.
Even if a debtor transferred assets to friends and family right before filing bankruptcy, fraudulent intent is not automatically assumed. That doesn't mean that the bankruptcy court won't demand that the assets are returned to the estate, because they will make that demand; but what it does mean is that if they want to deny the discharge they must prove that the debtor intended to defraud the creditors. Some debtors make these family/friends asset transfers because they are honestly trying to repay creditors and aren't aware of the fact that they cannot favor their loved ones over other creditors and in this case there is not fraudulent intent.
Bankruptcy debtors who do hide assets or make illegal transfers will be required to return those assets to the bankruptcy estate even if they are not denied their bankruptcy discharge.
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