When filing bankruptcy, the bankruptcy court requires that the debtor list ALL of their assets and all of their liabilities in their bankruptcy petition. The debtor must not only list his/her assets but they may also be required to list the replacement value of certain assets. This is often where debtors run into trouble. They might forget to list the asset or they might misstate the value of the asset. Forgetting to list an asset in your bankruptcy case can make it appear that you are hiding the asset and attempting to defraud the bankruptcy estate. Misstating the value of an asset can give the same impression and could jeopardize your ability to use your exemptions to protect the asset. So what happens when the bankruptcy court discovers that an asset was not listed or that the value of the asset was stated incorrectly?
- The bankruptcy trustee may decide to investigate why the asset was not listed or why the value of the asset was misstated. This bankruptcy trustee investigation could include depositions and interrogations of the debtor by the bankruptcy trustee. Not to mention the added expense and stress for needing to work with your bankruptcy attorney to navigate through the process.
- If the bankruptcy trustee is confident that the debtor is purposely trying to manipulate the bankruptcy court by misstating the value of an asset or by hiding assets from the bankruptcy estate, he/she could decide to bring a lawsuit against the debtor in an effort to dismiss their bankruptcy case or to deny the debtor their discharge.
The best way to avoid these nightmare scenarios is to make sure that you list even the most trivial assets in your bankruptcy petition and don't leave anything out. Also, work with your bankruptcy attorney to come up with estimated values for assets that are as accurate as possible.