Disclosure of Assets in a Bankruptcy: How Accurate Should You Be?
In a recent case in the Eastern District of Kentucky, the Judge found that debtors who failed to properly disclose their assets were not entitled to a discharge of their debts in bankruptcy. U.S. Trustee v. Haeberle, 08-10374, AP 08-1016.
In this case, which was not filed by our office, the debtors listed in their schedules “miscellaneous jewelry” valued at $10,000.00. The Trustee discovered that this was a misrepresentation by reviewing the debtors’ homeowner’s insurance policy which listed jewelry at $105,925.00 and home furnishings valued at $14,819.00. The Trustee required the debtors to turn over a list of all the items covered under the homeowner’s insurance policy. In addition, the Trustee conducted a deposition of the debtors who testified that it was their best belief that the jewelry was not worth more than $10,000.00.
The Trustee conducted an auction of the items and received $50,400.00 for the jewelry alone. The Trustee then filed a nondischargeability action against the debtors pursuant to 11 U.S.C. section 727(a)(2) and (a)(4) requesting the court to deny the debtors’ discharge on the basis that they attempted to hide assets from the Trustee. The court ruled in favor of the Trustee finding that because the debtors concealed the true value of the jewelry and other personal property, they should be denied a discharge of all of their debts.
Disclosure of all property owned by a debtor is critical when filing a bankruptcy. As can be seen by the above case, failure to be accurate on the bankruptcy schedules could result in losing those items and, more importantly, being denied a discharge of your debts in bankruptcy. An actual intent to deceive or hide assets could also be found to be criminal subject to jail time by the debtors if convicted. So remember, not only should all property be listed, it must also be listed with accurate values. And by signing the bankruptcy schedules, the debtors are swearing under penalty of perjury that the information is true and correct to the best of their knowledge.
