I recently noticed a bankruptcy attorney in California writing about a common issue presented by my clients. http://www.linkedin.com/osview/canvas?_ch_page_id=1&_ch_panel_id=1&_ch_app_id=42524850&_applicationId=103900&appParams=%7B%22document%22%3A%222eea2a0c-6173-4012-aeab-2a94fe843c00%22%2C%22method%22%3A%22document.view%22%2C%22layout%22%3A%22layout_blank%22%2C%22target%22%3A%22blank_content%22%2C%22surface%22%3A%22canvas%22%7D&_ownerId=0
Many people think that they can pick and choose what they file bankruptcy against. NOT TRUE! When you file for bankruptcy relief, you are a completely open book to the Court – almost all of that information is PUBLIC information as well. All your income, all your assets, and all your creditors must be listed in your schedules. Now, that’s not to say that just because something is LISTED in your schedules means you’re going to lose that asset. Again, NOT TRUE! There are some pretty basic rules to understand if you want to keep an asset when you file for bankruptcy: (1) you can’t have too much equity in the property; and (2) you must be current on the payments for any debt secured by that property. Even if one of those two things doesn’t apply in your case, you still have options if you want to keep that property. Meaning, even if you have too much equity in the property and/or even if you’re behind on payments, that doesn’t necessarily mean that you are going to lose the property. Usually it just changes the type of bankruptcy you file – Ch. 7 vs. Ch. 13 – or changes he amount of money you might have to pay back to your bankruptcy estate in order to retain the property you want to keep. I agree with Mr. Ruthven in the above article that these are situations that should be discussed with your attorney prior to filing. A little pre-bankruptcy planning is not only legal, but it’s necessary.
I often wish I could poll my clients to see how many of them have mistakenly failed to disclose an asset in their bankruptcy schedules. When discovered, most of the time these oversights amount to little more than an “oops” in the grand scheme of things, cured by a simple amendment. I would like to think that my clients would never intentionally hide an asset from the bankruptcy estate. Occassionally, I run into a case where the concealment of an asset is so blatantly an abuse of the bankruptcy system it’s shocking, but those cases are few and far between. Most people who file for bankruptcy are really just honest, hard working individuals who, through some event that is usually beyond their control, have just fallen into a bad financial situation. Bankruptcy offers those people an effective, responsible, and legal way to resolve their propblems.