What You Have to Disclose During Bankruptcy
When filing bankruptcy, it’s important that the debtor operate in good faith and be honest with both their bankruptcy attorney and they bankruptcy trustee.
So along those lines, below are a few things that debtors are expected to honestly disclose when they file bankruptcy:
- Disclose any pre-bankruptcy asset transfers. Let’s make it clear that if people could legally transfer their assets before bankruptcy, discharge their debts and keep all their assets, many probably would. However, it is not legal and pre-bankruptcy asset transfers are not allowed even if they weren’t done with the intention of defrauding creditors or the bankruptcy system. If you transferred a car, home, cash, jewelry, instruments, tools or any other assets to someone else right before filing bankruptcy you will need to disclose this in you bankruptcy filing.
- Disclose any pre-bankruptcy payments. If you made pre-bankruptcy payments outside of essential payments such as your rent, utility bills, food, etc., you will need to also disclose these payments in your bankruptcy. For example, if you repaid loans to family and friends prior to filing bankruptcy while not paying other creditors, you will need to let your bankruptcy attorney know because those payments may not be allowed. You cannot treat one set of creditors better than another set just because they are family and friends. In bankruptcy, creditor priority is ranked and most family/friend creditors will be classified as unsecured (low-ranking) creditors who may or may not get paid depending on how many (and the value of) assets you have.
- Disclose any pending or current lawsuits in which you might potentially receive some type of settlement. For example, if you have a workman’s compensation case which is pending and which may not be settled until after your bankruptcy case has ended, you still need to disclose it to the bankruptcy court.