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Posted by: National Bankruptcy Forum
Tell Your Bankruptcy Attorney Everything!
Have you ever used the expression ‘on a need to know basis’? Well as a bankruptcy attorney, I am on a need to know…………everything basis. Clients come to my office for help with financial problems. They are understandably very open about their debts and how they were incurred. What debtors don’t understand is that bankruptcy is often more about your assets than your debts. Your bankruptcy attorney needs to know about all of your assets.
The Bankruptcy “Deal”
Filing for bankruptcy can provide great relief, however, it does not come without a price. In exchange for a discharge of your debt, you agree to give the Bankruptcy Court an accurate assessment of your assets. Clients are often afraid that the Bankruptcy Court or the Trustee will take their property from them.
Exemption Laws Protect Your Property
In many cases these concerns are unfounded. Consumers who file for bankruptcy often keep all of their property. How?
Every state has exemption laws that are in place to protect people’s property from their creditors. Those with ‘normal assets’ can go through bankruptcy and keep all their of property UNLESS they fail to disclose it to the Court. That’s right, the best way to lose property in a bankruptcy is to try to hide it or forget about and have it discovered by the Trustee. Let’s use a car as an example.
I practice in Queens. Under New York bankruptcy exemptions, cars with up to $4,000 are exempt. Due to large loans, and depreciating value, many cars are completely exempt from liquidation in bankruptcy. As a matter of public policy, the legislature does not want people losing their transportation to creditors. In order to offer a true financial fresh start, many cars of normal value are off the table. These cars are only exposed if the client does not inform their attorney of the asset. If the asset is not disclosed, it cannot be exempted and is subject to liquidation.
Don’t Rely on an Amendment
As a practical matter, Bankruptcy Schedules can be amended right up until the case is closed, so an innocent error generally will not result in loss of property. If the Court finds that property has been intentionally hidden in an attempt to ‘delay, hinder or defraud’ creditors it may not allow the amendment and the property may be lost. Hiding property from the Court may also become the basis for a challenge to your discharge.
Tell Your Bankruptcy Attorney
Remember: bankruptcy can help, but full disclosure is the rule. The overwhelming majority of my bankruptcy clients keep all of their property through the process. A consultation with a knowledgable bankruptcy attorney will be a helpful guide in determining how best to protect your property while getting out of debt. Tell your attorney everything!