You sign your bankruptcy forms under penalty of perjury. The bankruptcy forms require you to list all real estate and personal property. Personal property includes anything that has value.
Furthermore, the Chapter 7 trustee asks you at the 341 Meeting of Creditors if the information in your bankruptcy filing is true and correct. The trustee asks if you disclosed all your assets. Your answers are given under oath.
The penalties for perjury can be severe. However, you could also face additional consequences for hiding assets in bankruptcy. Before you consider trying to hide cash or other assets in a Chapter 7 bankruptcy case, consider these five things:
Trustees do their due diligence when reviewing cases. Many trustees:
There are many ways a trustee could locate assets you might try to hide. For example, you claim to have nothing of value and minimal expenses, but you earn an average income.
A trustee might wonder if you are hiding cash because there is no evidence that you are spending as much money as you earn. As a result, the trustee might petition the court for an order granting a deeper search for assets.
It is unwise for someone to believe they are smart enough to get away with hiding cash during Chapter 7.
The Chapter 7 trustee can seize the cash once he discovers it. You could try to amend your bankruptcy forms to list the cash as an asset and claim an exemption. However, the court might rule that the exemption does not apply because you failed to disclose the cash. In that case, you would lose all the money you tried to hide instead of any cash that exceeded the bankruptcy exemption.
If you hide assets or cash during Chapter 7, the trustee or the United States Trustee can object to your bankruptcy discharge. The trustee can also ask the court to revoke the bankruptcy discharge if they discover hidden assets after the court issues the discharge order.
A bankruptcy discharge eliminates the legal responsibility to pay a debt. Therefore, your debts do not go away if you do not receive a discharge. Instead, you owe the money to your creditors as if you never filed Chapter 7.
You could not discharge the debts you listed in your bankruptcy case if your discharge was denied or revoked for hiding assets. As a result, those debts can never be eliminated. Therefore, your creditors can continue with legal actions to collect the debts, including debt collection lawsuits, foreclosures, repossessions, and wage garnishments.
Convictions for bankruptcy fraud include fines and prison sentences. A judge could impose a fine of up to $250,000 and a prison term of up to 5 years for each charge. In addition, you could face other charges and penalties, depending on the facts of your case.
If someone helped you hide cash or assets in bankruptcy, they could face criminal charges too. Therefore, a friend or family member could face criminal penalties if the prosecutor proves they willingly helped you commit bankruptcy fraud.
You can protect cash and other assets in Chapter 7 from your creditors and the Chapter 7 trustee. State and federal bankruptcy exemptions protect the equity in specific assets. The amount of equity you can protect depends on where you live, whether you are filing alone or with your spouse, and the type of assets you own. We created a free bankruptcy exemption calculator that helps you understand what assets are at risk in a chapter 7 case. Take it below.
Our bankruptcy exemption calculator estimates whether you own property that might not be exempt in a bankruptcy case. You can also research specific state bankruptcy exemptions by clicking the link to your state on the webpage below the calculator.
You might also consider filing Chapter 13 if you have assets that are not exempt. In a Chapter 13 case, you repay your debts over a three to five-year bankruptcy plan. Instead of losing property, the non-except equity is paid through your Chapter 13 plan. We have a free Chapter 13 calculator you can use to estimate a plan payment.
A person might believe they can hide cryptocurrency easier than other assets. The asset is virtual, so there might be few, if any, records of its existence. However, the lack of evidence or records does not mean you cannot get into trouble if you fail to disclose cryptocurrency during bankruptcy.
Popular digital currencies include, but are not limited to:
Cryptocurrency is an asset, and it must be listed in your Chapter 7 bankruptcy schedules. Even though cryptocurrency is a virtual asset, it has a value that a Chapter 7 trustee can liquidate. If you do not disclose that you own cryptocurrency, you face the same consequences and criminal charges as you would for failing to disclose cash hidden under your mattress.
Some crypto exchanges provide information for bankruptcy trustees searching for assets, such as Coinbase. Additionally, there is a great deal of information and resources about cryptocurrency available for bankruptcy trustees. Trustees often find out about cryptocurrency from reviewing tax returns.
Cryptocurrency and bankruptcy raise many questions. The value of cryptocurrency can be volatile. There are no specific federal or state bankruptcy exemptions that protect cryptocurrency. Wildcard exemptions could be used if the debtor does not need the wildcard exemption to protect other assets.
Because there are still questions about how to treat cryptocurrency in bankruptcy other than knowing it is an asset, it is wise to consult an experienced bankruptcy lawyer if you own cryptocurrency. A bankruptcy attorney assesses your situation to determine the best way to protect your cryptocurrency investment.
Mistakes and errors happen, especially when someone files for bankruptcy without a lawyer. If you forget to list an asset on your bankruptcy forms, notify your bankruptcy attorney immediately. You must notify the trustee and court by filing amended bankruptcy schedules if you do not have an attorney and represent yourself.
If the trustee believes you made an honest mistake, the trustee might not object to any bankruptcy exemptions you claim or your bankruptcy discharge. However, the longer you wait to disclose the mistake, the more likely the trustee will take action against you.
At Ascend, we work with you to develop a debt relief strategy that helps you get out of debt. We explain your options, including the pros and cons of each option based on your unique financial situation. There is hope. You can take control of your finances and get out of debt.
► Watch a video about Chapter 7 bankruptcy here: Bankruptcy Means Test
You can also text or call Ascend us at (833) 272-3631 or contact us online for a free case evaluation. We are dedicated to helping people achieve their goal of being debt-free.