Mandatory Disclosure

One of the prerequisites of filing for bankruptcy is being transparent. You must list your assets, income, and debts on your bankruptcy to have your debts fully discharged. Our firm (San Diego Bankruptcy Attorney) helps members of the San Diego community have debts discharged in bankruptcy. We can also help you with mandatory disclosures, as further discussed in this guide.

Why are Mandatory Disclosures Crucial in Bankruptcy Filing?

Mandatory disclosures are intended to increase transparency when filing for either Chapter 13 or Chapter 7 bankruptcy. You must disclose information related to the bankruptcy filing for you to make rational decisions regarding bankruptcy. The court or trustee can determine if you are honest by having your mandatory disclosures reviewed.

The review includes all of your assets (regardless of their location) in these disclosures and is crucial in a bankruptcy filing. You will be ineligible to have your debts discharged if you fail to disclose your recent asset transfers and assets fully. In this case, you will lose your current or subsequent bankruptcy case. You may also face criminal penalties for this violation.

What is Considered as “Hiding Assets” in Bankruptcy Filing?

Debtors try to hide their assets from bankruptcy proceedings in various ways. They include lying about asset ownership, giving someone else to hold your assets or transferring your assets into another person’s name. Creating fake mortgages or liens for making assets seem invaluable may also be considered as a way of hiding assets. A bankruptcy trustee will locate the property regardless of the means you took to hide the property.

What are the Mandatory Disclosures When Filling Out a Bankruptcy Schedule?

Prior to having your debts discharged or seeking debt relief, you must complete the official bankruptcy forms used in both Chapter 7 and 13 bankruptcy. The process of filling out these forms is relatively straightforward since there are instructions on each page. Bankruptcy courts organize these forms based on the details to be disclosed on each one of them. The mandatory disclosures are as follows:

Your Identifying Information

The cover sheet of your bankruptcy paperwork will constitute a form known as the Voluntary Petition for Individuals Filing for Bankruptcy. You must provide your full names, address, Social Security number, and name of any business you own on this form. The form also requires you to state how you intend to pay the bankruptcy filing fee and whether you recently filed for bankruptcy. Other pieces of identifying the information required include your residential status, the hazardous property you own and stating whether you completed a credit counseling course.

Property Under Your Ownership

The Schedule A/B: Property form will require you to describe the property under your ownership. Your property may include motor vehicles, real estate, financial assets, personal and household items, and money owed to you. Businesses and other assets related to your businesses also count as property.

Property You Claim as Exempt

California’s bankruptcy exemption laws allow property owners to keep various pieces of property in a bankruptcy case. The property and assets may include clothing, household items, most retirement funds, and jewelry of a particular dollar amount. You are also required to fill out Schedule C: The Property You Claim as Exempt with details regarding your exempt property.

Your Financial Transactions and Situation

As a debtor in a bankruptcy case, you must inform the court about your previous financial transactions and situation. You can fill out this information on a special form titled: Statement of Financial Affairs for Individuals Filing for Bankruptcy. Details to list in this form include your past two-year gross income, recent payments made to creditors and storage spaces or safe deposit boxes. Others include your business information, bank account closures, borrowed property, prior repossessions and foreclosures, and active lawsuits.

Income and Expenses

Consider disclosing your employment information and income on Bankruptcy Schedule I: Your Income. You should also list your spouse’s income if you are married. Schedule J: Your Expenses is intended for filling out your monthly expenses. The expenditures will be subtracted from your net income in determining your disposable income for a month.

Your Debts

Money owed to creditors can either be collateralized or unsecured. With collateralized debt, the creditor may take property used as collateral if you default on payment. You have these debts discharged if you include them in Bankruptcy Schedule D: Creditors Who Have Claims Secured by Property. You can fill out your unsecured debts under Schedule E/F: Creditors Who Have Unsecured Claims.

Your Codebtors, Contracts, and Leases

Consider disclosing the names of your codebtors on Schedule H: Your Codebtors. A codebtor is an individual who has to settle your debt if you default on the payment. Include your executory lease or contract on Schedule G: Executory Contracts and Unexpired Leases. You may use this form for unexpired contracts such as a rental agreement for an equipment or gym membership.

How Do Bankruptcy Trustees Establish Discrepancies in Mandatory Disclosures?

A bankruptcy trustee can be an individual or entity assigned the duty to represent your estate by the United States Trustee Program in a bankruptcy case. The role of this entity involves evaluating and making recommendations regarding your demands pursuant to the federal bankruptcy laws. Expect the bankruptcy judge to have superior authority over asset distribution in your case. The trustee cannot act in your case unless approved by a bankruptcy court.

How Bankruptcy Fraud Comes to a Trustee’s Attention

Once assigned to your case, a bankruptcy trustee works to protect the creditors' interests. The trustee will review your bankruptcy paperwork by comparing it to documents such as tax returns, paycheck stubs, and bank statements. At the course of your case, you must attend a 341 meeting of creditors at least once. The trustee will use this hearing to verify your identity and ask you whether you included all your income and listed your property and assets.

Hiding your assets may lead the trustee to sense discrepancies in your mandatory disclosures. Bankruptcy trustees are usually skilled at identifying omissions in bankruptcy paperwork, including signs of hidden assets. A trustee may use the following mean to find your hidden property:

  • Reviewing your debts
  • Conducting public record searches
  • Checking your tax returns and bank records
  • Reviewing your payroll slips, which show deposits into retirement accounts or unlisted bank accounts
  • Commissioning online asset searches
  • Gathering reports from your friend, business partner, coworker or former spouse

What Will the Trustee Do After Suspecting Fraud?

The bankruptcy trustee will pursue a lawsuit in the form of an adversary proceeding at the local bankruptcy court after finding information on your hidden assets. One of the aspects of the lawsuit will involve proving you had the intent to delay, defraud, or hinder creditors from recovering debts owed. If this aspect of the case is proved, the court will immediately deny your request to discharge the debts.

The trustee may request a bankruptcy court for a Bankruptcy Rule 2004 examination if there is inadequate evidence to bring a fraud case to the court. Bankruptcy Rule 2004 allows the trustee to examine matters affecting the administration of your bankruptcy estate. With this examination, the trustee can also review your acts, property liabilities, conduct, and financial condition.

What are the Consequences of Hiding Your Assets on Your Bankruptcy Paperwork?

While assets are linked to wealth, they do not necessarily mean that you are in a position to repay your debts. Most people tend to hide their property on the bankruptcy papers with hopes of being eligible for Chapter 13 or 7 bankruptcy. You risk facing the following consequences if the trustee finds out about the omission:

  1. Trustee Revoking Your Discharge

The trustee may ask a bankruptcy court to take back or revoke your discharge if they find out you have hidden assets. Bankruptcy courts allow trustees to take this action before or after your case closes. They may also revoke your discharge one year after you had your debts discharged.

  1. Inability to Discharge Debts

Hiding assets from a bankruptcy court may waive your entitlement to receiving a discharge. The discharge is your only way for having your qualifying debt wiped out in your bankruptcy case. If you are filing a Chapter 7 bankruptcy, your trustee will be given the hidden property, which will be sold to settle your debts. You will still owe debts not discharged in the bankruptcy filing.

  1. Ineligibility to Discharge Recurring Debts in a Subsequent Bankruptcy Case

A bankruptcy court may deny or revoke your discharge for hiding assets. Since this revocation bars you from having debts discharged in bankruptcy, your creditors will expect you to pay the debts. Pursuing a subsequent bankruptcy case will not change the court’s ruling on your discharge.

  1. You Risk Being Subject to Criminal Charges

Hiding assets may be considered as a crime of bankruptcy fraud under the California criminal laws. You will be committing perjury for failing to list your assets in your bankruptcy paperwork.  The penalties associated with bankruptcy fraud may include imprisonment for a maximum of twenty years, a maximum fine of $250,000 or both.

Are There Any Consequences for Forgetting to List an Asset in the Bankruptcy Paperwork?

Failing to list your legal assets in the bankruptcy paperwork may hinder you from claiming them once the court discovers them. Most debtors forget to list assets such as lottery winnings, interests in trusts, retirement benefits, co-owned assets or inheritances (including potential ones). Once you realize the omission, consider filing the paperwork immediately to disclose the assets. A bankruptcy court will not revoke or deny your discharge after proving you did not intend to delay, defraud, or hinder your creditors.

What Does it Mean to Have Your Bankruptcy Discharge Revoked for Omitting Mandatory Disclosures?

Most debtors aim to eliminate their debts and restart their financial lives when filing for bankruptcy. A bankruptcy discharge is your best hope at wiping out your liability in most debts whether they are collateralized or unsecured. The bankruptcy court may revoke this discharge if you are not transparent when filling out bankruptcy papers.

Entities with a stake in the outcomes of your bankruptcy case have the right to request a discharge revocation from the court. Most revocation requests come from the United States trustees, bankruptcy trustees, and creditors. Any instance of fraud will result in your bankruptcy discharge being revoked by a bankruptcy court.

Are There Any Time Limits for a Trustee to Request the Revocation?

Fraud is the basis of requesting a discharge revocation in a Chapter 7 bankruptcy case. The trustee must make the revocation request within one year after a bankruptcy court grants you the discharge. After the one-year period has elapsed without the trustee making the request, your debts will automatically be discharged in bankruptcy. In this case, your creditors will be barred from recovering sums of money loaned to you.

How Can You Amend Omissions in Mandatory Disclosures?

If the omissions made when disclosing your information in bankruptcy forms are not deliberate, you can amend the mistakes. You may have forgotten to include a piece of information when you recently filed a Chapter 7 or 13 bankruptcy. The need to amend the form may arise due to sudden changes in your circumstances. Either way, you can correct these errors with your attorney’s help in the following ways:

Finding the Necessary Forms

Forms and procedures for amending bankruptcy paperwork are available on the official website of your local bankruptcy court. Your lawyer may alternatively find the forms from the court. The forms usually constitute a blank version of the particular form you forgot to fill out correctly. You will also receive an additional notice form for listing more creditors upon request.

Including Correct Information in the Forms

Your attorney should guide you through the process of filling out the forms. You are required to correct the omission or mistake on the original form on the new blank form. Strive at complying with the rules of the district court when filling out the new form.

Having the Amended Forms Filed and Served

After filling out the required forms, you should have them filed with your local bankruptcy court. Though you will not be charged for amending most mistakes, you may incur an additional fee if you added new creditors. Besides filing them, you need to serve the forms to the affected creditors and the bankruptcy trustee. The term "serve," in this context, entails sending a copy of the form to various parties.

What are the Mandatory Disclosures When Filing for Chapter 11 Bankruptcy?

Unlike Chapter 7 and Chapter 13 bankruptcy, Chapter 11 bankruptcy is targeted at businesses looking to reorganize their debts in a suitable bankruptcy plan. Individuals whose debt cannot be reorganized under Chapter 13 bankruptcy can also file for Chapter 11 bankruptcy.

With this type of bankruptcy, debtors can maintain control of their assets while continuing to operate their businesses as usual.

In most cases, a trustee is usually not appointed to administer a Chapter 11 case since the debtors have maximum control and possession in their assets. However, a bankruptcy court may appoint the trustee if mismanagement of funds or fraud is imminent. The role of the trustee will involve overseeing the bankruptcy process, monitoring the business operations, and filing mandatory reports with the local court.

A disclosure statement is among the documents you must file in a Chapter 11 bankruptcy case. The disclosure statements offer adequate information regarding your affairs to your creditors. Your creditors can use this information to choose an effective reorganization plan for you.

What Type of Information Should You include in the Disclosure Statement?

After filing your disclosure statement with a local bankruptcy court, expect the court to hold a hearing aimed at approving or rejecting it. Your debt reorganization plan will only be accepted once the court approves your disclosure statement. The details to include in this statement will depend on the size, history, or nature of your business.

The bankruptcy court may rule out the need for a separate disclosure statement if you are running a small business. A court can base this ruling on the fact that the debt reorganization plan of a small business provides adequate information to the creditors. You may include your history, circumstances contributing to the bankruptcy filing, and a summary of the debt reorganization plan in the statement.

The disclosure statement should also feature a description of liabilities and claims and means you intend to treat them while repaying debts. Other mandatory details include the plan's feasibility, confirmation requirements, and procedures and description and value of your assets. Pieces of information such as tax consequences of your debt reorganization plan can help the creditors decide on its effectiveness.

Consult Your Bankruptcy Case With a Skilled Attorney Near Me

While it is important to disclose useful information related to your bankruptcy case, hiring an attorney may help to make your case more solid. San Diego Bankruptcy Attorney is a leading force (in regards to bankruptcy law) in the San Diego community. Our legal services encompass different types of bankruptcies, debt settlement, foreclosures, and repossessions. Discuss your bankruptcy-related case with one of our skilled San Diego Bankruptcy lawyers by calling 619-488-6168 today.

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