Bankruptcy law requires full disclosure of all assets. The disclosure of all assets is a basic premise of bankruptcy. The reason behind this requirement is to make sure the bankruptcy trustee, the court, and the filer’s creditors receive full, candid disclosures.
Bankruptcy Law Requires Full Disclosure* of Assets:
Section 521 of the Bankruptcy Code codifies the disclosure requirement.
Section 541 of the Bankruptcy code provides a definition of what assets become the property of the bankruptcy estate when a bankruptcy is filed. According to Section 541, the debtor’s “legal and equitable interests” become the property of the bankruptcy estate when the bankruptcy commences. Debtors must list all “contingent and liquidated claims of every nature,…counterclaims…, and rights to setoff claims” when filing bankruptcy. Section 541 encompasses every “conceivable interest of the debtor, future, non-possessory, contingent, speculative and derivative”.
Is Disclosing All Assets in Bankruptcy Important?
The importance of bankruptcy disclosure rules is emphasized by the fact that if a debtor conceals an asset (knowingly or fraudulently), they may face repercussions in civil litigation, and even risk the chance of criminal prosecution. Sections 521 and 541’s stringent disclosure requirements mean all claims of a debtor are considered property of the bankruptcy estate whether the debtor discloses them on their bankruptcy schedules or not.
Failing to List Assets in Bankruptcy:
Failing to disclose assets during bankruptcy could mean the omitted debt is not discharged. If you forget to list a debt in your bankruptcy, and you are nervous it may not be discharged along with the rest of your debt in the Chapter 7 bankruptcy, there are options available. If the bankruptcy case is still open, and you haven’t received a discharge of debt yet, you can amend the bankruptcy schedules to add the unlisted creditor. If the bankruptcy case is already closed, it may be necessary to file a Motion to Reopen the bankruptcy case and add the unlisted creditor. To reopen the case, there must be a good reason for the omission. If the court agrees to reopen the bankruptcy case, you can add the omitted creditor so it can be included in the Chapter 7 bankruptcy discharge.