Listing All Your Assets in Bankruptcy - The Do's and Dont's
ALL OF YOUR ASSETS – LISTING PROPERTY IN BANKRUPTCY
Whenever you file for any chapter of Bankruptcy, you are required by law to completely and accurately disclose all of your assets which you own as of the time you file your case with the Court.
In a Chapter 7 case, these assets are listed to give the Bankruptcy Trustee an opportunity to determine whether he can sell any of your assets for the benefit of your creditors. In a Chapter 13 case, the list of assets allows the Bankruptcy Trustee to calculate the liquidation value of your assets. From that figure, the trustee decides what is the minimum amount you are required to pay through your payment plan to the Court. By agreeing to pay that amount, you will be able to keep those assets instead of being forced to sell them.
Failure to list all assets can have severe negative results, such as a sanction, or dismissal of your case and a bar to re-filing a new case, or even a revocation of your discharge, an inability to ever receive a discharge on debts included in the bankruptcy, and even criminal charges. Even an inadvertent failure to disclose an asset may result in you losing your exemption, resulting in the asset being seized and given to your creditors. For this reason, it’s vitally important to make sure you disclose everything you have in your bankruptcy.
However, many people may not realize exactly how deep the Bankruptcy looks into what is an asset, and therefore what must be disclosed. Obviously, tangible pieces of property such as cars, furniture, clothing, jewelry, firearms, knick-knacks, art, books, CDs, DVDs, video games, or other household goods must be listed. It should also be obvious that any financial account you own must also be included. Bank accounts, retirement accounts, stocks, bonds, and certificates of deposit should be listed, even if the account has no balance or cash value. What may not be so obvious is that even intangible pieces of property, and even potential interests in property, should be listed. While it’s impossible to come up with a comprehensive list of everything an individual can potentially own, the following is a brief list of items you might have a right to and not realize you need to list when you file for bankruptcy.
- Any security deposit you have with your landlord or your utility companies. If you can potentially recoup it in the future, let the Trustee know you have a right to it.
- Wedding rings and wedding bands. Keep in mind that Virginia does allow you to exempt these 100%, but they still must be listed.
- Toys, games, cameras, and hobby equipment, even if bought for your children.
- Interests in life insurance. This includes both “whole” life insurance, which can be cashed out for value, and “term” life insurance, which has no value unless you pass away.
- Interest in registered corporations, LLCs, and partnerships. While you must give an honest valuation of what you believe these would be worth if liquidated, you may offset its value against corporate debts (who would take before you if liquidated)
- Interest in property of an unincorporated business. This is yet another reason to make sure you organize your business instead of operating as a sole proprietor.
- Property used in your place of business, if you personally own it. If it belongs to your employer and you have no right to it, then don’t worry about listing it. However, if you have a right to take it with you, whether it’s machinery, equipment, or just supplies, it is your property and must be listed.
- Interest in inheritance. Everyone has an inchoate, or potential but unattached, interest in inheritance, because there is always the chance someone will die and leave you money.
- Interest in your Federal and State income tax refunds. Once you’re received your first pay stub in January, unless the government hasn’t withheld any money from your pay, you have a potential interest in having that money refunded, and need to list it.
- Interest in money owed to you. This includes debts, accounts receivable, and even earned but unpaid wages. If someone owes you money, you must let the court know this, and potentially allow the Trustee to collect on your behalf.
- Interest in lawsuits. Forgetting to list a potential lawsuit you may have against someone can render it impossible for you to collect, as we will explain in a later article.
- Patents, copyrights, and trademarks. Even if probably valueless, if you personally own one of these assets, or own an unincorporated business, list it.
- Pets. Once again, Virginia protects your interest 100%, so this is merely a formality.
In short, if you own it, if you might own it, or if you’ll potentially own it in the future, it’s better to let your attorney know about it. If it’s one of the very few things that won’t need to be listed, you’ll have at least brought it to his attention; otherwise, you could potentially be ruining your bankruptcy case by forgetting about it.