Bankruptcy is a transparent process. For your debts to be discharged (wiped out), you must list your income, all your possessions, and all your debts on your bankruptcy papers. Unless you fully disclose your assets and recent asset transfers, you won’t be able to discharge those debts in the current case or in a subsequent bankruptcy, and you may also be subject to criminal penalties.
In a bankruptcy setting, “concealment of property” refers to the act of a debtor dishonestly representing their assets to a creditor. A debtor’s actions that hinder or delay creditors’ efforts may constitute the concealment of property. This may be done for various purposes, but it is most commonly done to obtain a discharge of debt.
Some debtors may only qualify for a discharge of debt if they have assets under a certain amount. To appear as if they have less money, they may conceal some of their assets to obtain a debt discharge. This action is illegal and may result in negative consequences for the debtor.
The concealment of property can take many forms. However, a common method is for the debtor to transfer their property in a fraudulent manner so that the creditor does not know that the debtor owns the property.
Concealment of Property: What Are the Elements?
States and jurisdictions may have different laws regarding property concealment.
The creditor must, however, be able to prove the following in order to prove concealment of property:
- It was committed with the intention of delaying, hindering or defrauding the creditor
- A debtor or a person authorized to be a debtor’s agent committed the act
- Prior to filing the bankruptcy claim or petition for debt discharge, the act was committed
- A debtor’s property was removed, concealed, transferred, or destroyed
Furthermore, a debtor may be held liable even if they did not conceal their property personally. Also, they can be found liable if they knowingly allowed their property to be concealed but did not prevent it.
How Can Property Be Concealed?
Again, concealment of property is often used interchangeably with “fraudulent transfer of property.” However, concealment of property is much broader and does not always require any actual transfers. As an example, the following acts may be considered “concealment of property”:
- Oath falsification
- The falsification of documents or the falsification of bank account information
- Record books not being preserved
- Changing records to reflect a different statement on purpose
- Failure to explain discrepancies, differences, or incongruities in account statements (such as losses of assets, missing income, or instances of insolvency).
Once again, these acts must be committed with the intent to defraud the creditor. Therefore, accidental acts cannot be considered concealment.
Property Concealment: What Are the Consequences?
Concealing property has a number of negative consequences. Especially if the act involves government or state authorities, the person may be held criminally liable. The penalties associated with criminal charges may include monetary fines or a short jail term.
If caught concealing property, a person may also face the following consequences:
- Credit history is negatively affected
- Inability to obtain loans in the future, especially from the lender they defrauded
- Lenders may file civil lawsuits against debtors, resulting in the debtor paying damages and other costs, such as attorney’s fees
Therefore, concealment of property is punished severely and can result in severe penalties.
What Methods Will the Trustee Use to Locate Hidden Assets?
In your case, it is the bankruptcy trustee’s job to search for hidden assets. Any of the following methods might be used by the trustee to find hidden assets:
- Reviewing your debts (for example, if you have a lot of furniture store debt but very little furniture)
- Records searches in the public domain
- Searching for assets online
- A payroll slip showing deposits into an unlisted bank account or retirement account
- Tax returns and bank records
- Former spouses, friends, coworkers, or business partners can provide information.
In the event that a bankruptcy trustee discovers hidden assets, the trustee will file an adversary proceeding in bankruptcy court. Your discharge will be denied if the court finds you failed to disclose assets or concealed them with the intent of hindering, delaying, or defrauding creditors.
If You Forget to List an Asset, What Happens?
Unless you list assets that the law allows you to keep, you might not be able to claim them once they are discovered. Nonetheless, you may forget about some assets when filling out your bankruptcy schedules, such as those you haven’t received yet.
You might forget to list the following assets:
- Personal injury lawsuits and insurance claims that you have filed or are considering filing
- Winnings from the lottery or annuities you receive over time
- Trusts with beneficial interests
- Even if you have not yet received retirement benefits
- The probate court has not yet resolved inheritances or potential inheritances
- Assets owned jointly (bank accounts, real estate, automobiles, remainder interests).
You should disclose the asset as soon as you realize the mistake. Taking corrective action before someone else discovers the omission will help ensure your discharge won’t be denied or revoked if the circumstances show that you don’t intend to hinder, delay or defraud creditors.
Property You Can’t Protect in Chapters 7 and 13
Bankruptcy doesn’t mean you lose everything you own. Exemption laws in each state determine the types and values of assets you need to maintain a home and employment. You can keep your property if it is exempt.
In other words, what happens to nonexempt property-the property that an exemption can’t protect? The answer depends on the bankruptcy chapter you file.
Bankruptcy Chapter 7: Nonexempt Property
The bankruptcy trustee assigned to your case has the power to sell nonexempt property that an exemption cannot protect if you file for Chapter 7 bankruptcy.
Bankruptcy Chapter 13: Nonexempt Property
The value of your nonexempt property, minus sales costs, must be paid to your creditors over the course of your repayment plan in Chapter 13.
Before filing, you might be tempted to give away, hide, or sell some of your property for less than what it’s worth. However, this is never a good idea.
Your discharge may be denied if you make a fraudulent transfer.
Within one year of filing for bankruptcy, the court can deny your bankruptcy discharge – the order that erases qualifying debt – if you hide, give away, or destroy property to defraud your creditors. If the court denies your discharge, you will remain responsible for repaying all debts that your bankruptcy could have wiped out. It is, therefore, never a good idea to give away your assets to hide them from your creditors.
Do I Need a Lawyer If I Am Accused of Concealment of Property?
If you are currently dealing with debt, you may wish to contact a bankruptcy lawyer for advice. By working with a lawyer, you can ensure that all documents are filed in accordance with your state’s laws. An experienced attorney can also assist you if you are accused of concealing property. A lack of intent may be one of your defenses.
Use LegalMatch to find an experienced bankruptcy lawyer in your area today. Do not risk the costly penalties associated with bankruptcy.
