The basic paperwork filed in a personal bankruptcy case includes a petition, a certificate showing completion of a credit counseling course, and financial schedules. The schedules are meant to provide the bankruptcy court, the trustee, and interested creditors with a complete picture of your finances. The debtor is obligated to disclose information about income, expenses, debts, assets, and certain financial transactions.
Bad things can happen if you fail to provide this required information. First, it means that your attorney does not have accurate or complete details about your case. Your attorney cannot adequately represent you if you have concealed or “forgotten” financial information. Take, for instance, the transfer of property to a relative just before filing. Failure to disclose this transfer could mean that the trustee can “avoid” the transfer and force the return of the property. Since you no longer own the property, you cannot protect its value with legal exemptions. What seems like an innocent transfer could turn into a huge burden for yourself and your relative. The moral of this example is simple: “Tell your attorney.”
Intentionally concealing income (like a second job), property (like jointly-owned real estate out of state), or even debts (like a few credit cards with small balances that you want to keep) could result in the trustee accusing you of bankruptcy fraud. Your petition and schedules are signed under oath and providing false or incomplete information carries the penalty of perjury. Intentionally misleading the court can lead to criminal charges, fines, dismissal of your case, and denial of a bankruptcy discharge. Bankruptcy is meant to give the honest debtor a fresh start, and not to provide the dishonest debtor with a head start.
Even honest mistakes in your bankruptcy can cause difficulty. For instance, forgetting a creditor could mean that the debt is not discharged. If you “remember” a debt before the case closes, inform your attorney immediately. Likewise, tell your attorney if you “remember” a significant asset. You are able to amend your schedules to include property and claim exemptions to protect the asset. If you choose to let it slide, you may be caught without a defense. The Department of Justice operates a Bankruptcy Fraud Hotline and citizens are encouraged to report bankruptcy fraud. There is even a possible reward, although most of the reports come from ex-spouses, neighbors, or enemies.
Your attorney will ask the right questions to identify a complete and accurate financial accounting. However, it is your responsibility to be frank, honest, and diligent in providing information to your counselor. Your bankruptcy paperwork is only as good as the information you provide, so be sure your information and documents are correct.