Many debtors feel like they can get away with lying about their assets or about other items they are required to disclose in full their bankruptcy schedules, such as failing to disclose money given or repaid to family members. When a debtor files the bankruptcy statements and schedules the debtor is required to sign those statements and schedules. By signing these documents debtors are swearing and attesting to the accuracy of all the information contained therein.
Furthermore, at the 341 Meeting debtors are put under oath and are again asked if their schedules are accurate and correct. They are also asked if they have listed all their assets on their bankruptcy schedules.
If a debtor is later found to knowingly lie or if a debtor knowingly fails to disclose all of the debtor’s assets and other relevant information, there can be some extremely harsh consequences. One of the consequences is that the trustee or a creditor may file a motion or adversary action against the debtor requesting that the debtor’s discharge be revoked or denied. If a debtor loses his or her discharge, then all of the debtor’s creditors can continue to collect against the debtor. Most bankruptcy courts have held that if a debtor loses his or her discharge, then the debtor is prohibited from ever filing bankruptcy again on those debts that were included in the bankruptcy case where the discharge was lost.
A debtor can also lose a discharge if the debtor fails to supply the trustee with all of the information that the trustee has requested or if the debtor fails to turn over assets. Often times, debtors are ordered to turn over all or a part of their tax refunds in Chapter 7 cases. Usually, these refunds are only a few thousand dollars. If a debtor fails to turn over a $3,000 refund because the debtor spent it on an emergency, the trustee will likely file a motion requesting that the debtor’s discharge be revoked. If the debtor has $100,000 in debt the debtor could potentially lose debt relief on a large amount of debt for failing to turn over a relatively small amount of money.
If a debtor’s failure to disclose assets or list information is serious enough the debtor could also be referred to the Department of Justice for criminal prosecution. Bankruptcy fraud is a crime and those who commit bankruptcy fraud could go to prison. A debtor who fails to list a $4,000 Rolex watch could go to prison.
For the above mentioned reasons, it is very important that debtors be entirely forthcoming and honest in completing their statements and schedules and in dealing with the trustee. A debtor should never try to hide property or information. Full disclosure is the very important when it comes to filing bankruptcy.