"How would they ever know?"

From time to time we get clients who are reluctant to list all their property and income on the bankruptcy schedules. When confronted with information indicating that they are concealing assets from the Court they respond by saying "how would they ever know?" Well, here is a real story that came across our desk today.

In the middle of the Chapter 7 case, a debtor's grandfather passed away and left $100,000 of Certificates of Deposit payable on death to our client. Our client was not sure what she should do, so she spoke to her daughter to seek advice. Her daughter then spoke to her father who had been divorced from our client for some time. Her father was remarried and he asked his wife since she was the sister of another bankruptcy attorney. That attorney happened to be the Chapter 7 Trustee assigned to our client's case, and, not realizing that he was the trustee assigned to that particular case, he advised that the debtor speak to her attorney. So, our client called us to report the inheritance. We then called the Trustee who indicated that he already knew about the inheritance but he did not realize it was his case.

How would they ever know? You would be surprised to know how a bankruptcy Trustee learns of concealed property. Every year we attend bankruptcy seminars as part of our requirement to take continuing legal education courses, and a standard presentation at these seminars is a panel discussion hosted by all the bankruptcy trustees in Nebraska. With a smile on their face, the trustees tell stories of ex-spouses, neighbors, coworkers, employers, bankers and relatives who secretly contact them to inform of suspicious property that may not have been disclosed in the bankruptcy. "How can they file bankruptcy when own a vacation home in Florida?" "How can they keep a 5^th Wheel Trailer and file bankruptcy?" "How can they file bankruptcy when they just inherited $100,000 from their rich uncle?" Debtors are frequently surprised when a Trustee learns about their little secrets, and the consequences of hiding information from the Court can be painful.

What is the consequence of not listing all property, debts and income on the bankruptcy schedules? For starters, the discharge of debts can be denied. In addition, property concealed from the trustee is no longer exempt and the trustee may elect to sell the property even if it would otherwise have been protected. Lastly, criminal charges may be filed. As Teresa Giudice of Real Housewives of New Jersey recently discovered, bankruptcy fraud is very real and very serious.