Full Disclosure Required

Bankruptcy

by Win Holbrook

A few years ago, I was approached by a gentleman seeking to immediately file a Chapter 7 bankruptcy proceeding. The gentleman came to my office on a Thursday afternoon and stated he was set for a hearing on assets the next morning in a lawsuit pending in state court in Oklahoma County and he needed to file bankruptcy prior to the hearing. Upon inquiring about the need for such a quick filing he advised me that if he went to the hearing on assets he would have to disclose his ownership of a farm in Kansas, but if he filed bankruptcy he would not be required to disclose his ownership of the Kansas farm. Obviously, this took me by surprise.

The United States Bankruptcy Code, which is set forth in 11 U.S.C. §101 et seq. (“Code”), contains the federal statutes governing bankruptcy in the United States. Section 521 of the Code sets forth the debtor’s duties upon filing for bankruptcy. The very first provision of that section requires debtors to file, among other things, a list of creditors, a list of assets and liabilities, and a schedule of current income and expenses. This statutory provision does not require the debtor to file a list of creditors he wants to disclose, or a list of assets he wants to disclose. The bankruptcy statutes require debtors to list all creditors and schedule all assets.

When an individual files Chapter 7 bankruptcy they are seeking to have their debts discharged so their creditors are prohibited from trying to collect the money owed by the debtor, and so the debtor may receive a “fresh start”. Section 727 of the Code, sets forth several provisions where the discharge the debtor is seeking could be denied. Some of those provisions provide the debtor may not receive a discharge if the debtor conceals property, or the ownership of property, or if the debtor makes a false oath.

Failure to disclose one’s ownership of property is concealment and could be a false oath, which in both circumstances could result in the discharge being denied.

In addition, time in prison could await the untruthful debtor. Bankruptcy crimes are set forth in the federal statutes beginning at 18 U.S.C. §151. Section 152 provides, in pertinent part, which a person who knowingly and fraudulently conceals property, makes a false oath or declaration could be fined, imprisoned for not more than five years, or both. The author is aware of a debtor being sentenced to prison for failure to disclose ownership of an expensive watch.

So, full disclosure of one’s assets is extremely important, and attempts to hide assets could result in discharge being denied, a fine, and prison time. It is up to the client whether to be truthful and honest or not.

I did not file bankruptcy for the gentleman seeking to hide his farm ownership nor do I know if he found someone else to file for him.

For more information on bankruptcy, please contact Win Holbrook at 272-9241 or wholbrook@andrewsdavis.com.


Download Blog in PDF Format


2 comments (Add your own)

1. Andy Anderson wrote:
This article was very interesting to find out a few things. You made a wise decision on your part. Thanks for posting the article.

Fri, July 8, 2016 @ 7:49 AM

2. dan choe wrote:
I need chapter 11 for my business to stop foreclosure immediately. Could you make appointment on Monday(12th) morning?

Sat, December 10, 2016 @ 6:25 AM

Add a New Comment


code
 

Comment Guidelines: No HTML is allowed. Off-topic or inappropriate comments will be edited or deleted. Thanks.