When you file for Chapter 7 personal bankruptcy, you must list all of your assets and debts. This is so that the court can then decide which assets to liquidate in order to pay off the largest amount of debt possible. Unfortunately, you have no control over the liquidation of assets. Legal guidelines allow you to keep certain assets and not others. You may also buy back some assets (such as your car) if you make the proper arrangements. Otherwise, the court determines which assets to liquidate without regard to your personal preference.
But what happens if you decide that you do not want to include certain assets in your bankruptcy, so you hide them from the court? Here are some consequences that can result.
It is a criminal act to lie on your bankruptcy paperwork, so doing so can result in perjury charges. The court could impose a penalty of up to five years in prison and fine you up to $10,000 for the offense.
The judge can throw out your case. If that happens, all your debts will remain and creditors may continue in their collection efforts. Also, keep in mind that you can only claim a debt in one bankruptcy. In other words, if you choose to file again in the future you cannot claim the same debts twice. This means that the court can never discharge debts that you claimed in a dismissed bankruptcy case.
Revocation of discharged debts
The judge may revoke the discharged debts. If the trustee of your bankruptcy finds out after the discharge of your debts that you hid assets in your bankruptcy paperwork, the trustee will likely petition the court to reverse the discharges. The trustee has up to one year to do so.
The consequences of not including all of your assets in a bankruptcy filing are far too great, so do not risk it. Keep your filings as honest as possible, and you will be happy that you did in the end.