All assets and debts must be included in bankruptcy

This is probably the most frequently asked question when I meet with a new client.  The answer to the question is really pretty easy.  The answer is, ALL of them.  Bankruptcy is a really great deal – in exchange for making a full and fair disclosure of all of your assets and debts, income and expenses, and some financial history, you receive a discharge (legal release) of most of your debts.  There are a few debts that will not be discharged, but that is a topic for another post!!  The key point that I stress over and over is that you can’t “pick and choose” whether to include certain debts or assets.   You must disclose everything that you own and everything that you owe – no matter what you want to do after the bankruptcy – TELL ABOUT EVERYTHING!.  This is a straight forward concept that confuses people on a few different items.  Let me

Next, let’s walk through the common follow up questions that I answer regarding disclosure of assets and debts.

1.     My house is not “included” in the bankruptcy.  Why does my lender know that I filed for Chapter 7 or Chapter 13 bankruptcy?

Answer:  Remember the rule – we list EVERYTHING – so, while you have expressed a desire to keep your house, and in most circumstances, you can; the house is still “included: in the bankruptcy as an asset.  The debt you owe to the mortgage servicer is listed as a debt.

“But, Tara, you said I could keep my house!?”  You can absolutely keep your home as long as you continue to make the payments.  In Chapter 7 cases, I recommend my clients be current on their mortgage before we file to ensure they can keep the property.  In Chapter 13 cases, we can arrange a plan that will allow you to “catch up” any amounts you are behind and still keep the house.  I give the same answer when the question is about  your car, boat or trailer.  Bottom line – Full Disclosure is the ONLY way to go!

2.     Why does my landlord or tenant receive notice of my bankruptcy?

Answer:  If you have a rental agreement, regardless of whether you are the landlord or the tenant, you have a legal contract.  Contracts, like your lease, obligate each party to do something.  In the case of a lease, the tenant is obligated to pay the rent and the landlord is obligated to keep the property in good repair and available to the tenant.  Bankruptcy allows modification or outright rejection of some contracts, and so each person who is part of the contract must have a chance to speak up!

Additionally, most leases require a security deposit.  You may have paid your deposit to the landlord years ago, but most states require that all or a portion of that deposit be returned to you when you move out.  That is an asset!!  As a landlord holding a deposit, you want to be sure to tell the Court whose money that is, so everyone is clear.

3.     I have a car/boat/firearm/wad of cash that I don’t want to lose, can I just give them to a friend for now and not list them?

Answer:  Only if you are willing to risk the discharge of your debts, and are interested in paying large fines or even going to jail for bankruptcy fraud!  Not something I generally recommend!  Giving away or hiding assets to avoid losing them in a Bankruptcy case is not worth the possible consequences.  Since each situation is different, talk to your bankruptcy attorney, but for a hard and fast rule – JUST SAY NO!!

By making sure you have properly listed ALL of your assets and debts, you can sure to avoid big problems in the future!!  Remember to keep your focus on the end result, freedom from debt and a fresh start!!