When Kentucky residents file for bankruptcy, it is important that they are honest and that they follow the bankruptcy court’s rules. Hiding assets and income or otherwise attempting to abuse the process may lead to a their inability to successfully discharge their debts.
A 2016 case that was decided by the U.S. Bankruptcy Court for the District of Kansas illustrates what might happen when people try to skirt the rules of the bankruptcy court. The case involved a woman who had repeatedly filed for Chapter 7 and Chapter 13 bankruptcy since 2002. Her fifth filing was in 2013, and it was a Chapter 13 petition through which she entered into a repayment plan.
While the woman’s Chapter 13 case was pending, she sued her employer without notifying the trustee and received a settlement of $25,000. Instead of reporting the money to the trustee to be used to repay her creditors, the woman spent the settlement. When the trustee objected, she filed a motion to dismiss her bankruptcy case instead of agreeing to a modification of her plan. The court ruled that it couldn’t stop her from dismissing her case. It did rule that the debts she had asked to be discharged in her bankruptcy petition would not be able to be discharged in a future bankruptcy case, however.
In both Chapter 7 and Chapter 13 bankruptcies, it is important that debtors disclose all of their income sources and assets. Failing to do so may lead to a dismissal of their bankruptcy cases. Getting a discharge of unsecured debts in bankruptcy may not occur if a person tries to hide assets or income. A bankruptcy lawyer can often assist a client in submitting correct and complete financial schedules so that the case can proceed.