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Disclosure of all cash vital in Chapter 7 bankruptcy filing

On Behalf of | Dec 8, 2017 | Bankruptcy |

Debtors looking for a fresh start in Kentucky often have the option of filing for bankruptcy. However, they must reveal all assets during the process. The denial of one woman’s bankruptcy discharge in Illinois illustrates the importance of full disclosure of personal assets, including cash, on forms for the court.

The woman had sought Chapter 7 bankruptcy protection when creditors started to garnish her wages. Her court filings stated that she expected to receive approximately $10,000 from tax refunds, but she had in fact already received the money and spent some of it. When her meeting of creditors took place, she told the trustee that she had $3,500 in cash at the time of the bankruptcy filing but did not mention it because she wanted the funds to pay for rent and moving costs.

Her admission prompted the trustee to ask the court to deny her debt discharge. The court followed the recommendation of the trustee because she had lied under oath and knowingly concealed the money. Her bankruptcy was not approved because her failure to report the cash served to hinder payment to creditors. A Chapter 7 bankruptcy requires the liquidation of nonexempt assets to pay creditors before the court excuses remaining debts.

A person wishing to explore the potential of bankruptcy to reorganize or discharge debts could reach out to an attorney for advice. After reviewing the person’s financial situation, an attorney could explain the advantages and disadvantages of a bankruptcy for solving money problems. An attorney might organize financial records and oversee the preparation of documents for the court in an effort to ensure proper disclosure of assets. As part of the process, an attorney could also direct creditors to communicate with the court and halt efforts to collect money from the debtor.