Should I Hide Property When I File For Bankruptcy?

Trying to hide property from the bankruptcy trustee will land you in hot water, and even jail.

When you file bankruptcy, you are required to report on your bankruptcy papers all of the property that you own or have any interest in. Hiding property when you file for bankruptcy is always a bad idea and may even qualify as a crime. The consequences of intentionally omitting property from your bankruptcy petition can be serious.

Requirement to List All Property

In both a Chapter 7 and a Chapter 13 bankruptcy, you must list on your bankruptcy papers all property that you own or that you have some interest in. This includes both real property, most often your home or a parcel of land, and personal property, like your car. (Learn more about the papers you file in bankruptcy.)

Real property

Real property includes your home and any other real estate you own, including undeveloped land. In addition to real property that is just in your name, you must also disclose real estate that you own jointly with someone else.

Example: You and your sister jointly inherited your mother’s home when she died. You have a half interest in the home, but don’t live there. You are still required to disclose the half interest you have in this property.

Personal property

In addition to real estate, you must also disclose any personal property you own. Personal property includes those things you might expect like cash and money you have in the bank, household furniture and goods, and automobiles. Personal property also includes things you might not think of as property, like the cash value of your life insurance policy, or money owed to you by someone.

Like with real property, you must disclose all personal property that you own solely, and also property that you own jointly with another person, like your spouse who is not also filing bankruptcy.

How Will the Trustee Find Out If I Hide Assets?

Whether you accidentally fail to list some of your property or you do so in an effort to hide property, there is a good chance the trustee assigned to your bankruptcy case will find out. A trustee’s job is to find and liquidate (sell) assets of yours that may be used to pay your creditors. (See What Does the Chapter 7 Bankruptcy Trustee Do?)

To accomplish this, the trustee will not only carefully review the documents you have provided, but will likely also use other resources to determine what sort of assets you might have. This often includes a review of property records, motor vehicle records, and other databases to determine what property is or was in your name. It is also not uncommon for a trustee to receive unsolicited information from someone who knows a debtor is hiding assets, especially an ex-spouse, ex-business partner, or neighbor.

The Penalty for Failing to Disclose Assets in Your Bankruptcy

If you accidentally fail to disclose an asset but then fully cooperate with the trustee when she or he learns of your mistake, there will likely be no punishment for your error. (Here's what to do if you catch a mistake on your bankruptcy petition.)

If, however, the court determines that you purposefully failed to disclose certain assets in an effort to hide them from the trustee and the bankruptcy court, there will likely be very serious consequences. Possible consequences include the following:

  • The bankruptcy court can deny the discharge of your debts. If you are found to have purposefully hidden assets in your bankruptcy, you won't be able to discharge the debts you had when you filed for bankruptcy. Not only will you lose the ability to discharge the debts in this bankruptcy case, but you will also lose the ability to ever discharge those debts in any subsequent bankruptcy case you file.
  • A conflict with the trustee can involve friends and family in your bankruptcy case. If you have attempted to hide assets by transferring them to another person like a family member or friend, the trustee will likely need to involve that person in getting those assets back. This can include suing that person in the bankruptcy court to force them to turn over certain assets.
  • You could face criminal charges. The most serious of the possible consequences of attempting to hide assets in a bankruptcy is the potential for being fined and/or imprisoned for up to five years. When you sign your bankruptcy petition, you do so under the penalty of perjury. Making fraudulent statements either on the petition or under oath before the trustee is a criminal act.

Please see our article, Hiding Property & Assets in Bankruptcy, for more on how the trustee can get transferred property back into the bankruptcy case.

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