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Do I REALLY Have to List All My Assets, Wink, Wink, Nudge, Nudge?

By Joseph McDaniel, Esq.

When I tell you to list all your assets, it isn't because I dislike you, or I'm not willing to go to bat for you. I do it because it's a fundamental, critical piece of bankruptcy information for you. Failing to disclose assets in your bankruptcy case is not a viable bankruptcy option for you, whether it's in a Chapter 7, or a Chapter 13, or any other Chapter bankruptcy in Arizona. Or anyplace else in the United States.

And I mean it both when I tell you on my bankruptcy blog, and when I tell you in person, and I ain't winkin' or nudgin'.

The statements you make under penalty of perjury at your First Meeting of Creditors have consequences.

It's almost funny (which means it's not funny) that a person who fails to list assets, intentionally, is trying to get a result that he could get if he did it openly. He is trying to protect equity he has earned in one or more assets which are not exempt. The conversion of assets from non-exempt to exempt on the eve of bankruptcy is not fraudulent as to creditors, without more, says the legislative history to 11 USC 522. But there is a huge mass of case law on the point, so nothing is as simple as it seems in bankruptcy cases.

But there is standard practice in bankruptcy cases in Arizona.

For instance, it is not at all unusual for a debtor in Arizona who has a fifteen thousand dollar vehicle, free and clear, to sell that vehicle prior to filing for fair market value, and then spend the proceeds buying two different five thousand dollar vehicles for himself and his wife, and then buy food and provisions, and pay a house payment, using up the proceeds.

The two five-thousand dollar cars are exempt under Arizona exemption laws, and therefore under the exemption laws that apply in an Arizona bankruptcy case, because Arizona is an opt-out state pursuant to 11 USC 522, and does not permit the use of the Federal Bankruptcy Exemptions.

If that transfer is listed on his schedules, the chances are very good (nothing in bankruptcy cases is without risk) that his case moves forward through Bankruptcy Court without a hiccup.

If he simply fails to list the vehicle in his schedules, well, the chances are very good that he will get to wear striped pajamas at some point in the future.

Or pink underwear; we are in Arizona here.

The option of failing to list assets is not only illegal; it's just plain dumb.

Do you really think that it's the trustee's first rodeo?

Well, it ain't.

And your ownership of bank accounts and cars and real property is all part of public record. And if it's not part of public record, LIST IT ANYWAY!

Have you ever been divorced? Was it a warm, fuzzy, loving and supportive divorce?

And would your ex watch you screaming in a very hot place without handing you a drink of water, and laugh?

I've never heard such a thing, myself, but it shows up in the literature from time to time.

If you had a car that was a classic, and you didn't list it in your schedules because it had never been registered, do you think your ex would take great joy in sending the trustee a copy of the newspaper article about you and the car and the car show?

Oh, yes. Oh, most certainly yes.

At least, that's my personal hallucination.

There's a smart bankruptcy lawyer named Johnathan Ginsburg. He has a great bankruptcy blog, and he talks about this very issue.

And points out a case in which the poor, stupid devil who didn't list a car, some insurance proceeds, and some bank accounts went to prison for failing to list assets in a bankruptcy case.

DON'T LET IT HAPPEN TO YOU, FOR FAILING TO LIST YOUR ASSETS IN A BANKRUPTCY CASE IN ARIZONA!

Full post as published by Arizona Bankruptcy Attorney Blog on June 08, 2010 (boomark / email).