Hafemeyer Law

Assets in a Bankruptcy

When an individual comes to see an attorney about a problem that requires legal advice, the amount of questions and information that is requested can be daunting. Some may feel that the process is too overwhelming and do not understand the importance of divulging all of the information requested.

This is common in any area of practice. Attorneys and judges do not like surprises at trial. Sometimes surprises at a hearing can actually damage the claim and change the outcome. This is even more true in a bankruptcy filing.

In some situations, individuals feel that they have an asset or bank account that they do not want to disclose for fear of losing the asset in the bankruptcy. However, many times these assets if disclosed can be protected by an exemption. Exemptions are an allowance the court grants to assist individuals who have filed bankruptcy in starting over after the filing.

Only assets that are disclosed can be protected. In one such case, a client wanted to keep a $5,000 bank balance from the court in the bankruptcy. In the days leading up to the discharge hearing, a bank account statement was to be provided to the court as required. The statement showed that $5,000.00 had been withdrawn from the account just a few days prior to the court date. When the client was questioned, the client stated that the money was given to a friend to make a purchase. The court viewed this as a fraudulent transfer and required the client to turn a portion of the money over to creditors. If the client had disclosed the bank balance these funds could likely have been listed on the filings and retained under an exemption.

Situations like this show how important it is to give legal counsel all of the details of an individual’s financial situation to be added to the forms filed with the court. Disclosure of every financial asset and debt can help ensure that the outcome of the bankruptcy is as favorable as possible to the client.

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