When you file for bankruptcy, you will have to list all of your property. Sometimes, clients will ask whether they have to list all property and assets. Their instincts may be to hide some assets in fear that they will be taken during the bankruptcy. This is especially true when it comes to real property. If you are worried, keep in mind that your home is usually exempt from the bankruptcy. If you hide property or transfer property, it could be seen as bankruptcy fraud.
What Property Is Nonexempt?
Every state has its laws regarding how much equity in your personal property that you can exempt. If you have no equity in the property, then the trustee will not sell those assets. However, if you have a large amount of equity, there is a chance that you will have to sell it to pay your debts. If you want to keep the property but still owe the lender money, then you may have to reaffirm your debt.
You might feel the temptation to convert your nonexempt property to exempt property. Some people will transfer the property to another owner or sell the property to purchase something exempt. Exemption planning is not necessarily illegal. You can do this in good faith and or with reasonable assets. For instance, if you own a boat, but do not have a car, you can sell your boat to buy a car. However, if you use exemption planning excessively, it could be looked at as fraud.
What Is Asset Conversion Fraud?
If the courts suspect asset conversion fraud, there are several considerations. The court will look at whether you transferred or converted property right before the bankruptcy if you tried to hide what you did and how much the property was worth. The court’s decision will depend heavily on the state that you live in. For most clients, it is easier not to convert assets. Always talk to a bankruptcy lawyer, like from the Law Offices of Arcadier, Biggie & Wood, in advance before you try to convert or hide assets.
If you file for bankruptcy, do not try to hide any of your assets. You may feel like you are protecting your assets, but, you are ruining your chances of bankruptcy. Your bankruptcy could be discharged and you could face penalties such as fines or even a prison sentence. To find out what you need to list on your bankruptcy paperwork, set up an appointment with a bankruptcy lawyer.