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The Importance of Honesty When Filing for Bankruptcy

When filing for bankruptcy, some people get the notion that they must do whatever they can to protect and preserve their finances and assets, including lying. It should go without saying but falsifying a bankruptcy filing is not the best idea or even a good idea at all. The bankruptcy court is thorough, looking under every metaphorical stone for money and valuables. If you are anything less than honest, take it from an experienced bankruptcy lawyer, they will find out sooner or later.

What Can Happen If You Lie to the Bankruptcy Court?

If you are wondering, “What is the worst that can happen if I am not honest during my bankruptcy,” consider this recent example out of North Carolina:

A debtor – call her Cindy – filed for Chapter 7 bankruptcy and included several parcels of real property as Aheld@ for other parties when, in fact, the parcels and two more than were completely unmentioned belonged to her. Cindy also chose not to disclose within her Statement of Affairs that prior to filing her case, she had been given an $80,000 insurance payout following a robbery; $47,500 was used to pay random debts to friends and family, and another $7,500 was actually a sham transaction that went straight into a hidden bank account, along with several other transactions.

When the bankruptcy court discovered, without much effort, her numerous nondisclosures, it cited 11 U.S.C. 727 (a)(4)(A) and denied her filing altogether. But simply losing her chance at a successful bankruptcy filing was not her only concern. The court also referred the case over to the United States Attorney’s office for investigation of criminal wrongdoing. If charged and convicted of the fraud, Cindy could face high fines and incarceration.

What is the Moral of the Story?

The lesson to learn from Cindy’s mistakes is that you need to always tell your lawyer everything when you are filing for bankruptcy. Trying to sweep things under the proverbial carpet just doesn’t work and puts everything you have in jeopardy and could put you behind bars.

If you are thinking about filing for bankruptcy in Arizona, contact the Law Office of Harold E. Campbell P.C. Our Mesa bankruptcy attorneys would happen to go over your legal options and reaffirm why you must be honest in your bankruptcy filing, during an initial consultation.