Tell the Whole Truth When You File For Bankruptcy

Don't get clever and try to hide property. It will come back to haunt you.

You sign your bankruptcy papers under penalty of perjury, swearing that everything in them is true. One of the things you're swearing to is that your forms are complete, because the forms ask you to list "all" property and debts. Filing incomplete or inaccurate bankruptcy forms can lead to your case being dismissed -- or worse, if the court thinks you omitted information or made false statements intentionally.

The law is not supposed to punish those who make one or two honest mistakes. If you accidentally leave something off your papers or misstate something on your forms, you can correct your papers or explain the mistake to the trustee. But if you inadvertently leave out so much that it appears that you were careless or that you intentionally left it out, the court can find that your actions demonstrate an indifference to the truth and can dismiss your case or deny you a discharge on that basis.

If you deliberately hide assets or use a false social security number, it will effect you more than your current debt crisis.

List Creditors Even If You Don’t Think You Owe Them a Cent

Bankruptcy can't help you if you hide information. If you fail to list creditors, the debts you owe them may not be wiped out by your bankruptcy discharge. So if there is someone who claims you owe them money, be sure to list them on your bankruptcy forms even if you don’t think you owe them anything. You can indicate that the debt is "disputed." If the debt is already the subject of a pending lawsuit, the debt can be listed as "contingent" -- that is, it depends on how the lawsuit comes out.

When your bankruptcy is finished, you will no longer owe any debts that have been discharged. If a disputed debt is discharged, the entire dispute will be irrelevant. The creditor will be legally barred from collecting anything more from you regardless of who is right.

Don't Omit Creditors Just Because You Like Them

If a relative loaned you money and it wasn't a gift, the relative is a creditor and needs to be listed on your forms.

You may feel bad about the fact that bankruptcy will leave certain creditors with nothing, especially if you have a personal or long-standing business relationship with the creditor. But bankruptcy doesn't allow you to play favorites in listing your financial obligations. In fact, a central purpose of bankruptcy is to make sure that all of your creditors get their fair share of what you have, and that certain obligations (like child support) are not shortchanged. If the bankruptcy trustee learns that you've omitted creditors from your list, you'll have to add them, and it will raise suspicion about other statements on your forms.  You may be able to reaffirm some debts but they must be listed.

Don't Forget to List Money You May Have Coming to You

Although it's a common mistake, don't forget to list assets you may have coming to you when you are listing your property. A few examples of property that's easy to overlook:

• an inheritance from a recently deceased relative that you have not yet received.

• stock options, trust funds, or tax refunds.

• pensions, retirement funds, annuities, and life insurance.

• judgments from lawsuits you've filed or could file, arising from a personal injury or other matter.

All of these are examples of property that you must list on your forms. You may get to keep some or all of this property by claiming it as exempt, but you must list it so that the trustee has a complete picture of all of your finances.

Don't Underestimate Your Living Expenses

Many of us spend more than we think we do. Perhaps that's what got you into money troubles in the first place. When you file for bankruptcy, it's no time to deceive yourself. It will only hurt your case. Take the time to fully include all of your expenses on your bankruptcy papers.

If you underestimate your expenses, the trustee might conclude that you have enough extra income each month to support a Chapter 13 repayment plan, and could prevent you from filing a Chapter 7 bankruptcy.

Don't Deliberately Hide Assets or Other Financial Details

If you deliberately fail to disclose property, omit material information about your financial affairs, or use a false Social Security number to hide your identity as a prior filer, and the court discovers your action, your case will be dismissed and you may be prosecuted for fraud.

The punishment for fraud is serious: Jail time is not unusual for those who try to hide property from the court and get caught. Take note of these recent actions.

• A debtor in Massachusetts went to jail for failing to list on his bankruptcy papers his interest in a condominium and $26,000 worth of jewelry.

• Another Massachusetts debtor is serving time for listing her home on her bankruptcy papers as worth $70,000 when it had been appraised for $116,000.

• A Pennsylvania debtor omitted from her papers $50,000 from a divorce settlement and was sentenced to time in prison.

A debtor in Ohio was imprisoned for using a false Social Security number.

This and other information is available at http://www.nolo.com.