The idea of a debtor “hiding assets” before filing for bankruptcy infers that the debtor is likely going to not state ownership or awareness of that asset in the bankruptcy papers filed. Doing the action of hiding assets before the filing is “intent to defraud”. This is a criminal act and it is premeditated. Filing bankruptcy papers without listing the hidden asset is “criminal fraud”. It is a felony, and, again, it is premeditated. Add to this the fact that the debtor is violating Federal Law as well as likely violating state law means that the debtor is taking quite a lot of risks hiding assets. Federal law has a statute of limitations of five years after a discharge or dismissal or denial judgment occurs in the bankruptcy. If no judgment has occurred, then there is no limit to the prosecuting the crime. Penalties are up to $250,000 and or five years in prison and or any other violation that occurred due to this criminal act. Needless to say, the federal government takes hiding assets as a serious violation. On top of this, any relief provided in the bankruptcy will have been reversed, monies owed will be reinstated, and the government will likely prohibit use of the bankruptcy laws for some stated number of years.
On might wonder why the heavy handedness of penalties. The filing of assets and liabilities is an action that debtor does as if the debtor were under oath. This is a stated expectation in the federal law. In fact everything that the debtor says and does is said and done under oath. Truth is the only acceptable condition.
In the first place, there is a high risk of discovery because the task of the court appointed trustee is to investigate the list of assets and liabilities against background information available to the trustee. A number of people expressed some experience around this and to a person they said the downside is not worth taking the chance is the first place. This result goes on the debtor’s credit reports, driver’s report as well as a criminal record. Nothing but a big bowl of bad bubbly is what it is. It is definitely not worth it.
So, what are the alternatives, the options … the preferred options? Negotiation is an option, before the filing discussing alternatives with creditors, after filing using of federal and state statutes on exemptions, the need to support one’s self and family. Many different types or sources of money are exempted under federal law. States vary greatly on supplementing with the state’s ideas on exemptions. Some states exempt $20,000 for an individual, even more if family and dependents exist. To use state exemptions in some states, the debtor must be a resident in that state for a statute stated number of years, like two years. Some states will protect the debtor’s home, especially in light of the mortgage scandals of the last few years. On the other side, there are many types of debt that bankruptcy excludes, leaving the monies owed fully intact for after the bankruptcy is decided and finalized.