The Definition of Bankruptcy Assets
August 5, 2011
By: David M. Serafin
After the initial consultation, I’ll forward my standard questionnaire requesting thorough information regarding assets/liabilities and income/expenses for the debtor. Clients are made very aware that ALL assets of every kind must be disclosed and listed on the bankruptcy schedules. As an experienced Littleton bankruptcy lawyer, I will then determine whether a given asset should be claimed as exempt from creditors, or the chapter 7 or chapter 13 trustee.
Most assets owned are fairly obvious. Real estate, cars, cash in bank accounts, a retirement account and household goods, such as furniture, fit in this category. But, clients must know that other assets owned may include the following: a pending personal injury claim or lawsuit, property owned by a business or partnership owned by the debtor – including business accounts receivable, equipment, inventory or tools, or any real property titled in the debtor’s name (even if solely paid for and used by another), or a timeshare. The sanctions imposed for failing to disclose an interest in any type of property are very serious ranging from a given debt being excluded from bankruptcy discharge, denial or revocation of discharge, and/or even criminal prosecution by the Federal government.
To reiterate, ALWAYS tell me about any assets you believe you own and we’ll discuss what could happen to the asset (if anything) in bankruptcy. Many assets up to a certain value are exempt and, even if an asset is partially or fully non-exempt, waiting to file a chapter 7 or filing a chapter 13 bankruptcy – to pay back the non-exempt portion of the equity into a repayment plan – will allow you to keep the property.
At the same time, debtors are permitted to spend down cash or bank accounts, or sell assets (and then spend down such proceeds) prior to filing for chapter 7 or chapter 13. For instance, a recent chapter 7 client sold a parcel of non-exempt land for $20,000. After paying realtor commissions and title costs, I advised the debtor to pre-pay the car payment (for 2 vehicles), pay back non-dischargeable Priority taxes back to the IRS and State of Colorado, and contribute the remainder – within IRS guidelines - to an ERISA qualified retirement account. The chapter 7 trustee had no issue with our pre-bankruptcy strategy and deemed the case as a no-asset chapter 7, meaning that my client could not be asked to turn over anything.