Myths and Truths About Chapter 7 Bankruptcy, Part IV

Myths and Truths About Chapter 7 Bankruptcy, Part IV

Myth:  A debtor can dismiss a Chapter 7 bankruptcy if the Trustee finds assets.

Truth:  In a Chapter 7 bankruptcy, it is not possible to voluntarily dismiss your case if the Trustee finds assets.  Generally, a debtor can voluntarily dismiss their case before discharge if they change their mind about filing the bankruptcy; however, this is not the case if the Trustee has found assets.  When a bankruptcy is filed, the debtor has an obligation to list any property they have at the time of the filing and the value of said property, as well as any pending insurance claims, inheritance, and personal injury claims, etc.  If the Trustee determines that the personal or real property has a higher value than the debtor originally assessed or if the Trustee finds assets that were not listed in the bankruptcy petition, the Trustee can seize the assets if they are not exempt.  In order to prevent this from happening, many debtors request to voluntarily dismiss their case without discharge so they may retain their assets.  This is not a possibility.  If a Trustee finds unexempt assets in a Chapter 7 case, debtors are unable to dismiss their case voluntarily.  That is why it is so important for debtors to accurately disclose their property and assets (present and future) to their attorney and on their bankruptcy petition before filing. 

Myth:  If a debtor does not list something on the bankruptcy petition, the Trustee will not find out.

Truth:  It is essential for debtors to disclose all income, assets, and property, as well as the accurate value, on their bankruptcy petition and to disclose this information to their attorney.  It is also important for debtors to list any transfers, money paid to family members or friends, payments to creditors, etc.  The trustee completes their own investigation into the debtor's petition.  They can check what property the debtor has and the value of the property.  They can also find out about transfers of property and the recipients of transferred property.  Trustees can require an appraisal of real or personal property if they believe the value listed is too low.  They sometimes even wish to view the property personally.  They can also look at bank accounts to determine if money was taken out or given to someone else or if income was earned but not reported.  The Trustee will ask debtors questions under penalty of perjury.  For this reason, it is essential to disclose fair, honest, and accurate information on the bankruptcy petition and schedules. 

If you have any questions, please contact a St. Louis or St. Charles bankruptcy attorney.