Bankruptcy Denied: Failure to Explain Loss of Assets

During bankruptcy the debtor, the individual owning the creditors, will surrender his or her assets to the trustee as per the terms of the court approved bankruptcy. This is known as a loss of assets, even though the trustee will, upon discharge of the bankruptcy, return to the exempt items to the possession and control of the debtor. Failing to claim items correctly as exempt through the bankruptcy or an attempt to conceal assets can result in the bankruptcy being denied and possibly even criminal charges.

Loss Of Assets

During the bankruptcy hearing the trustee assigned to the bankruptcy case will review all assets and debts of the individual or individuals filing the bankruptcy. If the trustee doesn't believe that the individual is truthful about the loss of value of a particular asset or his or her ability to repay the debt, they can deny the discharge of the bankruptcy. Loss of assets can also include the failure to explain why the asset cannot be used to bring the debt current and therefore eliminate the need to go into bankruptcy. While there are allowable exemptions from bankruptcy often individuals intentionally or unknowingly list exemptions that are not allowable.

Objectors

Any creditor or the trustee can object to the discharge of the bankruptcy due:

• Failure to explain loss of assets
• Failure to have proper documentation and records
• Making false statements or preparing false accounts
• Hiding assets or property prior to filing for bankruptcy

The objector has to provide detailed information on their objection to the bankruptcy, which is most often hiding or transferring substantial assets or failing to explain the value of an asset accurately. When this occurs the debtor then has the opportunity to respond and clarify the information they provided to have the objection dismissed. Failure to do so can result in the denial of bankruptcy relief, allowing the creditors to proceed with legal action to recover the amount owed.

Legal Support

Accurately listing and evaluating all assets and knowing what legally qualifies as an exemption to the bankruptcy is critical in preventing a denial from happening. An attorney that is familiar with bankruptcy law can provide just this information  as well as assist in preparing any explanations for objections that may occur. Working with an attorney to protect your assets through bankruptcy also means you won't fall into many of the common mistakes, some which can have long term financial and legal implications.