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Bankruptcy Law Frequently Asked Questions (FAQs) | Missouri & Illinois Common Bankruptcy Legal Questions

Q: I am currently in the process of preparing to file for Chapter 7 bankruptcy. I have been current on my house and car payments. There is no equity in the house as I now owe more than it’s worth. In my filing, do I need to list the house and vehicle because I don’t want to risk losing them?

A:

This is actually a very common question. Since the mortgage industry’s collapse, many people do not believe they should list a home with no equity. However, this is a serious mistake. Under bankruptcy law, you must list all assets and all debts you have on the date of filing.

All of your personal or real property (such as your car and home) makes up the “bankruptcy estate.” Your estate has specific items that may or may not be taken from you to satisfy your obligations to creditors. Generally, in a chapter 7, if you have no equity in your home and are current on payments, you will not lose the home in the bankruptcy.

Failure to list all property in your estate will only result in your right a discharge of your debt being delayed or possibly even revoked.

When you file for bankruptcy, even if the case is dismissed, the filing will remain on your credit report for a certain period of time. Therefore, you shouldn’t let your credit rating be affected while failing to obtain the relief you may deserve because you didn’t want to list all your assets. An experienced bankruptcy attorney’s first job is to protect your assets. He or she will be able to tell you if something is in danger, but only if he or she knows about it up front.

In order to receive a discharge, you need to disclose all assets and liabilities. You are filing a federal document requiring full disclosure. In fact, when you attend your hearing 30 days after you file your petition, you will most likely see a sign posted on the wall stating: “Bankruptcy fraud will be reported to the FBI.” Intentionally leaving assets off of the schedules can lead to charges of bankruptcy fraud.

In your filing, your goal is to have the person who has been assigned to review your petition and schedules, known as a “trustee,” to look through the pages and see that you are eligible for a discharge. In order for this to happen, the trustee needs to know the value of all your assets.

Typically, you will not need to list small things like the number of towels or forks you own. These types of things will normally be lumped into a category called “household goods” but if you have separate pieces that might be valuable on their own, like antiques, a grand piano, or Rolex watch, it is better to list these individually. However, failure to disclose all information will only mean your petition will be facing tougher scrutiny than if you had disclosed everything from the beginning.

Your 10-year-old dog is considered an asset, even if it has no marketable value. Airline miles are an asset of your estate. Current or potential lawsuits are assets. Money you owe your mother is a liability, even if you plan on paying her back after you file for bankruptcy.

In reality, very few or our clients actually lose any property when filing bankruptcy. So, don’t just assume that if you own something free and clear from any debt that you will lose it. A qualified bankruptcy lawyer will be able to discuss the items you want to protect and all of your legal options to do so.

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