Hiding Cash During Chapter 7

When filing for bankruptcy, it’s important to understand that not all of your assets need to be surrendered. While it’s true that cash can be included, hiding cash during Chapter 7 is not a wise decision. The good news is that certain exemptions may allow you to keep your property, including cash. 

However, it’s important to note that most state exemptions won’t protect significant amounts of cash. That being said, wildcard exemptions may be able to provide coverage for larger sums. If you’re considering filing for Chapter 7 bankruptcy, it’s crucial to understand the various exemptions available to safeguard your assets, including cash.

Bankruptcy Exemptions to Help Protect Cash

In exchange for your Chapter 7 bankruptcy discharge, you agree that the bankruptcy trustee who is appointed to manage your case can take the property to repay unsecured creditors. However, you can keep an item of property or money that is exempted under the bankruptcy exception laws.

Your state’s law will determine which exemptions you have. While some state exemptions cover cash, others only $300. Some states also have wildcard exemptions, or general personal property exemptions, which allow you to protect all types of property up to a dollar limit.

Example: Let’s say your state does not exempt cash but allows you to use the $3,000 wildcard exemption. If you have $4,000 cash, the wildcard exemption can be used to protect $3,000 but you will likely have to surrender the $1,000 remaining.

Cash That Might Be Exempt

These are examples of cash or assets that can be converted into cash and could qualify for additional bankruptcy protection.

  • IRs and other exempt retirement funds or benefits
  • Salary
  • Unemployment benefits
  • Public assistance
  • Cash or bank balances
  • Social Security proceeds
  • Personal injury lawsuits

Cash That Won’t Be Exempt

In general, exempt property that you sell before bankruptcy filings is generally not subject to exemption protection. If you are entitled to a $2,500 motor car exemption and you sell your vehicle before you file for bankruptcy, you cannot claim the proceeds as an exemption under the motor vehicle exemption.

This is not always true. Some state exemptions let you protect your home sale proceeds for a specific period. Social security proceeds are exempt from tax as long as they can trace their source (e.g. if the funds are deposited in an exclusive-use account).

Talk to a Bankruptcy Attorney

It is important to know what happens to your property if you file bankruptcy. You may not be able to dismiss a Chapter 7 bankruptcy case if you make an exempt mistake. Even if you lose something you thought you could keep, the court will continue distributing your non-exempt assets to creditors. To ensure that you navigate the bankruptcy process smoothly and protect your assets, it’s advisable to consult with a bankruptcy attorney.

What Happens If You Hide Your Property

Here’s what could happen if you fail to list any of your assets and property on your bankruptcy papers.

Your Debts Will Not Be Discharged

Attempting to conceal assets during a bankruptcy proceeding can have serious consequences. If the court discovers that you’ve hidden any property, you won’t be able to discharge your debts. Your Chapter 7 bankruptcy case won’t be dismissed, but you’ll be required to surrender any non-exempt property to the trustee overseeing your case. The trustee will then sell the assets and use the proceeds to pay off your creditors. You’ll still be responsible for any remaining debt after the sale, so it’s important to be transparent with the bankruptcy court about all of your assets.

Your Discharge Can Be Revoked by the Trustee

The trustee has the authority to ask the court to revoke or take back your discharge if they uncover any hidden assets. It’s important to note that this action can be taken at any point, even after the discharge date has passed. 

These Debts Cannot Be Discharged in Subsequent Bankruptcy Filings

The debts listed in your bankruptcy filing cannot be eliminated in any future bankruptcy cases if your discharge was denied or revoked due to concealing assets.

Criminal Charges Could Be Brought Against You

It is important to understand that when you sign bankruptcy schedules that list your assets, you are making a legally binding statement that they are accurate and truthful. If it is found that you have provided false information, you could face serious consequences. Specifically, you could be charged with bankruptcy fraud, which carries a penalty of up to $250,000 in fines, up to 20 years in prison, or both. Therefore, it is crucial to ensure that all information provided during the bankruptcy process is completely truthful and accurate.

How Do People Hide Assets?

There are many ways that people try to hide assets during bankruptcy proceedings. Bankruptcy trustees know all of them. Here are some examples:

  • Lying about having assets
  • Transfer assets to another person’s name or give them to someone to keep
  • To make assets appear to have no value, create fake liens and mortgages.

It could also be considered to be hiding assets if you fail to disclose an asset transfer that occurred before the bankruptcy filing.

How Will the Trustee Find Hidden Assets?

A bankruptcy trustee is appointed to review your case and can look for hidden assets. Hidden assets might be found by the trustee using any of these methods:

  • Review your debts 
  • Public record searches
  • Online asset searches
  • Payroll slips showing deposits to unlisted bank accounts and retirement accounts
  • Bank records and tax returns
  • Reports from a friend, former spouse, coworker, or business partner

If the trustee discovers you have hidden assets, they will file a lawsuit in bankruptcy court (called an adversary proceeding). The court will deny you discharge if it finds that you failed to list assets or have hidden assets in order to delay, hinder or defraud creditors.

What Happens if You Genuinely Forget to List an Asset?

You might not be allowed the right to any assets you haven’t listed that the law permits you to keep once they are discovered. However, you might forget some assets if you’re filling in your bankruptcy schedules.

Here are some examples of assets that you might overlook to list:

  • Lawsuits you filed including personal injury claims and insurance claims
  • Lottery winnings and annuities that you receive over time in payments
  • Beneficial interests in trusts
  • Retirement benefits
  • Potential inheritances and inheritances not yet sorted out by probate court
  • Co-owned assets: bank accounts, real estate, automobiles, and remainder interests

Once you have realized the error, you will need to immediately file papers to disclose it. If the circumstances prove that you did not intend to delay, hinder or defraud creditors, the court will not deny or revoke your discharge. It is important to take corrective action as soon as possible so that others don’t discover the error.

Meet With a Bankruptcy Lawyer

If you’re facing a bankruptcy court problem, you may be feeling overwhelmed and unsure where to turn. That’s where Bruner Wright comes in. Our team of expert bankruptcy attorneys is here to help you navigate the complexities of bankruptcy law and achieve the best possible outcome for your situation. Don’t try to handle a bankruptcy case alone – our attorneys have the experience and knowledge necessary to guide you through the process and keep you out of trouble. Contact Bruner Wright today to see how we can assist you.

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