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Chicago Bankruptcy Question: Do I have to list all of my assets when I file for Chapter 7?

Chicago Bankruptcy Question of the Day: Do I have to list all of my assets when I file for Chapter 7 bankruptcy?  The short answer to that question is an emphatic yes.  Every asset you own or are financing, every receivable due to you and every contingent asset you may receive, such as proceeds from a lawsuit, must be listed and disclosed in your Chapter 7 bankruptcy petition. 

Section 521 of the U.S. Bankruptcy Code states that one of the duties of a Debtor in bankruptcy is to file a schedule of assets.  The reason that a schedule of assets must be filed in a Chapter 7 bankruptcy is because the trustee in your bankruptcy must be able to determine whether or not there are non-exempt assets that you own that could be liquidated to pay any or all of your debts.  Most assets that you own are protected by a series of exemptions.  In Illinois, we use state law exemptions to protect assets.  These include exemptions on your primary residence, your motor vehicle, your personal property (depository accounts, furniture, household items), your retirement funds, etc. These exemptions are limited in size and scope, however, so the advice of a good bankruptcy lawyer is vital in preparing these schedules.

The vast majority of cases filed under Chapter 7 are "no-asset" cases, meaning that there are no non-exempt assets available for the trustee to liquidate and pay your creditors.  In these cases, all of the assets of the debtor are protected and no property is lost.  There are cases where some assets are not protected.  In those cases, either the property can be surrendered to the trustee for liquidation or your bankruptcy attorney can negotiate a buyout of the equity from the trustee. 

Failure to disclose an asset in your schedules can result in very serious consequences.  The trustee, upon discovering an unscheduled asset, may refuse to negotiate with the bankruptcy lawyer and simply seize and sell the asset.  The trustee or the U.S. Trustee may file a motion seeking denial of discharge for failure to act in good faith in not disclosing the asset.  If the U.S. Trustee believes that there is actual intent to defraud involved, they can (and will) pursue a criminal action against the debtor for bankruptcy fraud, which can result in hefty fines and prison sentences.  This is not an area where you want to take chances in disclosure.

The advice of an experienced Chicago bankruptcy attorney is absolutely necessary to ensure that all assets are properly scheduled, that all allowable exemptions are maximized and that, if there is a non-exempt asset, that you have proper representation throughout the negotiation process with the trustee.  At Ledford & Wu, we are happy to offer a free in-person consultation to review your assets, explain your options and represent you throughout the bankruptcy process.

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