New bankruptcy clients frequently ask us about whether they may transfer assets to another person prior to filing bankruptcy, or if they are required to list certain assets. In short, the answer is that you must list all assets and cannot transfer assets away to avoid the bankruptcy process. When you file a bankruptcy case, you are required to disclose all of your assets in your petition. You are required to be completely truthful, and you cannot hide assets. Attempting to hide assets can have serious consequences. Some people believe that if they hide assets, then the assets will not be taken by the court in their bankruptcy case. However, your bankruptcy petition is made under oath, and making false statements, including concealing assets, is considered perjury and could stick you with sever penalties.
Bankruptcy trustees are very good at uncovering hidden assets, and are not often fooled by debtors. All a trustee need to do is review public records, or bank account and tax return records that you are required to provide to the trustee. If you are found to have tried to hide assets, you can face a number of penalties. First, your hidden assets may not be eligible for discharge. Second, your discharge may be denied, which prevents any relief from the bankruptcy process. Third, you may face criminal penalties for perjury, which could land you in jail and/or subject to paying a large fine.
Sometimes, however, assets are not disclosed simply because a person made a mistake and simply forgot to list an asset. If this happens, you should immediately disclose the asset to the trustee. As long as you were not trying to delay, hinder, or defraud creditors, such a mistake, if corrected, should not result in a denial of your discharge.
Remember, it is much better to be truthful on the front end and list all assets in your petition. Usually, state exemptions apply that would prevent the trustee from taking your property, anyway. Trying to hide assets is most likely to leave you in a worse position than if you approached the process in a straight-forward manner.