If you don’t list all of your property on your bankruptcy schedules, you risk losing it. Let me repeat this again, just in case you think I might be kidding: if you do not list all of your property on your bankruptcy schedules, you will lose it.
I’ve written about this before and I came across a recent decision out of the US Court of Appeals for the District of Columbia that reminds is that “list it or lose it” is alive and well.
The decision involved a debtor who failed to disclose the existence of a Title VII discrimination and retaliation claims against his former employer, Howard University Hospital. He brought the lawsuits in February 1999. In 2003, the debtor filed a chapter 7 petition and did not list the existence of the lawsuit on either Schedule B (list of personal property) or the Statement of Financial Affairs (which among other things, requires the debtor to identify lawsuits they are or have been a party to within a specific time period). In 2004, a chapter 7 discharge was entered.
In 2007, the debtor again filed bankruptcy – this time under chapter 13. And again, this debtor did not identify the existence of the lawsuit on Schedule B or on the Statement of Financial Affairs.
As the parties were preparing for trial, the employer learned of the two prior bankruptcy cases and sought to dismiss the case based on the debtor’s failure to disclose. The debtor moved to reopen chapter 7 bankruptcy case to identify the lawsuit, which the Bankruptcy Court allowed. But this 11th hour move did not save this debtor.
Because the debtor misled the Bankruptcy Court by not disclosing his interests in the law suit, and misled the District Court by essentially claiming that he was the proper party to the Title VII claims (when it is the chapter 7 trustee who should be the proper party), the debtor lost his rights in the employment case against Howard University.
There’s a lesson here: first, if you want bankruptcy protection and relief, tell the truth about your assets. You risk your discharge if you don’t, and you risk committing criminal charges for bankruptcy fraud. Second, if you’re inclined not to tell the truth, know that someone, somewhere will have the wherewithal to learn about your bankruptcy petition, look it up, and evaluate whether you are telling the truth or not. Bankruptcies are public record.
There are real consequences for lying under oath: it is a crime and morally reprehensible; it is also strategically disadvantageous if you’re trying to break free from the debt you find yourself buried in. Had this debtor disclosed the claim property, the debtor might have had other options – but instead, this debtor chose a foolish route.
With that said, I offer this reminder that can be underscored enough: list it, or lose it.
Read the decision here: Moses, et al. v. Howard University Hospital
- A little friendly reminder….
- The Stuff You Find on Craig’s List
- No Cake and No Discharge
- The Consequences of Non-Disclosure
- Not Huge and Very Stupid: A Discharge is Denied