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Hidden cash prevents bankruptcy discharge

On Behalf of | Dec 13, 2017 | Bankruptcy

Virginia residents who are considering undergoing bankruptcy should understand that it is a legal process and that their bankruptcy may not be discharged if they do not follow proper procedure. This is what occurred to a single mother who filed for Chapter 7 and did not disclose that she had $3,500 on hand.

On November 22, 2017, a bankruptcy judge in Illinois determined that the debtor purposely hid the money, but that the debtor’s attorney shared some of the responsibility for her actions. The debtor had filed for Chapter 7 bankruptcy to stop her wages from being garnished by a creditor. Individuals who file for Chapter 7 bankruptcy have their assets liquidated to pay creditors. In the majority of cases, the debtors receive a discharge, which eliminates most of their debts.

The debtor submitted disclosures forms with her bankruptcy that stated she expected to receive almost $10,000 in tax refunds. However, the debtor had already received the refund and had spent a portion of it. The debtor admitted during the meeting of creditors that was held by the trustee that she had cash available when she filed for bankruptcy, but she did not disclose the funds as she intended to use them to assist with rental and moving costs.

A lawsuit was filed by the trustee to deny the discharge on the basis that the debtors gave false testimony and intentionally withheld money from the creditors by spending the funds. The court concurred with the lawsuit’s assertion.

A bankruptcy attorney may advise clients of how the Chapter 7 bankruptcy process works and how it could help them find debt relief. The attorney may also explain which assets may be liquidated to pay off creditors. Assistance may be provided with filing the necessary bankruptcy documents to stop wage garnishments, creditor harassment and repossessions.