J Thomas Black
Board Certified, Consumer Bankruptcy Law- Texas Board of Legal Specialization

If you are going to file bankruptcy, list all of your assets. If you don't disclose all of your property, in addition to possible criminal sanctions, you can have your bankruptcy discharge revoked, even after it has been granted. A Houston woman found that out the hard way recently. In re Chapman, Adversary No. 14-03201, U.S. Bankruptcy Court, Southern District of Texas, Houston Division.

This lady filed chapter 7 bankruptcy in February, 2013. She appeared at her Meeting of Creditors in March, and the trustee determined there were no assets. In May, the Court granted her discharge of debts. A new lawyer that she hired discovered that she had not listed certain assets and filed a motion to reopen the case to disclose new assets, and listed the assets in the bankruptcy.

The U.S. Trustee office then filed an adversary proceeding to revoke her discharge based on her original non-disclosure. The debtor eventually admitted in the adversary proceeding that she had failed to disclose a counterclaim, mineral rights, bank accounts, a life insurance policy, a tax refund, eight causes of action (possible lawsuits against other parties), two personal vehicles, three trucks, and office equipment.  The debtor argued that the non-disclosure was not intentional on her part, and blamed it on her first lawyer in the bankruptcy case.

After hearing the evidence including the debtor's testimony and that of the first lawyer, Judge Isgur disagreed with the debtor. He held that the discharge was obtained through fraud, and that fraud under 11 USC 727(d)(1) includes the intentional failure to disclose assets. He pointed out that a mere omission of assets will not constitute a fraud justifying revocation of the discharge. Instead, it must be knowing and intentional. The Court stated:

As to her fraudulent intent, the Court need not go far. After she filed bankruptcy, Ms. Chapman utilized the undisclosed assets as her own. She received and spent the undisclosed tax refund, she prosecuted the undisclosed lawsuit against Bank of America, and she retained possession of the undisclosed vehicles. Ms. Chapman’s failure to disclose, combined with her false testimony, and her use of the undisclosed assets after the petition date, demonstrate her bad faith and her fraudulent intent.

The decision is being appealed by Ms. Chapman.

The lesson here is to always disclose all assets to the bankruptcy court. If you fail to do so, even unintentionally, you risk having your discharge challenged and denied, or even revoked after you have received it.

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