When you ask if the bankruptcy trustee appointed to oversee your case can find your bank account, you’re implying that you failed to disclose it. Purposely omitting a bank account or any other asset can cause you to come out of bankruptcy a lot worse off than when you went in. Why? Because failing to list a bank account can be a federal crime.
In this article, you’ll learn that the trustee will review your filings and documents, ask questions about the information you provide, and conduct audits when necessary. Learn about the steps involved in filing a Chapter 7 bankruptcy case if you aren't familiar with how bankruptcy works.
The Trustee Will Review Filings and Documents
When you file a bankruptcy case, you’ll provide extensive financial information to the court, including listing all your creditors, income, expenses, recent payments, and other financial transactions. You must also list all property, including money.
If you are thorough, you’ll include:
- checking and savings accounts
- utility deposits
- retirement accounts
- certificates of deposit
- investment accounts
- layaways
- Christmas Club accounts
- gift cards
- savings bonds, and
- the balance in your wallet and the change jar on your dresser.
Although you might be surprised by the level of detail in a debtor’s bankruptcy schedules, every one of those items must be disclosed even if the property qualifies for a bankruptcy exemption—the law that allows you to keep assets needed for a fresh start.
The Trustee Will Ask Questions About Your Bank Account
Part of filing for bankruptcy involves providing documents that prove the truth of the answers in your paperwork. You’ll have to send these before the 341 meeting of creditors—the hearing that all bankruptcy filers must attend.
You’ll likely have to forward bank statements or bring them to the meeting. If you show up without bank statements, the trustee will question you about where you keep your cash and how you pay your bills. You might have to produce evidence of money orders or receipts for payments. The trustee will likely consider this to be a red flag that will trigger further investigative steps.
Learn when the trustee will come to your house.
A Bankruptcy Audit Could Uncover an Account
The trustee might also uncover a hidden bank account during a case audit. The bankruptcy code instructs the U.S. Trustee (a division of the Justice Department) to audit Chapter 7 and Chapter 13 cases, both randomly and in any case that raises the trustee’s suspicions.
If your case gets selected, the audit firm will likely ask you for additional documents or evidence to support the information in your bankruptcy schedules. And the audit firm isn’t limited to reviewing your bankruptcy schedules (although they will scrutinize them for inconsistencies). An audit can include:
- public record searches
- online asset searches
- accounting records for a business
- payslips for evidence of a direct deposit
- tax returns, and
- reports from friends, family members, and unhappy ex-spouses.
If you’re worried about an audit, consider meeting with a bankruptcy attorney. Being familiar with the types of things that trigger audits, the lawyer will review your case and help you take steps to ensure that your filing is above reproach.
You’ll Declare That You’ve Been Truthful
Above your signature in several places within your schedules, you’ll find a warning that advises you that you’re signing the form under penalty of perjury and that you declare that you’ve read the summary and schedules and that they are true and correct.
Committing perjury under federal bankruptcy law carries possible penalties, including:
- up to twenty years in prison
- up to $250,000 in fines
- restitution (money to pay back any damage caused)
- the loss of your discharge
- the loss of some citizenship rights, and
- deportation for non-citizens.
Learn valuable tips that should help keep you in the clear and avoiding bankruptcy fraud.
Bankruptcy Fraud Headlines
Most bankruptcy fraud cases don't make the national headlines, but these did—and they’ll likely give you insight into why you want to avoid this area.
- An ex-pro baseball player landed in prison for six months, plus was hit with 200 hours of community service and $200,000 in restitution.
- A bankruptcy judge sentenced a real housewife to 15 months in federal prison and $200,000 in restitution.
- The real housewife's husband received 41 months in federal prison and will likely face deportation when he finishes his sentence.
- The mother of a dancing child reality star received one year and one day of prison time and two years of supervised release, plus a $40,000 fine and $120,000 in restitution, and had to give up a DNA sample.
Of course, it isn’t just the rich and famous who come under scrutiny. The FBI investigates bankruptcy fraud, and it’s likely fair to say that they’ve seen it all.
