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Bankruptcy

: Florida Bankruptcy Law

Debtor Is Responsible To Report Changes In Finances Or Assets Up To Day His Petition Is Filed

By Jonathan Alper

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I read a blog post by attorney Craig Andresen, a Minnesota bankruptcy attorney, discussing a problem which occured when a debtor?s assets or finances changed just prior to the attorney?s filing of the debtor?s bankruptcy petition. Most bankruptcy clients complete a bankruptcy questionnaire or sample schedules which they give to their bankruptcy attorney?s office for preparation of a bankruptcy petition. When the debtor signs the final petition he is swearing to a financial situation that exists when the signs the petition and not the financial facts when he completed the questionnaire. It is the debtor?s duty to inform the attorney of any changes in his assets or financial situation up to filing the petition.

Mr. Andresen discussed a case with the following facts:

"Before filing chapter 7, the debtors had told their lawyer that they had $325 in their bank account, based upon their average balance in the preceding months. Accordingly, the lawyer listed $325 as their bank balance in the bankruptcy schedules. Before reviewing the schedules, the debtors received a $17,000 loan against the husband?s 401(k) account. They deposited the loan proceeds into their bank account.

Upon meeting with the lawyer to sign the bankruptcy schedules, the debtors failed to inform the lawyer of the greatly increased bank balance. Consequently, the schedules were filed with the erroneous figure of $325, when the actual bank balance was in excess of $13,000. "

They tried to amend their bankruptcy schedules to exempt the entire balance. The bankruptcy court denied the amended exemptions, and the Eighth Circuit Bankruptcy Appellate Panel agreed. The debtors had signed their bankruptcy schedules under oath, and they had testified under oath at the meeting of creditors that their schedules were accurate. (the case is In re Barrows 09-6003)

I represent a debtor facing a similar issue. The debtor signed his petition and mailed it to my office for filing. The debtor assumed that we would not file his petition for a few days after he mailed it to us. The debtor had $10,000 in his bank account. The day he signed the petition he also mailed the $10,000 to his mortgage lender to pay past due mortgage payments in an effort to save his house from foreclosure. He did not asks us to hold his petition pending clearance of his check, nor did he tell us about the money in the account or the mortgage payment The debtor assumed the mortgage company would have the $10,000 by the time his petition was filed.

It turned out that my secretary received his signed petition as she was filing previously other petitions, and she filed this client?s petition immediately upon receipt. The mortgage check had not cleared. The bankruptcy trustee found that the $10,000 was still in the debtor?s account on filing date. The trustee wants the money. We'll see what happens.

The point is that you must inform your bankruptcy attorney about any changes in your assets or finances up to the date of filing. Things can change between the time you first complete a bankruptcy fact questionnaire, the time you sign your petition and up to the time your attorney files the petition. You are responsible for the contents of your petition on the filing day.

posted by Jonathan Alper, bankruptcy and asset protection attorney, Orlando, Florida

Full post as published by Florida Bankruptcy Law on July 19, 2009 (boomark / email).