Many reasons can make you commit a blunder when filling the mandatory disclosure documents. You may forget or overlook an asset or a transaction. Else you also choose to exclude an asset that is co-shared for fear of it being seized. All these errors can lead you to consequences that you can regret in life. If you are considering beginning life anew in financial intelligence and freedom, then advice from the top-notch Los Angeles Bankruptcy Attorney is the choice to make. We defend the clients accused of bankruptcy fraud in Los Angeles and reverse cases with lifetime consequences.
What Is Mandatory Disclosure?
Mandatory disclosure is the regulation that anyone filing for bankruptcy must comply with by revealing everything that determines their financial position. These candid disclosures are availed to the trustee, the debtor’s creditors, and the court handling your bankruptcy case.
The following are what should be revealed in a mandatory disclosure:
When considering a bankruptcy case, you ought to provide identification details such as:
- Your full name as it appears in the official identity documents
- The personal address
- The names of the businesses under your ownership
- The details of your most recent bankruptcy case if there be any
- The criterion you would use to pay the fee for filing the bankruptcy case
- The hazardous properties under your name
- Your residential status
- Whether you completed your credit counseling training or not
Property under Your Ownership
Mandatory disclosure also requires a declaration of all properties, both in the United States and those abroad. The properties may include:
- Money owed to you
- Household items such as television fridges and gymnasium
- Real estate properties
- Financial assets such as bonds stock cash and bank deposits
The mandatory disclosure aims at giving the court a hint of why you are eligible for a bankruptcy case. The court ought to know your previous financial situation. As a result, your financial position ought to be clarified by giving the following details for the past two years:
- Your annual gross income
- Recent transactions settled with your creditors
- The valuable items stored in the safe-deposit boxes
- Recent bank account closures
- Active lawsuits in court
- Borrowed properties and any repossessed property
Income Expenses and Debts
This piece of information is intended for determining the amount of disposable information that can be used as part of the nonexempt property. The following are therefore disclosed:
- Your monthly source of income, its regularity receipts, and the respective amounts
- The income of your spouse if married
- The monthly or annual living expenses such as rent, food clothing, health care, and taxes
- The list of all creditors, the amount he owed to them and the specific details on the nature of their claims
- List of creditors who have secured claims and unsecured claims
- Contracts that are still in force and leases that are yet to expire
The debts owed to creditors can either be unsecured or collateralized. If it is secured, you can get debts discharged.
The Bankruptcy Trustee
The trustee gets access to mandatory disclosure details since they represent the creditors in all financial transactions. The following duties of the trustee make them legally and reasonably able to access the mandatory disclosures:
- Approving repayment plans that you set with you creditors
- Liquidating any property that is not protected in the bankruptcy
- Possessing the debtor’s property or assets on behalf of the creditor
- Making approval for loans cram-down and lien stripping as for the debtor when the market of assets changes in to reflect the true market value
- Negotiating on transactions between the debtor and the creditor that regards the exemptions or the discharge of debts
- Releasing the proceeds of the estate to and in behalf of the creditor as per the agreement
Hence for the sake of a smooth process of bankruptcy, the trustee must have all the material facts of the mandatory disclosure.
Importance of Mandatory Disclosure
Revealing everything about your financial status is important, especially when seeking bankruptcy protection. Bankruptcy protection is extended to people who honestly cannot settle their debts for having found themselves in unfortunate financial situations. Hence they enjoy relief from debts they are supposed to disclose anything that has to do with their financial status.
Mandatory disclosures serve two reasons:
- To help those filing for bankruptcy gain a reasonable relief of debts
- To enhance the integrity in the bankruptcy process
Mandatory disclosure hence requires the affected person to disclose any solid assets such as properties and liquid assets such as bank accounts both in the US and those in other countries. It is the duty of the court or the trustee to determine if you are honest about your financial position by reviewing your disclosures. After reviewing the details of your disclosure, they help you make informed decisions on your financial future and bankruptcy procedures.
Filing for bankruptcy and further giving a declaration of your financial position through mandatory disclosure is not the end of life. It does not imply you will be deprived of all your assets. The purpose of a bankruptcy filing is to give you a fresh start in your financial life. Here you try your luck again and focus on building your asset volume again without debt burden.
Exempt and Nonexempt Property
After the mandatory disclosure, the court, in conjunction with the trustee determines the exempt and nonexempt property in your declaration. Nonexempt property is any asset you own that is not shielded from being taken from you by the bankruptcy. Whereas an exempt property is protected from being acquired from you by the bankruptcy laws.
According to your state exempt law, you will be able to protect assets that enable you to maintain a basic life such as running a home, working and educating your kids. Generally, the following are exempt assets could include:
- Household items such as clothing, jewelry, and television
- A certain amount of equity of their home
- A modest portion of the car’s equity
- The retirement savings
- A portion of earned but yet to be paid income
- Damages awards from personal injuries compensation
- Public benefits such as the amount of social security and unemployment compensation
- Tools you need to maintain your job or profession
On the other hand, the following properties if declared in the mandatory disclosure, will be given up in the bankruptcy case:
- Valuable items such as stamps and coins
- Investments and assets such as bonds, stocks, cash, and bank account balances
- Other items such as musical instruments if one’s profession is not music
- A second home that the debtor does not live in or a vacation home elsewhere
- A second vehicle
Whatever happens to your nonexempt depends on the type of bankruptcy you file. So this implies despite obeying the mandatory disclosure, you still have some control of what can happen to your properties through the type of bankruptcy you file.
For instance, when you file chapter seven bankruptcy, the trustee auctions all your nonexempt properties on behalf of your creditors. The trustee acts by powers granted by the court to handle your bankruptcy case. He, therefore, uses the proceeds from the sales to settle debts in the order required by the court.
Priority in payment is given to:
- Tax debts in case you defaulted paying your taxes
- Child or spousal support in case you have such legal obligations of paternity or divorce
The other non-priority bills settled when the amount remains or if the priority debts are not there.The non-priority bills include:
- Utility bills
- Credit card balances
- Personal loans that you defaulted
However, sometimes the debtor may not have any nonexempt property as it is legally determined by a thorough analysis of the mandatory disclosure. Their case hence becomes a no-asset case. The court has nothing to sell to settle the amount you owe to the creditors. Consequently, the creditors receive nothing from your bankruptcy case.
Misrepresentation in Mandatory Disclosure
Sometimes the debtors are not honest. They hide assets in bankruptcy proceedings in the following ways:
- Transferring ownership to somebody else or letting them hold the properties informally
- Making the assets less valuable through fake mortgages and liens
- Dishonesty in admitting property ownership
However, the court or the trustee will always see inconsistencies in your mandatory disclosure and determine that you are lying.
A flaw in the mandatory disclosure is always detectable, so you ought to think twice before settling on dishonesty. The trustee is vigilant to notice discrepancies in the disclosure by investigating the paperwork. They use the following criteria to determine as a sign of hidden assets nor properties:
- Conducting searches in the public records databases
- Reviewing the data of your debts with the mentioned creditors
- Evaluating your bank records and tax returns information
- Searching for the asset ownership online
- Gathering information from your former spouse, work colleagues, business partners, and acquaintances
- Assessing your payroll data to get the various deposits to social welfare security or other unlisted banks deposits
If the trustee suspects fraud in your mandatory disclosure, he will sue you in the local bankruptcy court. The litigation takes the nature of adversary proceedings. The main aspect of this case is being accused of defrauding, hindering, or delaying the creditors from obtaining the full amounts of debts they owe you. If this aspect is proved with unquestionable evidence, then you lose the opportunity to have your debts discharged.
Moreover, the trustee, through the powers of the court, is given the authority under the Bankruptcy Rule 2004 to investigate matters affecting your bankruptcy estate. The examination happens in case there is not enough evidence to bring a fraud case against you. The trustee can, therefore, review your liability, properties, financial condition, and conduct.
Credit and Debt Training Course
Mandatory disclosure is a requirement when filing a bankruptcy case. However, there is always a preliminary known training which one must satisfy before filling the asset and financial situation form. These courses are:
- Debtor education
- Credit counseling
The purpose of credit counseling helps decide whether the bankruptcy filing is the right option for you. A professional financial counselor takes you through to help you see your financial situation. The counselor helps you in going through various alternatives and financial goals.At last, you may be motivated and given steps you can use to establish your financial footing.
The consideration in credit counseling is that the bankruptcy option could have lasting impacts on your financial determinants, such as income assets and credit.
The course gives you tips on alternative payment methods of settling your debts.If, after the credit counseling, you still consider the bankruptcy filing as the best option for you, therefore, include the certificate of completion. This certificate shows that you have satisfied the education requirements before considering the option.
Taking credit counseling is done online or over the phone and can take less time, such as two hours.
After filing the bankruptcy and finishing the mandatory declaration, you are required to take debt education training. This education equips you with management tools useful for managing your finances after you recover from bankruptcy.
The tips covered in debt education training include:
- Budgeting your income
- Using the available credit responsibly
- Handling financial emergencies
A certificate is awarded after the completion of training.Debt education enables you to improve your financial genius hence you would be careful never to find yourself bankrupt again.
If you file a Chapter seven bankruptcy, then you must file your certificate of completion of debtor education within 60 days after the first hearing. Other debtors filing bankruptcy under chapters eleven, twelve and thirteen are legally required to submit the certificate before making the last payment to creditors.
Failing to file a certificate has the following consequences in your bankruptcy case:
- The court will never consider your case, and no debts will be discharged
- You will be required to pay the filing fee to activate your bankruptcy case
- In some courts, you still need to file a motion requesting for acceptance of a late-filed certificate and consequently the discharge of debts
All individuals filing a bankruptcy case under either of the chapters 7, 11, 12, or 13 must complete the courses stated above. Taking these two courses is not compulsory for business organizations that get insolvent and file a bankruptcy case. Couples are treated as individuals, and each must take the course on their own.
Consequences of Hiding Assets in a Mandatory Disclosure
It may seem like the wisest idea to reduce your worth and escape paying your debts, but the consequences are even a lifetime should you be caught. Remember that you can confidently defend an error such as forgetfulness, but you cannot give a consistent explanation when committing fraud. The figures from the disclosed assets will always show the inconsistency. Below are the consequences for hiding assets in mandatory disclosure:
Inability to get Debts Discharged
The purpose of filing for a bankruptcy case is to get debts you owe to your creditors discharged. This privilege, however, may be forfeited should it be unveiled you hid assets during the mandatory disclosure. The trustee will get access to the hidden assets and sell them to settle the debts they can, but still, you will owe debts to the remaining creditors.
Inability to File another Bankruptcy Case
Hiding assets in mandatory disclosure cast a shadow in your future bankruptcy case filing endeavors. The privilege of debt discharging is wiped forever. This means your creditors will be expecting you to pay them since no opportunity is available to wave them off.
Dishonesty, in a mandatory disclosure, is a criminal offense known as bankruptcy fraud. The conviction for fraud attracts the following penalties under the California state law:
- Imprisonment in for not more than 20 years
- A hefty fine of up to $250000
- A combination of the above penalties
Revoking Your Debt Discharge
You may have seemingly succeeded in getting away with hiding assets after the bankruptcy case is concluded, and debt discharge privilege is extended. However, this debt discharge can be revoked when the trustee realizes your fraud. The revocation may happen even a year after the debt discharge.
Time Limit for Debt Discharge Revocation
The trustee cannot always revoke the debt discharged in the court after the debts are waved. Only one year is allowed after court grants you debts discharge privilege for the trustee to revoke it. During the one year, the trustee can, therefore, scrutinize your mandatory disclosure documents for any fraud. After one year, the discharge of the debts cannot be canceled even with a piece of compelling evidence for fraud.
Find a Los Angeles Bankruptcy Attorney Near Me
Flouting the law on declaring all in the mandatory exposure may not be the right decision. As you stare at the consequences listed above, the Los Angeles Bankruptcy Attorney can come to your aid. We have overturned many seemingly formidable cases. When debt is overwhelming, and you need to make a financial change, our experience brings relief in your bankruptcy case. Call us today for inquiries about your case by dialing 424-285-5525.