When filing Chapter 7 bankruptcy, a debtor must disclose all interests in any assets, including assets that have not yet been received, but which the debtor is entitled to receive. Assets that are often overlooked by debtors include:
• Old bank accounts that have not been used in a while;
• Tax refunds;
• Stock accounts or bank accounts where the debtor does not control the money, but has a legal interest in the account;
• Right to receive unpaid alimony or child support;
• Inheritances or life insurance proceeds that have not yet been distributed;
• Earned commissions from sales positions that have not been received;
• Money owed to the debtor that he/she has not collected; and
• Legal claims the debtor may have against others (whether or not the debtor intends to act upon those claims).
It is important to list all assets the debtor can remember or discover in order to properly exempt (protect) those assets in the bankruptcy schedules, if possible. If the assets cannot be exempted, the Trustee has the opportunity to liquidate the assets as allowed by bankruptcy law.
There are instances where the debtor may wish to delay the filing of a Chapter 7 bankruptcy when some assets would not be exempt. Exhausting a non-exempt asset for necessary expenses may be a better strategy for a debtor who is not in a rush to file.
Knowledge of all the debtor’s assets is also important when deciding which exemption statute to use in California bankruptcy cases. There are two Code Sections in the California Code of Civil Procedure that debtors are entitled to use to protect assets when filing bankruptcy in California. However, a debtor must choose one statute or the other, and the exemptions provided by the two statutes are different in many respects.
A debtor should always take the time to evaluate all their existing assets and potential assets, and disclose them to their attorney to maximize the protections available for those assets.
For more information or a consultation, please call 661-210-5657, or e-mail mjf4bk@ca.rr.com .