Texas consumers sometimes face mounting debt that becomes unmanageable and need to file for bankruptcy. While bankruptcy can provide people with a fresh financial start, a recent case out of North Carolina demonstrates the importance of fully disclosing all assets and debts to the bankruptcy court.
In the case, a husband and wife filed bankruptcy after having financial problems prior to 2011. They mortgaged their home twice between 2009 and 2011, and they borrowed money from the husband's individual retirement account several times. A mortgage held by Wells Fargo did not have the deed of trust for the property recorded. In their bankruptcy petition, the couple did not disclose the existence of the husband's $234,000 IRA and made misrepresentations about their property as well.
Because of their misrepresentations, the bankruptcy trustee sought to reopen their bankruptcy case after discovering the undisclosed assets. The trustee asked the court to allow him to sell the couple's home to pay creditors who were harmed by their omission of assets. The bankruptcy court ruled that the trustee could sell the home. The district court, however, overruled that decision because nothing in the bankruptcy indicated that they were behind on their mortgage payments. The district court did rule that the trustee could instead sell the husband's IRA in order to satisfy the creditors due to the couple's bad faith.
In order to receive protection under the bankruptcy code, people are required to file schedules in which they must disclose all of their assets and their debts. As this case demonstrates, failing to disclose assets can lead to the bankruptcy estate being reopened and having those undisclosed assets sold. It is important to be completely honest and accurate in bankruptcy filings. People who need to file for bankruptcy may benefit by seeking the help of a bankruptcy attorney.