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review all the documents provided by law looking for signs of assets in documents like bank statements. They check public databases like the state's corporation registration and county recorder of deeds looking for ownership interests. They do it themselves or hire paralegals just for this purpose. When trustees find things outside the bankruptcy filing that should have been included, they are required to ask questions about those inconsistencies. It also causes them to become suspect and encourages them to dig deeper.
I can say, as a bankruptcy attorney, the last thing we want to happen is to learn new information about our client's finances at the creditor's meeting from the trustee because the client forgot or failed to tell us. This can cause a relatively straight forward proceeding that usually takes about 20 minutes to blossom into an hour long interrogation. I watched a case unfold like that at a creditors meeting last week.
I was in the meeting room waiting for my client's case to be called. My client was a little nervous; as most clients are. I suggested we sit closer to a meeting that was starting so he could hear some of the questions he would be asked. The case called before us was an older couple. The man was in a mobility scooter. For some reason, I thought, "oh this looks likes an easy case."
After a few standard questions, I heard the trustee ask about a parcel of real estate. I heard the man try to explain it wasn't his. After a few minutes of back-and-forth between the trustee and the man, the trustee said "well wouldn't you agree if your name is the only name on the deed, that it is your property?" It took about another 15-minute to discuss the rent being collected from that property. Then the trustee went into two businesses he found that were not listed in the schedules. The debtors' attorney did not seem to have a clue about these undeclared assets. What should have been a 15 - 20 minute interview turned into an hour ordeal.
The way to avoid this happening to you is to be open and honest with your attorney. The only way your attorney can help you through bankruptcy is for him or her to know and understand your finances. Everything discovered above could be innocent and may have no impact on the bankruptcy at all. The property could be mortgage with no equity; the rent could be just enough to maintain the property; and the businesses could be losing money or not operating at all. But all of that information needs to be disclosed and set out in the schedules. If the trustee would have had this information, that meeting could have been just like any other well documented bankruptcy case.
But what happened instead, with the case I discussed above, the trustee ended the meeting and the attorney walked out with a page full of questions to be answered. What is even worse, by not informing their attorney of these assets, the debtors may have placed their assets at risk of being taken. If the assets are not eligible to be exempted, the trustee could take them, sell them and distribute the proceeds among the creditors as is his job to do. They are at risk because once the debtors filed for bankruptcy they cannot withdraw it without permission from the court.
Until the case is completed and the debtors are discharged, it is the responsibility of the trustee to administer the case. Trustees diligently investigate the debtors and work to determine what, if any, is left for the creditors. The best way to avoid problems is to make sure your attorney has a full understanding of your financial picture. This allows your attorney to determine if bankruptcy is right for you and to present the full and complete case to the trustee and the court.
If you want assistance, legal representation, or just want to know more about Mark Medvesky or Medvesky Law Office, LLC, check out our website at www.medveskylaw.com.
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