Much attention has recently been given to the disastrous bankruptcy filing of Denny Hecker. Clearly, the Hecker case is not a run of the mill case; however average individuals contemplating bankruptcy should take note of the things which got Mr. Hecker in hot water. These things can happen to average individuals as well.
The most important lesson an average person should take from this case is that one should never attempt to hide assets in a bankruptcy. When an individual files a bankruptcy they are required to list all of their assets. Most people are allowed to keep their assets as long as they are properly disclosed. Not disclosing an asset will result not only in the loss of that asset, but may result in the revocation of one’s bankruptcy discharge. A discharge is the order given by the judge at the end of a bankruptcy which alleviates the bankruptcy filer’s obligation on his/her debts. If a discharge is revoked, the debtor will have a bankruptcy on their record and will still owe all of their debt.
Many people may wonder how a non-disclosed asset is discovered in a bankruptcy. Simply put, it’s not hard to find undisclosed assets. When a person files a bankruptcy, a trustee is assigned to his/her case. It is the trustee’s job to try to verify that a person has been truthful in disclosing his/her assets in the bankruptcy. The trustee will typically run a public records search on a bankruptcy filer; this search shows all car titles, boat titles and real property listed in the debtor’s name. The trustee will also examine bank records. These records will show if a debtor has recently been making large purchases.
In addition, a trustee will often review a divorce decree to see if assets have recently been awarded to the bankruptcy filer. A trustee may also get tips from creditors regarding potentially non-disclosed assets.
If a trustee finds a significant asset that has not been disclosed, the trustee may move to have the case dismissed.
Another lesson learned from the Hecker case which the average person should walk away with is that transferring assets to another person before filing a bankruptcy will not help an individual keep the asset. In fact it will cause significant legal issues for the person to whom the individual has transferred the property. It may also cause the individual filing to loss their discharge.