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What is Considered “Hiding Assets” in a Pennsylvania Bankruptcy Case?

Before filing for bankruptcy, some people might move assets or transfer them to a family member. However, this practice is illegal and will be considered as hiding assets in a bankruptcy case.

Individuals in Pennsylvania must give a full accounting of their assets when they file for bankruptcy. Any transactions or sales before filing for bankruptcy will be seen as suspicious. Fortunately, our attorneys can help you amend a bankruptcy filing if you made a mistake or overlooked assets you did not know you had. The state has a great deal of time to discover hidden assets, so it is best to be honest and forthcoming with your financial disclosures. If not, you could face criminal charges in addition to your case being dismissed.

Our Pennsylvania bankruptcy attorneys at Young, Marr, Mallis & Deane can provide you with a free case review by calling us at (215) 701-6519.

How Do Pennsylvania Courts Decide if Assets Are Being Hidden in a Bankruptcy Case?

When you file for bankruptcy in Pennsylvania, some of your assets will usually be sold off to satisfy and discharge your debts. When the court accepts a bankruptcy filing, the person filing will need to make a full accounting of their assets to the court. However, some people think they can trick the court by hiding assets. There are a number of ways people attempt to do this, but the court is very good at discovering assets that do not want to be found.

Unfortunately, some financial transactions might be legitimate but appear as if you are attempting to hide assets, which can jeopardize your entire bankruptcy case. Our West Chester, PA bankruptcy attorneys can help you accurately assess your assets so you can legitimately discharge your debts. We can also help you amend a filing if you discovered or inherited assets after making your financial disclosures to the court. The following will help you understand what actions the court might consider as hiding assets and how it discovers those assets:

What the Court Considers Hiding Assets

One of the most common ways people hide assets is by selling their property to family or friends. While this might seem like a clever bypass, it is also illegal. You might not be in possession of the asset in question, but the willful sale of property with the purpose of keeping it close is considered fraud. It will also drag your friends and family into the crime, as they can now be sued for the property to recover the asset and sell it in your bankruptcy case.

Some individuals actually ask their attorney to hide assets. However, a lawyer who helps hide assets will likely not be practicing law for long and could end up criminally prosecuted along with their client. If another firm says that it can help transfer property before filing your bankruptcy claim, it should send up an immediate red flag.

Other petitioners simply lie about the assets and finances in their possession. They might move financial assets to offshore bank accounts that cannot be tracked easily or lie about the value of an asset so its value is not factored into the discharge. Other times, petitioners fail to list an asset in the hopes that the court will overlook it.

These are considered premeditated actions. At the very least, you might lose your right to use bankruptcy to discharge your debts. In the worst-case scenario, you could be criminally charged by the state and federal government. The court has a great deal of resources and time to find hidden assets.

How Assets Are Found

After filing for bankruptcy, the court will appoint a “bankruptcy trustee.” This person oversees the debtor’s estate during the course of the bankruptcy lawsuit. It is ultimately their job to look for and find a debtor’s hidden assets. To do this, the trustee will review your financial records, debts, payroll records, tax returns, bank records, and any other record they consider relevant to their search.

In most cases, the trustee is looking for undisclosed income or property. They often use public records to determine whether a debtor undervalued their property in their filing. They will also compare your bank statements with your employment and pay records. If a trustee finds discrepancies between what you have claimed and what they have found, they can file a motion with the court to address it. From there, it will be up to the court to determine what the punishment should be. They might determine it was an honest mistake and amend the bankruptcy filing. Or, they might recommend the case for prosecution.

A bankruptcy trustee also has a few years to find hidden assets. In Pennsylvania, a trustee has up to four years from the initial bankruptcy filing to discover hidden assets and report them to the court, according to 12 Pa.C.S. § 5109. This is commonly known as the “look-back” period. If you learn about assets you were previously unaware of or inherit property, you should report it immediately to the court if you are still within the four-year look-back period.

What Are the Penalties for Hiding Assets in Pennsylvania Bankruptcy Case?

The court considers hiding assets a serious offense and can punish a debtor for it in a number of ways. If the court or trustee discovers hidden assets before your filing is accepted, you will likely not be allowed to discharge your debts. Thus, your bankruptcy case will typically be dismissed. However, that does not mean you will keep the assets you hid. In some cases, your non-exempt property can still be retained by the court to satisfy your debts, and you will still be responsible for the remaining amount to your creditors.

Your bankruptcy case can also be revoked after the court has approved it. If your case’s trustee finds hidden assets, they will petition the court to revoke your claim. Remember, trustees have up to four years to request that your filing be revoked.

You might also harm future opportunities to file for bankruptcy. If the court sees that you hid assets in your last filing, it can deny your new case outright. Even if the court did allow the case, you would not be able to discharge the debts still lingering from the previous filing.

The worst offenders hiding assets can expect to face criminal prosecution. Under 18 U.S.C. § 157, those guilty of bankruptcy fraud can be fined up to $250,000 as well as be imprisoned for up to five years. It is considered perjury to hide assets since the court is being lied to.