Be Prepared to Fully Disclose in Bankruptcy or Suffer the Consequences
By A pair of recent cases remind one that bankruptcy is no place to be if you have something to hide about your financial life. The key requirement for relief in a bankruptcy case is full disclosure. When that disclosure is lacking, a debtor suffers the consequences.
In In re Everett, 2010 WL 4105458 (Bankr. N.D. Ohio Oct. 18, 2010), the Court found that debtors’ failure to disclose their prior bankruptcy case, together with their refusal to rectify the failure to disclose and their contumacious conduct in refusing to meet their obligation under the Bankruptcy Code and Federal Rules of Bankruptcy Procedure to attend a meeting of creditors and submit to an examination by the Trustee, constituted bad faith and an abuse of the bankruptcy process and was cause for dismissal with prejudice under 11 U.S.C. ยง 349.
In In re Coffelt v American Frozen Foods, Inc. 2010 WL 4238005 (E. D. Tenn. Oct. 21, 2010), a Plaintiff’s claim against a former employer for retaliatory discharge was barred by judicial estoppel because he failed to disclose a potential claim in the Ch. 13 bankruptcy case he filed less than a year earlier. The lawsuit hadn’t been filed when Plaintiff filed his bankruptcy petition, but he was aware of the factual basis of the claims. Plaintiff claimed his non-disclosure was inadvertent, but he didn’t offer to amend his petition until after the Defendant filed a Motion to Dismiss and the Ch. 13 plan had already been confirmed.
So, failure to fully disclose can affect the relief you can and can’t get in a bankruptcy case and can even preclude relief in subsequent cases after a bankruptcy. Rule of thumb — when in doubt disclose.
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