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socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 38879
Experience:  Attorney and Real Estate Broker -- Retired (mostly)
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How does the court appointed Trustee know if the person filing

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How does the court appointed Trustee know if the person filing for chapter 7 bankruptcy has not disclosed everything?
The trustee's clerks will investigate the filing to see if there are any inconsistencies (e.g., assets with unusually low valuation; large liability, such as a loan, with no corresponding assets in the debtor's possession, etc.). Also, the system depends somewhat on creditors coming forward and identifying their interests, if the debtor has stopped paying on a particular debt. Finally, there is the certain knowledge that the discovery of undisclosed assets could cause the court to revoke a prior discharge order and report a fraud to the U.S. Department of Justice for criminal investigation and prosecution.

The combination of the three provisions of the bankruptcy laws is usually sufficient to uncover must of the possible failures to disclose. However, there is always the possibility that a debtor has assets outside of the USA, which would be very difficult to discover, unless a creditor comes forward to identify those assets.

Please let me know if I can be of further assistance.
Customer: replied 4 years ago.

What if the person filing has closed bank accounts within the year of filing and did not disclose that information?

A closed account is not necessarily proof of fraud, however, the failure to identify an account closed within the past year would be a misrepresentation on the bankruptcy petition (Form B7, Section 11) -- because the schedule is signed under penalty of perjury.

So, if the failure to disclose was willful, and the result of the failure is material, because assets were not disclosed as a result, then that would be grounds to revoke a discharge order or dismiss the bankruptcy petition, if no discharge has yet been granted.

Hope this helps.
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