Things to be aware of if facing bankruptcy 7

A temptation that many people have when facing a bankruptcy is hiding assets. Often this arises from the mistaken notion that a debtor cannot get relief from debt unless they give up most of what they own. The bankruptcy code is not intended to be a punitive mechanism to harass people who do not pay their debt; it is intended to be a tool to give people a fresh start when they cannot reasonably cover all their debts. As part of this “fresh start’ intent, the federal bankruptcy exemptions are fairly generous. Some state law exemptions are more generous, but most are far less expansive.

One must first determine if their state law allows a debtor to utilize the federal exemptions. Kentucky does allow a debtor to opt for either the state exemption or federal exemptions. I have only found two cases where the Kentucky state exemptions were more favorable than the federal ones: 1) a case where a joint-bankruptcy was filed but one of the debtors passed away while the bankruptcy was pending, and 2) a case where the debtor was due a substantial worker’s compensation package. In each of those circumstances, the state exemptions were 100% of those assets being exempt where the federal ones were limited to “reasonably necessary”.

In all my other bankruptcies, the federal exemptions were the best choice. And, in nearly all consumer Chapter 7 bankruptcies, the federal exemptions will allow debtors to keep all their property. Since most debtors have enough exemption to keep all their properties, then there is no reason to try to hide those same assets. The attempt to hide assets, creates a real risk that could sabotage the entire bankruptcy and lead to the trustee giving tremendous scrutiny to your whole situation. It can also lead to loss of the relief of a discharge of debt.