《楊清泉律師專欄》HONESTY AND TRANSPARENCY OF FINANCES REQUIRED FOR BK DISCHARGE(Part I)

I cannot overemphasize the need for debtors to be honest and transparent in their financial transactions when they file for bankruptcy. That is why the bankruptcy petition and schedules must be as accurate as possible when the case is filed. Even though debtors have the absolute right to amend their petitions and schedules after the case is filed, a petition that is fundamentally inaccurate affects the credibility of debtor, and could eventually cause the dismissal of the case or denial of discharge. The bankruptcy bargain is simple and straightforward. Debtor gets a discharge of all his debts. He may owe $10,000, $100,000, or $100 million. If he is honest and transparent in his bankruptcy, the court will discharge even $100 million, even $1.0 billion of debt! On the other hand, if debtor is dishonest and not transparent in his financial transaction, the court will deny his discharge and debtor will not be able to get rid of his debts, leaving him and his assets to the mercy of his merciless creditors. Worse, debtor may end up in jail for committing a bankruptcy crime, if he is dishonest in his bankruptcy.

In Re Jalajel, debtor and his wife filed for Chapter 7 relief on February 27, 2009. He filed his schedules and statement of financial affairs one month later. Schedule B listed personal property with a total value of $75,014 of which $8,800 was jewelry and $100 was a Rolex watch. The value of the Rolex watch alone is a red flag. Everyone knows that a Rolex is worth several thousand dollars. The court found that debtor bought 28 pieces of jewelry, excluding the Rolex watch, for $110,056 from a single jewelry store about two years before he filed his bankruptcy. Was debtor thinking of setting up his own jewelry store? When the bankruptcy was filed, the couple still had half of the jewelry representing a purchase price of about $100,000. After filing bankruptcy, debtor sold jewelry including his $100 Rolex watch to a pawn shop in three separate transactions for a total of about $12,000. Right before the bankruptcy was filed, debtor sold twelve pieces of jewelry for $11,000. And, debtor testified that seven pieces of jewelry were lost. Probably his dog ate them?

《楊清泉律師專欄》HONESTY AND TRANSPARENCY OF FINANCES REQUIRED FOR BK DISCHARGE(Part II)