4 Surprising Questions You Might Be Asked at Your Bankruptcy Hearing

Sacramento Bankruptcy Lawyer Rick MorinFor most debtors, the bankruptcy hearing is the most daunting part of the bankruptcy process. Whether you are filing Chapter 7 or Chapter 13 bankruptcy, each debtor is required to appear in court for a “meeting of creditors.”

As I have discussed in the past, the meeting of creditors is an opportunity for the Bankruptcy Trustee and your creditors to ask you questions regarding your financial affairs. Most hearings go well and are done in a matter of minutes. But not always!

Here are four questions that tend to surprise people during a meeting of creditors.

1. Did you disclose all property that belongs to your non-filing spouse?

A married couple is not required to file bankruptcy together. One spouse may file bankruptcy and the other spouse is not required to file. However, because California is a community property state, the debtor must disclose all property owned by both the debtor and his or her spouse. By not disclosing all property owned by the non-filing spouse, the debtor would not be able to “exempt” that property. This means that the property of the non-filing spouse may be subject to liquidation by the bankruptcy trustee!

The lesson here is to list all property owned by either spouse.

2. Have you paid any money to family in the past year?

Money paid to family in the 12 months prior to the filing of the bankruptcy (and sometimes longer too!) can be recovered by the Bankruptcy Trustee. Some debtors don’t think that it is important to disclose payments to family on debts. This is because the debtor intends to repay the family member after the bankruptcy. This can cause a lot of trouble for a debtor in a bankruptcy. All debts, even debts that a debtor intends to repay after the case, must be disclosed to the court.

The lesson here is that if you have repaid a family member a loan prior to the filing of a bankruptcy, you must discuss this with your attorney. There are plenty of options here, but it must be discussed prior to the filing of your bankruptcy!

3. Why are you filing bankruptcy?

Most Bankruptcy Trustees don’t ask the reason behind your bankruptcy filing. But some do! Make sure that you have a concise, easy-to-understand answer to this question. You might be surprised by some of the answers I have heard from debtors while waiting in court.

4. Are you entitled to any money such as lottery winnings?

Can you imagine filing bankruptcy and then winning the lottery? It actually happens. In some cases the bankruptcy trustee will have the right to recover these lottery winnings for the benefit of your creditors. Even though this situation sounds unlikely, if it does actually happen, the debtor must disclose recent lottery winnings. Failure to do so can result in the revocation of your bankruptcy discharge, and in some cases, even prosecution!

If you have any questions about filing Chapter 7 or Chapter 13 bankruptcy in Sacramento, please call my office at (916) 333-2222.