Schedule B in Bankruptcy: Should I Keep Important Property Off?
When you file bankruptcy, on Schedule B, you are required to list all of your personal property (everything except real estate).
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ALERT: As part of a multi-year court project to modernize the Official Bankruptcy Forms and make them more consumer-friendly, the Advisory Committee on Bankruptcy Rules has recently revised most of the consumer bankruptcy forms (several had already been revised in 2013 and 2014). The changes became effective on December 1, 2015. The revisions involved reformatting, renaming, and renumbering the forms, and in a few instances, combining two forms into one. You can find the new forms here: www.uscourts.gov/forms/bankruptcy-forms. We are in the process of revising all of our articles to comport with the new forms. Check back soon.
When you file for bankruptcy under Chapter 13 or Chapter 7, you must file a set of forms that gives the court, the trustee, and your creditors detailed information about your income, expenses, assets, debts, and financial transactions. On Schedule B, you are required to list all of your personal property (everything except real estate).
Some people consider -- or are told by others that they should consider -- leaving property they really want to keep off of their bankruptcy forms. While the desire to hang on to property that you really need or that has sentimental value to you is understandable, lying on your bankruptcy forms is a very bad idea.
What to Include on Schedule B
Schedule B lists 35 categories of personal property, from money in the bank to clothing, furniture, boats, and farm supplies. On the form, you must indicate which types of property you have (or check the box marked "none" for that category if it doesn't apply). You must describe the property, explain where it's located, indicate how you own it (solely or with a spouse), and provide its current replacement value: what it would cost to buy the item, given its age and condition.
The final category is a catchall, where you must list any personal property that didn't fit into any other category.
You must list everything, even if you plan to claim that it's exempt in your bankruptcy case. Every state provides a list of exemptions that allows debtors to keep certain essential items, often including some equity in your home, a car, clothing, home furnishings, and retirement accounts. Some states allow bankruptcy filers to choose between the state exemption list or a federal list of exemptions; others do not. (For more information on exemptions, see Bankruptcy Exemptions - What Do I Keep When I File for Bankruptcy?) You get to claim your exemptions on Schedule C.
Why You Must Be Honest on Your Forms
When you complete Schedule B and your other bankruptcy forms, you must be thorough and accurate. If the trustee discovers that you left property off your forms, the consequences could be severe. If the trustee believes that you made an innocent mistake, you can amend the form. But the trustee may review your other paperwork very carefully, looking for other problems. Your credibility will definitely take a hit, which could lead to closer questioning at your meeting of creditors and other hassles.
If the trustee believes you were trying to hide property, with the intent to deceive your creditors and the court, it could put your whole bankruptcy case in jeopardy.
The good news is that you may well get to keep property that's important to you. Many who file for Chapter 7 bankruptcy have what are called "no asset" cases. This means all of the filer's property is exempt. You may be pleasantly surprised to find that you are able to claim exemptions for all of your property, or at least all of the property you want to keep.
Even if you want to keep something that isn't exempt, you may be able to negotiate with the trustee by handing over exempt property or cash instead. For example, let's say you own a piano that belonged to your grandmother and has strong sentimental value to you and your family. You don't want to give it up, but it isn't exempt in your state. It's worth about $2,500, so the trustee could well decide to take it and sell it, to distribute the proceeds to your creditors.
You own a used car worth about $3,000. It's exempt in your state, but you don't really need a car -- and you've decided to sell it to cut your monthly bills for gas, maintenance, insurance, and so on. You might be able to negotiate with the trustee to take your car instead of the piano. Or, you might be able to sell the car and use the money to "buy back" your piano from the trustee. The trustee isn't interested in depriving you of beloved possessions for its own sake. The trustee's only interest is the bottom line: how much your nonexempt property is worth, which determines both how much your creditors will receive and how much the trustee will earn in your case.
Getting Legal Assistance
If you left important property off Schedule B, and particularly if you've gotten caught, you might want to consult with an experienced bankruptcy attorney. Hiding property could result in dismissal of your case, without getting any of your debts discharged.