Like all Bankruptcy lawyers, I am happy that just about every client or potential client that has walked through my door is completely honest with me and in their filings with the Bankruptcy Court. However, when discussing the Bankruptcy Schedules and list of assets, it is natural to occasionally get asked how Chapter 7 Trustees know what assets or property you have if it is not listed on Schedules A or B. My response to this question generally starts with telling my clients that they would be surprised how often Trustees will find assets that have not been disclosed. How do they do it? Having represented several Chapter 7 Trustees in the Northern District of Georgia, here are a few ways Trustees in Georgia get their information.
- Before the first meeting of creditors the Trustee (or staff) will review your Schedules and other filings in detail and make sure everything looks in order.
- The Trustee will likely get a report through Lexis or Westlaw that has basic information such as current and prior addresses, real property owned, vehicle and boat registrations, UCC financing statements, and lawsuits. Although these reports are sometimes outdated or inaccurate, a Trustee is likely to ask about any property or vehicles on these reports that do not appear on the Schedules.
- A few Trustees may go a step further and check the county real estate records. This can be done online in Georgia, and generally just requires searching for the debtor’s name. If there is a reason to go further, the Trustee may even order a formal title search.
The above steps may only take 15-20 minutes for some cases, so it is not a big time requirement for the Trustee, especially if they have an efficient staff person. In the great majority of cases, the information obtained by the Trustee is consistent with the Schedules. In a few cases, the Trustee may ask about a car or piece of property that showed up on the reports. Again, this will not be a problem because it is almost always property that has been sold and the reports have not been updated.
In some cases there is a reason to investigate further and the Trustee may obtain more information from the debtor or other sources. The primary source is to ask for documents (such as bank statements) from the debtor or to conduct a Rule 2004 examination of the debtor or other parties. In other cases, a scorned former spouse or business partner may try to get even by providing information to the Trustee. Creditors, especially those who have previously done their own investigation, are also key sources of information.
It is important to note that one of the most important requirements in a Bankruptcy case is simply to be honest. If you forgot about a bank account or remember you have a little stock in a company, it is no problem at all to amend your schedules. Trouble generally comes when you intentionally leave assets off the schedules or do not amend when you realize a mistake was made. A good Bankruptcy lawyer will go through the schedules in detail and remind you of property you may overlook on your own.