Bankruptcy Due Diligence Requirements

By Elizabeth Stock

When you file for bankruptcy, the bankruptcy court needs information about your current financial situation, including a full disclosure of your assets and income. You must act with due diligence in providing the court with supporting documentation regarding your financial situation. Due diligence means that you cooperate with the bankruptcy court to the best of your ability by providing requested documents and answering all inquiries truthfully. Failure to act with due diligence can result in the dismissal of your bankruptcy case or a revocation of your bankruptcy discharge.

Filing for Bankruptcy

Whether you file for Chapter 7 or Chapter 13 bankruptcy, you will need to provide the bankruptcy court with a list of all of your assets. In Chapter 7 bankruptcy, also known as liquidation bankruptcy, your assets may be sold to repay your creditors. In contrast, a Chapter 13 bankruptcy allows you to create a plan to repay all or a significant portion of your debt while saving your home from foreclosure. You will make monthly payments to a bankruptcy trustee, who then uses the money to repay your creditors. During your bankruptcy case, all of your assets will be part of the bankruptcy estate and must be listed on the schedules you file with the court to initiate your bankruptcy case.

Completing Bankruptcy Paperwork

You will complete several bankruptcy schedules when you submit your paperwork to the court. These schedules list all of your property, the amount of debt you owe, and the names and addresses of all of your creditors. All information must be included in your bankruptcy schedules for the bankruptcy trustee to continue with your case. In addition, your assets must include any potential civil lawsuits that you may file in the future if you have an outstanding claim against one or more individuals.

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Due Diligence

Due diligence means that you will cooperate with the bankruptcy trustee during your bankruptcy case. The bankruptcy trustee is the individual appointed by the court to administer your case. For example, during your case, the bankruptcy trustee may ask for supporting documentation, including copies of your tax returns or pay stubs. Your duty is to do your best to provide this information to the bankruptcy trustee in a timely manner. If you cannot provide the requested documents, you should notify your bankruptcy trustee as soon as possible. In addition, you owe your attorney, if you have one, the same due diligence.

Consequences

The bankruptcy court takes the requirement of due diligence very seriously. If you fail to exercise due diligence in your bankruptcy case, the bankruptcy court can dismiss your case or revoke a bankruptcy discharge. If your case is dismissed you will not receive a bankruptcy discharge, meaning your debts will be still be legally enforceable by your creditors. In addition, if you have already received a bankruptcy discharge but you did not list all of your assets in your bankruptcy schedule, the trustee can ask the court to revoke your discharge.

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Facts About Chapter 7 Bankruptcy
 

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