Recently, the music artist 50 Cent, who filed a Chapter 11 bankruptcy in July 2015, was called into court to account for several social media posts in which he appeared to be in possession of a great deal of cash. The judge expressed concern that he may be failing to disclose his assets properly in his schedules, which raised worries that he was not repaying his creditors as appropriate.
50 Cent, as noted in his pleadings on the matter, is somewhat stuck in a situation where outward displays of wealth and conspicuous consumption are part of his professional image and branding, and falling short of those standards can have a material impact on his future income. However, most judges and attorneys who work in bankruptcy don’t appear to have much sympathy to his rather unique problem. Indeed, not only is accurate disclosure of assets and debts vital to any bankruptcy case, it is very easy to increase the scrutiny on any particular case by outward expressions at odds with the nature of a bankruptcy pleading.
Let’s say the most important part first: You are under oath when you file your bankruptcy pleadings, and lying on those pleadings is a crime that can be investigated by the FBI and prosecuted by the U.S. Department of Justice. You can go to jail, face six figure fines, and still end up liable for all your debts in the end. Not telling the truth is very bad. So be complete and honest when you are filing bankruptcy. You and your lawyer will be thankful for it.
Reasonable minds can disagree, however, on the value of a given asset, or on the reasonableness of certain living expenses. A client claiming that they do not have the needed disposable income to repay creditors will have some explaining to do if they post instagram photos of a cruise they are on during the case. Have a nice wedding ring with a value that may make it subject to administration by the Trustee? Maybe don’t wear it to your meeting of creditors, so as not to draw attention to it. Certainly don’t brag about it on Facebook. An appearance of modesty might earn a debtor some leeway.
At the same time, be realistic about the value of your assets. If you live in a half million dollar home, you likely have more than $1000 in furniture, and claiming that value will surely lead to an in-depth investigation of your assets. And if you are a rap star, explain to the judge that “it is imperative that I continue to project aspirational goals of success in order to preserve my brand and those I represent.”
Your attorney is there to defend your interests, but also to advise you on where your pitfalls may occur. If you have assets you will likely lose in a bankruptcy case, your lawyer will help you weigh the costs and benefits of one type of bankruptcy versus another, what a reasonable value is on an asset, and when it might be in your best interest to just let something go.
Bankruptcy is, by its nature, a point of contraction in your financial life. Appearing to understand that and abide by it is very helpful in achieving the end point you want, which is a fresh start.