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August 2004 - Bankruptcy is not hiding assets from creditors

Bankruptcy is not hiding assets from creditors

☳ by Adam Aspilla

Many think that when a person has a financial problem, bankruptcy is the best solution. In fact, some hide their assets before filing for bankruptcy thinking that they would be richer after bankruptcy for the hidden assets could no longer be subjected to creditors’ claims.


The misconception (usually motivated by greediness) of the true essence of bankruptcy made many in worse financial condition than before filing for bankruptcy, for in bankruptcy hiding assets from creditors is not part of the process. In fact, it is a ground for creditors or even the bankruptcy trustee to oppose the discharge of a person who filed for bankruptcy.


The primary purpose of bankruptcy is to enable a person who is loaded with debts (incurred legally without fraud or misrepresentation) with little assets to start life again without the burden of forestalling collection activities from creditors, collection agents or law suits arising from non-payment of debts.


Many who filed for bankruptcy without seeking prior advice as to the best options in solving their problems called me asking for assistance on their present predicament of not able to secure a discharge from bankruptcy for their inability to account the assets they sold or given to relatives to hide from creditors.


A good example was a man who just retired. He had a total debt of about $35,000.00. He thought that the best way to get rid of his obligation is to file for bankruptcy. Just before filing for bankruptcy, he sold his condominium with a net proceeds of $40,000.00; he collapsed his RRSP of $25,000.00 and he maximized the use of credit cards by taking vacations to exotic places.


A requirement for his discharge from bankruptcy was for him to account the full amount he received from the sale of his condominium and the collapsed of his RRSP. He failed to comply with the requirements. Therefore, the bankruptcy trustee himself opposed his discharge.


In the above scenario, the likely ending would be for the bankrupt person to pay the full amount of his debts of $35,000.00 plus the trustee fee and other related expenses, for the sale of his condo and the collapsed of the his RRSP were made for the purpose of hiding (a fraudulent act) them from the creditors.


His desire to take advantage of his creditors by filing bankruptcy—thinking that assets could be hidden from them and could not be discovered, placed him in a worse financial circumstance than before filing for bankruptcy. As a consequence, as above mentioned, he would be required to pay for his total debts of $35,000.00, the trustee fee and administration fees. The worst part is his record in the credit bureau that would reflect his bankruptcy (which is unnecessary) and would stay on file for seven years. It would have been much better if he chose the path of honesty by simply pay his debt of $35,000.00 from the proceeds of the sale of his condo than filing bankruptcy. Understand that bankruptcy is not a process hiding assets from creditors. In Ecclesiastes 12:14, King Solomon is correct in saying, “For God will bring every work into judgment, including every secret thing, whether it is good or whether it is evil [cheating included].” 


Adam Aspilla is a Senior Financial Counselor of the Debt Clinic of Canada Inc. and the author of the book, You Can Negotiate All Your Debts. He also writes a biweekly column, “What Matters In Life” in “Taliba Newspaper. For free initial, professional and confidential consultation, please call 905-306-7572.