OBLIGATION TO DISCLOSE FINANCIAL AND INCOME CHANGES

On October 31, 2013, the appellate court for this region issued an important opinion concerning what is called "after acquired property."  For some time, the status of "after acquired property" has been in limbo.  The Bankruptcy Code treats chapter 7s and 13s differently.  While it is clear that assets from property settlement agreements and inheritances acquired within 180 days of the bankruptcy petition are part of the bankruptcy estate for chapter 7 purposes, the status of such property was not clearly defined under chapter 13 proceedings.  Afterall, a chapter 13 bankruptcy lasts for 36 to 60 months.  The specific issue before the Court concerned an inheritance received by a chapter 13 debtor after month 6 but before the completion of his plan payments.  The Debtor did not disclose the inheritance to the chapter 13 trustee, and the latter sought the monetary value of the inheritance on behalf of the bankruptcy estate.  The Court of Appeals for the Fourth Circuit held that property acquired after 6 months but before the completion of the plan is part of the bankruptcy estate.  More importantly, some of the language employed by the Court in its opinion is very expansive.  In essense any windfall to the chapter 13 debtor or any large salary increase ought to be disclosed to the chapter 13 trustee seasonably.  The Fourth Circuit states that a chapter 13 bankruptcy is very advantageous to the debtor and that the debtor ought to pay his creditors if he can do so.  The Code language will be interpreted accordingly. 

This blog is not intended to render legal services to the reader, including advice about bankruptcy or taxes. Consult with a lawyer concerning the specific application of the law to your unique circumstance.