Yes, all of your assets must be disclosed to the bankruptcy court. The concept here is simple: if you are sitting on a proverbial gold mine, there is no reason you shouldn’t sell that gold mine to pay off your debts, rather than receive the benefit of a bankruptcy discharge.
In your bankruptcy case, you will be entitled to use a set of property exemptions. These are allowances of the amount of property that you are entitled to keep. In the state of Wisconsin, you are allowed to use either the Wisconsin state set of exemptions or the federal set of exemptions. Federal exemptions are fairly generous and can protect all of the assets in the vast majority of cases. State exemptions are used less frequently, but have a benefit for single debtors who have more than $20k equity in their home.
If you have property with a value that exceeds the allowed exemptions, then a Chapter 7 Trustee may seize that asset, and sell it for the benefit of your unsecured creditors (this is called an Asset Case). Alternatively, you can file Chapter 13 to keep your property, but you buy out the Chapter 13 trustee’s interest in un-exempt assets over the course of a 3 or 5 year plan. This money is earmarked for your unsecured creditors, and they are thus made as whole as they would have been if your property had been liquidated under Chapter 7.
Some people, believing that their property is going to be taken, try to hide assets from their attorney and the bankruptcy court. They erroneously think that if they don’t disclose what they have that it can be protected. This is a huge mistake. Your attorney cannot apply exemptions and protect property that he doesn’t know about. Trustees and creditors have some clever ways of finding out if you’ve hidden anything. You might get away with it, but if you get caught, I can just about guarantee the consequences would be far worse than if you had disclosed your property to begin with and let your attorney find the best way to deal with it.
Placing a value on your property can be confusing. For simple cash and baking assets, the value is quite obvious. Vehicles have standard values that can be determined via Kelly Blue Book or NADA. For real estate, we look at a combination of municipal assessments, appraisals, comparable markets, and overall housing market conditions. For household goods, we are putting ourselves in the trustee’s shoes (when he liquidates) and the question becomes: what would a disinterested third party would pay?
Finally, we get to the question of what constitutes an asset. An asset is anything of value that you have a legal ownership interest in. Many people hear the words “property” or “asset” and think real estate. Real estate is certainly property, but it is not the only thing that counts. The following list will give you an idea of how diverse property can be, but it is certainly not an exhaustive list.
- Real Estate (residence, business property, rental property, hunting land, timeshares, etc.)
- Vehicles (automobiles, boats, motorcycles, ATVs, snowmobiles, campers, aircraft, etc.)
- Household Goods (Furniture, Appliances, Electronics, Clothing, Books, CDs, DVDs, hobby equipment, firearms, hunting equipment, sporting equipment, tools, photos, art, jewelry, office supplies, etc., etc., etc.)
- Bank Accounts
- Life Insurance Policies
- Retirement Accounts
- Security Deposits
- Stocks and Bonds
- Tax Refunds
- Potential Claims / Lawsuits
- Potential Inheritances
- Pets / Animals / Crops
- Business Assets, if you own or have a partial interest in the business
- Patents, Licenses, Copyrights
Everything that you own constitutes an asset that is property of the bankruptcy estate, down to the last paper clip in your desk drawer. Of course, as a practical matter, we don’t list every single pen, pencil, and thumbtack down to that level of nauseating detail. Most attorneys will list something to the effect of “Miscellaneous Knicknacks” to cover the aggregate value of all of your property that is of negligible individual value. But do not try to decide for yourself that something is too insignificant to disclose.
As you may have noticed from the list above, property can be tangible (e.g. vehicle) or intangible (e.g. copyright). It can be cash or something with a same-as-cash value (e.g. retirement account), or it can be something of varying or subjective value (e.g. real estate). Perhaps you only have a partial interest in the property (e.g. you and a friend each own one-half of an interest in some hunting land). Perhaps you have a future interest, which means you cannot access the asset or you do not yet have possession, although you are legally entitled to it (e.g. tax refund, inheritance).
Think of everything, and tell your attorney about it immediately. Your attorney cannot protect what he doesn’t know exists. Surprises are for birthday parties. It is considerably easier for your attorney to fix problems before your case is filed than it is after.