Uncashed Checks and Money Orders: Still Property of Your Bankruptcy Estate
Why Do You Need to Disclose Your Assets in Bankruptcy?
The US Bankruptcy Code (the Federal law that governs the bankruptcy process in the U.S.) requires that, along with debts and other transactions a filing debtor may or may not have engaged in, all assets must be disclosed in the bankruptcy petition. Why? Because the value of a debtor's assets help to determine the extent to which creditors are repaid some (or all) of what they are owed by the debtor through the bankruptcy process. In a Chapter 7 bankruptcy, this happens through direct seizure and liquidation (sale) of the property by the Chapter 7 Trustee assigned to the case (if the assets are worth more than can be protected by your bankruptcy lawyer). In a Chapter 13 bankruptcy, this happens by way of requiring an increase in the amount that creditors must be repaid through the Chapter 13 payment plan.
What Is An "Asset" in Bankruptcy?
Section 541 of the Bankruptcy Code defines as "property of the (bankruptcy) estate (that is created by automatic power of law with the filing of the bankruptcy petition)" "all legal or equitable interests of the debtor in property as of the commencement of the case." There is more to Section 541 than that, but it answers the question: assets in bankruptcy are not simply material goods or property you may have in your possession at the time that you file a bankruptcy case but also "equitable interests." This includes not just interest you may have in, say, a car that you paid for but is titled to someone else—but also the funds underlying an uncashed check or even simply the right to cash a paper check you may be holding onto.
Uncashed Checks Are Assets in Bankruptcy
That being the case, if you are holding a paper check, cashier's check, money order, or even have the right to collect a debt owed to you by your grandmother, you must let your bankruptcy attorney know about it. If your lawyer doesn't now about the asset, it won't be protected—and it will end up belonging to the Chapter 7 Trustee (in a Chapter 7 case). Not disclosing assets is one of the few ways in which you can get your bankruptcy discharge of debt denied by the courts, furthermore. Hiding assets purposefully can land you in Federal prison.
How Are Assets Protected in Chapter 7 Bankruptcy?
The long story short, in any case, is that there is often no reason not to let your bankruptcy attorney know about assets. Usually, they can be easily protected from seizure and liquidation, and hiding them serves no real purpose. This depends on the value of the asset, however. If you did have property too valuable to protect, you would want to give your bankruptcy attorney an opportunity to discuss with you whether Chapter 13 is a better option than Chapter 7 (as no assets are liquidated in Chapter 13, though you might have to repay more to your creditors than you would have without that asset), or whether bankruptcy is simply a bad idea for you, period. If you don't give your attorney good information, you won't get good advice. Don't assume something like an uncashed check is not an asset in your bankruptcy process because you "don't have the money yet." If you are a Michigan resident and would like to explore your options for a Chapter 7 or Chapter 13 bankruptcy with an experienced Michigan bankruptcy attorney, please contact us at (866) 674-2317 or click the button below to schedule a free, initial consultation.
If you enjoyed reading "Do I Need To Tell My Bankruptcy Lawyer About Uncashed Checks I Have?," please browse our other articles on our main Michigan Bankruptcy Blog.