I got an urgent call yesterday from a woman who had filed bankruptcy a few years ago. She wasn’t calling because she needed to file bankruptcy again. She had other problems. She had recently had some jewelry stolen. Her insurance company wanted to pay the claim, just not to her. They were planning on paying the bankruptcy trustee from her case that had closed years earlier and she wanted to know if I could help her get the insurance company.
I needed to know more. As I asked questions, a better picture emerged. When she filed bankruptcy, she owned some jewelry. She claimed at the time of filing, she didn’t know how much it was worth. She said her attorney’s paralegal just filled in the petition with a number and that she signed the petition without reading it. Some time after bankruptcy, she had her jewelry insured. Amazingly, she now claimed the jewelry was worth $43,000! (Keep in mind that jewelry in Colorado is only protected up to $2,000.)
While I was talking to her, I pulled up her bankruptcy case on PACER. It turns out she claimed her jewelry was “costume jewelry” and only worth $200. The insurance company was now trying to avoid paying her $43,000 by settling for less with the bankruptcy trustee. Although her case had been closed and likely a distant memory to the trustee, the trustee filed a motion to reopen the case so that he could distribute the insurance proceeds (and also get a healthy percentage of the payout).
Unfortunately, I didn’t think I could help. She is going to have to persuade the bankruptcy court that she didn’t know how much she valued the jewelry for on her petition, even though she already told the trustee under oath at the creditors meeting that she read the petition. Even if she does persuade the court, she would then have to amend her petition to show the actual value of jewelry. At that point, she is going to have to pay the trustee the unprotected (non-exempt) value of the jewelry, which she likely doesn’t have. In the end, letting the trustee take the insurance proceeds is probably the easiest way to resolve the issue.
What I didn’t tell her is that the trustee could have filed a motion to have her discharge set aside since she didn’t disclose all her assets. Had that happened, she would be faced with much bigger problems than losing her insurance money. When you sign your petition, you are affirming that you have accurately disclosed all of your income, assets, and debts. When you go to your creditors meeting, you will once again be asked if you have disclosed everything. You may not discover how lying on your petition can affect you until several years after your case is closed.
As Colorado bankruptcy lawyers, our job is to make sure you keep as much of your property as possible when you go through the bankruptcy process. If you’d like to learn more about bankruptcy and how your personal property and real estate will be affected, we hope you’ll come in for a free, no-obligation consultation. You can schedule an appointment by calling 303.331.3403 or using our online scheduling system.