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How Your Bank Statements Can Affect Bankruptcy

When going through a hard time such as bankruptcy, it is hard to understand the “do’s” and “don’t” of what’s expected of you. Many individuals believe, and they are right to some extent, that just because a person is going through bankruptcy, doesn’t mean they have zero dollars to their name. However, what’s in your bank account does have the possibility of affecting your bankruptcy status.

For example, a New York state resident had his Chapter 13 case dismissed in the Brooklyn Bankruptcy Court, earlier this year, because of information a trustee found in his bank statements.

His trustee had requested bank statements for the 6 months prior to the filing and discovered about $12,000 of deposits that were not salary. The trustee asked the debtor to explain such deposits. The debtor said that he thought they were from family contributions but he could not explain each individual deposit and did not keep records.

The obvious conclusion that the trustee and court drew by implication was that the debtor had some off the books, unreported cash income. The trustee treated the deposits as income for purposes of the means test (Form B22C) and this required an increase in the plan payments that rendered the whole case not feasible based on the debtor’s budget.

The dismissal could have been avoided if the debtor had been honest with his counsel about this. He could have made some legitimate attempt to show the source of the income if it truly came from others and not from an off the books job, or he could have waited another 6 months before filing the case and kept better, more legitimate bank records without unexplained deposits.

If you are considering bankruptcy, contact an experienced attorney immediately to ensure your legal rights are protected as best as possible.

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