03 Aug 2018

Uncovering Hidden or Unusual Assets

0 Comment

In a Chapter 7 bankruptcy case, there may be assets which are hidden or not in plain sight. These assets may be found through deeper investigation – whether through Internet searches, bank records or even personal observation – potentially resulting in valuable returns for the estate.

By delving deeper into the case, the Trustee may find a wealth of valuable assets just under the surface to return to the estate.

Learn more about ways to uncover hidden or unusual assets below.

1) Look Beyond the Debtor’s Schedules

In a Chapter 7 bankruptcy case, most assets can be found directly on Schedules A & B of the debtor’s petition.

However, the following may also contain information which may lead to additional assets:

  • Statement of Financial Affairs (SOFA): In addition to financial transactions, transfers and preferences are listed on the SOFA. This information could help the Trustee uncover additional assets for the estate.
  • Testimony at 341(a) Meeting: The Trustee should pay close attention to the debtor’s testimony at the 341(a) meeting and take advantage of any opportunities to ask follow-up questions.
  • Bank Records: It may be helpful for the Trustee to request the debtor’s bank records to analyze the  bank activity for potential assets. Examples of bank activity which may point to additional assets for the case include: payments to mortgage companies (possibly for an unlisted property), purchases on credit (such as electronics), or purchasing gas (potentially for an unlisted vehicle).

2) Pay Attention to “Whistleblower” Tips

The term “whistleblower” refers to a person who shares concealed information with a separate party which was not intended to be shared by the original party. In a bankruptcy case, whistleblowers can be individuals who are connected to the debtor, such as an ex-wife or ex-business partner, and can oftentimes alert the Trustee to assets which may have been obscured or intentionally hidden by the debtor.

Examples of whistleblowers may include:

  • Creditors at 341(a) Meeting: Creditors ask questions at the 341(a) meeting which may point to information that the Trustee did not pick up on the debtor’s schedules. The Trustee should pay close attention to these questions and ask any follow-up questions that may arise.
  • Phone calls, Letters or Emails: Communication from separate parties can be a good source of information, whether in the form of phone calls, letters or emails. This communication may disclose that the debtor is not being as forthcoming about estate assets as they should be.

3) Internet Searches

In the digital age, online records can be valuable resources in uncovering potential assets for the estate.

Below are a list of websites the Trustee can search for potential assets:

  • Paypal: A debtor may have a Paypal account if they are collecting money or selling items online. The Trustee may ask if the debtor has a Paypal account at the 341(a) meeting, and also request the debtor’s username and password to look into transactions made on this account.
  • Ebay:  If the debtor holds an account to an auction-type site like Ebay, this may indicate the debtor is regularly selling items online which could be included as assets to the estate.
  • Etsy: If the debtor holds an account for an online shopping website such as Etsy, they may be making their own products or purchasing bargain products to sell online, which may count as additional assets to the estate.
  • Social Media Accounts: The Trustee may wish to reference any social media accounts held by the debtor to potentially discover photos or other evidence of unlisted assets.
  • Land Records: Land records can be valuable resources to discover potential property assets, and can be searched on websites such as TitleSearch, NetrOnline, and NACO.
  • Patents, Trademarks & Copyrights: Patents, trademarks and copyrights can potentially be valuable assets for the estate, and can be searched on USPTO.gov and Copyright.gov.

4) Power of Observation

When investigating a bankruptcy case, the Trustee should refer to their intuition and pay attention to any inclination that the debtor may be hiding something.

For example, if the debtor wears expensive jewelry to the 341(a) meeting, such as a Rolex watch or a 3-carat diamond ring, and their schedules only list $250 worth of jewelry, the Trustee may want to ask additional questions or even request that the debtor turn over the expensive jewelry at the meeting.

5) Look for Unusual or Hidden Assets

Assets can also come in the form of something unusual that the Trustee did not think to look for.

Below is a list of unusual assets which may provide value to the estate:

  • Personal Time Off (Vacation, Sick, Misc. Benefits): Unused vacation time or other types of benefits may be recoverable assets to the estate, and, if built up over a long period of time, could be quite valuable.
  • Collections or Hobbies: If a debtor has a collection or hobby, it may be worth investigating further if there are any additional assets to be found in this area. Examples of collections or hobbies which may lead to valuable assets for the estate include:
    • Designer Handbags
    • Hummels (figurines)
    • Coca-Cola memorabilia
    • Baseball Cards
    • Designer Jewelry
    • Golf Equipment
    • Woodworking Tools and other hobby equipment

Other hidden assets may include:

  • Liens: If not perfected (properly filled out), liens can hold significant value for the estate. It is estimated that 1 in 20 liens are not perfected.
  • “Retirement” Funds: Some debtors will call personal savings a retirement account. The Trustee should double-check to make sure retirement funds are actually in an IRA or 401(k).
  • Real Property: Some judges allow second mortgages to be removed so that a property may appear to have little value where there is plenty.
  • Creditor Harassment: Settlements from collection agencies that have violated harassment laws can yield a couple of thousand dollars to the estate.
  • Mesh Cases: Old cases may be re-opened to administer these class-action lawsuits, and those settlements may be attributed to the estate.