Concealment of Property in Bankruptcy: Hiding Assets from Your Creditors – A Dangerous Path
When an individual faces bankruptcy, it marks a profound moment of personal financial upheaval. At this juncture, bankruptcy law imposes strict duties to ensure transparency and cooperation with the Official Receiver or Trustee in Bankruptcy. One of the most serious Bankruptcy Offences an individual can commit is the Concealment of Property, specifically dealt with under Section 353 of the Insolvency Act 1986 (IA 1986). This is a severe criminal offence and is often directly linked to fraud within the context of bankruptcy.
In my long career, having dealt with insolvency related cases for over 36 years, I’ve observed that individuals, in a desperate attempt to protect their assets from their bankruptcy estate, sometimes make rash decisions that lead to devastating legal consequences. Hiding assets in bankruptcy is never the answer, and the consequences far outweigh any perceived short term gain.
What is Concealment of Property in Bankruptcy?
Section 353 IA 1986 makes it a criminal offence for an individual who has been made bankrupt to:
- Conceal any part of their property (including their books, papers, or records relating to their property or affairs) from the Official Receiver or Trustee in Bankruptcy.
- Fail to disclose to the Official Receiver or Trustee any property or its disposal.
- Fail to deliver up to the Official Receiver or Trustee any property, books, papers, or records.
The essence of this bankruptcy offence lies in dishonesty and a deliberate attempt to mislead or deprive creditors of assets that should form part of the bankrupt’s estate. This can include anything from undeclared cash, hidden bank accounts, vehicles transferred into another’s name, property, or even valuable personal possessions that have not been declared on the statement of affairs in their bankruptcy. This offence is explicitly classified as criminal and inherently involves fraud, as it signifies an intent to deceive and defraud creditors during the bankruptcy process.
Why is this a Serious Bankruptcy Offence?
The entire purpose of bankruptcy is to gather an individual’s assets and distribute them fairly among their creditors. If a bankrupt conceals property, they are undermining this fundamental principle, effectively trying to cheat their creditors out of what they are legitimately owed within the bankruptcy framework.
Investigations into bankruptcy offences are carried out by the Official Receiver and can be referred to specialist teams at the Insolvency Service or the Police for criminal prosecution. I recall one case where a client, under immense stress from his bankruptcy, “forgot” to mention a classic car kept at a friend’s garage. Despite the relatively low value, the deliberate omission was a clear breach of bankruptcy law, leading to significant complications in his bankruptcy discharge. The Insolvency Service takes such matters very seriously, as it goes to the heart of the bankrupt’s integrity and willingness to cooperate in their bankruptcy.
Consequences of Concealment of Property in Bankruptcy
The consequences of being found guilty of Concealment of Property in bankruptcy are severe and include:
- Criminal Conviction: As a criminal offence under bankruptcy law, it can lead to a substantial fine, imprisonment (up to 7 years in serious cases), or both.
- Extended Bankruptcy Restrictions: The Official Receiver can apply for a Bankruptcy Restrictions Order (BRO) or accept a Bankruptcy Restrictions Undertaking (BRU), which can extend the period of bankruptcy restrictions for up to 15 years, meaning the individual remains subject to limitations on obtaining credit, acting as a company director, or engaging in business.
- Non Dischargeable Debt: Any debt arising from the concealment or the fraudulent act itself may not be discharged at the end of the normal bankruptcy period, leaving the individual still liable.
- Reputational Damage: A criminal conviction, particularly for a fraud related offence within bankruptcy, will cause severe and lasting damage to an individual’s reputation, affecting future employment, business opportunities, and personal standing.
My Guidance: Full Disclosure in Bankruptcy – Your Full Protection
Facing bankruptcy is daunting, but attempting to conceal assets will only compound your problems and lead to far more severe long term consequences under bankruptcy law. My advice is always to be completely honest and transparent with the Official Receiver and Trustee in Bankruptcy from the outset. Full disclosure, even if difficult, is always the best and safest approach in a bankruptcy situation.
I can assist you by:
- Clarifying Your Duty of Disclosure in Bankruptcy: Helping you understand precisely what information and assets you are legally obliged to declare in your bankruptcy, ensuring nothing is inadvertently overlooked.
- Navigating Investigations by the Official Receiver: Guiding you through the investigative process by the Official Receiver or Insolvency Service concerning your bankruptcy, helping you prepare for interviews and formal requests for information.
- Advising on Allegations of Bankruptcy Offences: Providing clear, straight talking advice if you are accused of concealment or other bankruptcy offences, and helping you formulate your response or defence.
- Working with Other Professionals: Collaborating with your accountant or legal counsel to ensure all financial records are presented accurately and any complex asset arrangements are clearly explained to the Trustee in Bankruptcy.
- Providing Crucial Support During Bankruptcy: Offering supportive, clear headed guidance during what is undoubtedly a highly stressful and challenging time in bankruptcy, ensuring you understand your options and the potential outcomes.
Do not let the fear of losing assets in bankruptcy push you into actions that could cost you your freedom and reputation. Transparency is your greatest defence under bankruptcy law.
If you want to find out anything further about this topic then please feel free to call me on 0330 236 9937 or 07961 116321. All conversations will be in strict confidence. You can also email me vee@navigatebr.com.
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This article is for information and interest only. It is not a substitute for full professional advice, which will take in to account the specific and individual circumstances. Navigate Business Recovery Limited cannot accept any responsibility for any loss arising as a result of any person or organisation acting or refraining from acting on any information.
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