Virtually all of us know that we have the right to “take the 5th,” keep our mouths shut, and not speak to the police and lawyers when we might say something that could incriminate us. The Fifth Amendment of the U.S. Constitution provides that no person “shall be compelled in any criminal case to be a witness against himself.” On the other hand, a person who willingly chooses to file a Bankruptcy case is implicitly agreeing to lay out all of their financial lives in front of the Court, Trustee and creditors in exchange for a discharge of debt, avoidance of a foreclosure and other benefits. They have a legal obligation, under federal law, to fully cooperate with the Trustee and provide just about any information the Trustee requests. If the person has engaged in unlawful behavior in the past, some of this information may incriminate them. As an easy example, tax returns are required in Bankruptcy cases. If a tax return shows that a person has failed to disclose significant income in the past (a federal crime), providing the returns to the Trustee and answering questions about them certainly could incriminate the person. Does the filing of a Bankruptcy petition mean the filer has waived their Fifth Amendment rights against self-incrimination?
The answer is a very clear “no,” filing a Bankruptcy case does not mean Fifth Amendment rights are waived. As Bankruptcy Courts are federal courts, the Judges are well aware of Constitutional rights of all individuals appearing in the case, whether they are debtors, creditors, trustees or other parties. Individuals who file for Bankruptcy can “take the 5th” the same as any other party in any court, or any other person being investigated. I have been involved in several cases in which it has happened, and it is generally not contested. I have represented clients who took the Fifth in depositions and Rule 2004 Examinations, although I always make sure that the client consults with a criminal lawyer beforehand. In most of these cases, a criminal lawyer has handled the deposition on behalf of the client. In a couple of cases, my clients were “surprised” with allegations of possible criminal conduct and the decision had to be made on the spot.
On the other hand, refusing to answer questions or cooperate with the Trustee and other parties by taking the Fifth does not mean there are not negative consequences. The primary consequence is that the person is probably not going to get a discharge of their debts because they cannot meet the basic requirements of getting one (i.e., full cooperation). It also alerts the Trustee and other parties that there is possible criminal activity that needs to be investigated. The case may be referred to the U.S. Attorney’s office, or other law enforcement authorities, for further investigation.
Like most Bankruptcy lawyers who have practiced for a while, I have met with clients or prospective clients who have some skeletons in their closets. Since the filing of a Bankruptcy case constitutes an invitation for the Court personnel to step in and investigate all financial affairs in a person’s life, I have advised several people that the last thing they need to do is file a personal or business Bankruptcy case, regardless of their debt situation. I have been involved in many cases that led to someone going to prison or jail due to things that were discovered in the Bankruptcy case, or conduct that actually took place while the case was pending. Of course, in virtually all these cases, their lawyers were not informed ahead of time of the criminal activity.
It is important to know that when you meet with a Bankruptcy lawyer as a client, you are protected by the attorney-client privilege the same as if you were meeting with a criminal lawyer. If you think you have some skeletons, discuss them in the beginning!
Scott Riddle is a Bankruptcy and Foreclosure lawyer in Atlanta, Georgia. The best way to contact us is by phone at 404-815-0164. You can also email scott@scottriddlelaw.com, or contact us through the contact page.
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