The Short Answer
Social media — especially Facebook — can seriously damage or destroy your bankruptcy case if you've posted anything that contradicts what you filed in your petition. Bankruptcy trustees now routinely search debtors' public profiles to look for undisclosed assets, recent purchases, or financial activity that doesn't match the paperwork. Failing to disclose assets in your bankruptcy petition is federal perjury, and it can result in criminal charges, heavy fines, and the loss of assets you might have legally protected. Be honest with your attorney about everything you own before you file.
If you’re reading this blog post the chances are good that you have a Facebook profile or account. If so, you’re not alone. Recent statistics reported by The Blog Herald indicate that there are now over 500 million Facebook users. Of those 500 million users, half of those users log in to their Facebook account every day. The average Facebook user has 130 friends and there are a staggering 30 billion pieces of content added each month. To fully understand that amount 30 billion looks like this when written out: 30,000,000,000.
So Why Does Facebook Matter to Your Bankruptcy?
Facebook is a window into your personal life. A bankruptcy Trustee, after filing bankruptcy, has the right and ability to look into that window.
When you file a bankruptcy you are required to disclose your assets and other important acts within certain time periods. If you fail to disclose the required information in your bankruptcy petition then you are committing a federal crime of perjury. You could face jail time and be fined large sums of money. Do I have your attention yet?
More and more bankruptcy Trustees are looking up debtors’ (people who file bankruptcy) social media accounts. It is so quick and easy to pull up information on social medias, it has become a logical part of the due diligence research that a Trustee’s office will complete.
Death Of A Bankruptcy Case Via Facebook
Let’s look at a common example. Husband and wife Donnie and Debra Debtors file a bankruptcy together. They fill out their bankruptcy petition and file it with the court. However, they chose not to list down some of their assets because they don’t want the courts to take it because they hope to give it to their children some day. Specifically, they don’t list down a 1957 Chevrolet Bel Air that has be restored and a whole life insurance policy with a substantial cash surrender value. Donnie and Debra show up to the creditors’ meeting and quickly realize they have some real problems.
Tom Trustee, who represents the people Donnie and Debra owe money to, has started paying a part time high school student to go online and after school and look up different debtors who have filed bankruptcy and see if they are showing assets that aren’t listed in their bankruptcy petition. Well, low and behold, the 16 year old high school student searching on Facebook has found some important information for the bankruptcy Trustee. Donnie and Debra have posted pictures on Facebook showing their newly restored 1957 Chevrolet Bel Air winning as “Best in Show” at a recent car show located in Charlotte, NC. In addition to that, Debra responded to one of her friend’s posts asking how to pay for college tuition by explaining that she and Donnie are withdrawing the cash surrender value from their whole life insurance policy to pay for their daughter’s freshman year in college.
Tom Trustee asks Donnie and Debra if they need to add anything else to their bankruptcy petition and they explain that it is accurate and complete. At that time, Tom Trustee begins to ask them about the assets not listed down in their bankruptcy petition, the car and whole life insurance policy. Stunned, Donnie and Debra first try to deny they have those assets but then the Trustee presents them with pictures printed off of their Facebook page. They eventually admit their failure to properly disclose assets.
Several weeks later Donnie and Debra are indicted and face federal charges of fraud and a fine of $150,000 by the federal government – money they don’t have because the Trustee seized both their “Best in Show” car and whole life insurance policy. Because Donnie and Debra didn’t tell their attorney about the assets they didn’t realize they could have protected both assets. The whole life insurance could have been fully protected because their children were the beneficiaries and the vehicle could have been exempted using a combination of their motor vehicle exemptions and “wild card” exemptions.
The Lessons To Be Learned
There are two important take-aways from this example. First, and most important, you should fully disclose your assets and be completely honest and forthcoming in your bankruptcy petition. The consequences of not doing so are not worth the perceived benefit. Second, tell your bankruptcy attorney about everything. Keep no secrets. If they would have discussed the concerns they had about their assets with their experienced bankruptcy attorney they would have known they could have protected their assets.
The Bottom Line: The purpose of this post is not to tell you to take hidden assets down but, instead, to encourage you to list the assets you have and discuss those assets with your bankruptcy attorney. Facebook and other social media sites are now used to confirm that you are being forthcoming within your bankruptcy petition.
Key Takeaways
- Bankruptcy trustees are actively searching Facebook and other social media platforms to find assets that debtors failed to list in their petitions.
- Omitting assets from your bankruptcy petition is federal perjury — not a technicality — and can result in criminal charges, fines up to $150,000, and jail time.
- In North Carolina, a restored collector car can often be protected using a combination of the $3,500 motor vehicle exemption and the $5,000 wildcard exemption — but only if you disclose it.
- Whole life insurance policies with cash surrender value may be fully protected in NC when minor or dependent children are the named beneficiaries — again, only if properly disclosed.
- What you post publicly on Facebook can be found by a part-time staffer in minutes — never assume your profile is too obscure for a trustee to locate.
- Tell your bankruptcy attorney about every asset you own, no matter how minor it seems — protecting property is only possible when your attorney knows it exists.
Attorney Insight
The mistake I see most often is people hiding assets from their own attorney — not from the trustee. Clients assume that if they don't mention a classic car or a life insurance policy with cash value, it will stay off the radar. What they don't realize is that trustees in North Carolina's bankruptcy districts are methodical, and social media searching has become a standard part of their due diligence. The cruel irony is that the assets they tried to hide were often ones we could have fully protected under NC exemptions — if only we'd known about them before the petition was filed.
