You wouldn’t think old bankruptcies are a place worth checking when hunting for assets. If someone’s bankrupt, it means they are essentially out of money, right?
Wrong, at least sometimes.
We have found all kinds of wonderful material when looking at bankruptcies. Some of it leads right to assets, and some leads to a non-financial asset known as leverage: good information you can use to extract a better settlement.
Financial assets and information. What kind of asset can you find in a bankruptcy? The exempt kind. When people go bankrupt they don’t have to hand everything over to their creditors. Some states allow an entire main residence to remain in the hands of the debtor after discharge. The other day, we found a large pension fund in an old bankruptcy. Just check the schedule of exempt property in the petition. Of course, the fact that someone had an asset ten years ago doesn’t mean they have it now, but what if that person turns out to have misled his wife about the kind of money he had access to during the marriage? Chances are that if the pension money is something an estranged spouse is just finding out about, that money could have been moved into other accounts, taken out, invested or used in some other way that could be reachable.
Suppose the married couple did all of their banking at Bank of America, and the accounts there are nearly empty. Then, it turns out that the husband had a large IRA on deposit at JPMorgan Chase just before marriage. Wouldn’t the records of that account be of interest during the time of the marriage? What happened to the money?
Leverage. Compare what the debtor presented as his financial situation with what you know about the debtor. Did he leave out assets you know that he owned at the time? Misleading a bankruptcy court is a serious offense. There is no statute of limitations on re-opening a bankruptcy, and knowledge that could get a spouse into major trouble with a court could help move negotiations along on a settlement.
The takeaway point about bankruptcies is the same for most other information in an asset search: Keep your search as broad and general as you can. You are searching for assets, but also information that will lead to assets. That could be anywhere, which is why a good asset search is not that different from a thorough background check.