Bankruptcy and Bookkeeping

Bankruptcy is relief for the honest debtor. If you live in the 5th Circuit, that definition now includes a requirement to keep records. The Bankruptcy code allows a Bankruptcy Judge to deny a discharge to a debtor who has failed to adequately maintain books and records in circumstances not justified under the circumstances of the case. There is no definition of the phrase “adequate under the circumstances of the case” and appeals courts have left the decision pretty much in the hands of Bankruptcy Judges.

If you file for Bankruptcy after having given away your computers, or thrown away your paper records, there is a very real chance that one of your creditors will try to block your discharge. This can be used as a weapon to get you to pay a particular complaining creditor or it can be used to deny you the benefit of the Bankruptcy altogether.

On the other hand, your books and records can be filled with stupid, foolish, even questionable decisions and that alone will not deprive you of a discharge. The moral to the story is that keeping your records intact is important both as a way to prevent Bankruptcy and as a way to get the full legal advantage of Bankruptcy.

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