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Is it fraud not declaring an insurance policy in a bankruptcy petition?The debtor concealed auto insurance policy in bankruptcy.

Los Angeles, CA |

The debtor filed for bankruptcy in the midst of being sued for their at-fault auto collision. Debtor has auto insurance to cover the damages of the people in the other vehicle. Debtor did not write this insurance policy in their filed bankruptcy schedules. Debtor concealed from the bankruptcy court that they had auto insurance policy. Is this bankruptcy fraud?

The court fully approved the creditor's proof of claim against the debtor. The debtor’s bankruptcy plan ordered them to pay for this approved claim. The insurance company gave debtor an attorney for the auto collision lawsuit. But, their insurance company never paid for the claim that the court approved. Yet, the debtor did pay on this claim that the bankruptcy court approved. Is this bad faith insurance?

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Attorney answers 4



The question would be is the insurance policy an asset that this person has at the time he declared the assets in the Chapter 7 proceeding. It is not like a 'car' or 'savings account'. The insurance policy has no particular value as an asset. Therefore, it would not be considered fraud to not list it as an asset. The next question arises as to whether a lawsuit can still go forward based upon the insurance policy, or whether a Chapter 7 discharge will have a permanent injunction on this matter; whether the debt preexisted or not; whether it was fraudulent, etc. No easy answers without analyzing in more detail the facts of this case. Please see more below.


Brian D. Lerner
Attorney at Law


You would need to have the bankruptcy petition reviewed by an experienced attorney in your area. It's hard to say w/o more facts.


I do not think the policy is an asset. The insurance company merely insures the potential liabilities of the debtor. Even if the debtor is being sued the insurance company is off the hook for coverage if the debtos liability is discharged. There is no possible law suit against the insurance company unless the coverage is for underinsured/uninsured motorist coverage, and even in that case if the liability of the debtor is discharged it would appear that the obligation of the insuranc company is waived unless the State law finds hat the injured person is a third party beneficiary with a right to go after the insurer.

Disclaimer: This answer does not constitute legal advice. I am admitted in the States of New York, New Jersey and Massachusetts only and make no attempt to opine on matters of law that are not relevant to those three States. This advice is based on general principles of law that may or may not relate to your specific situation. Facts and laws change and these possible changes will affect the advice provided here. Consult an attorney in your locale before you act on any of this advice. You should not rely on this advice alone and nothing in these communications creates an attorney client relationship. The opinions expressed herein are those of the author only and the fact that he has worked as an Assistant District Attorney; State Supreme Court Clerk; Special Assistant United States Attorney (Hawaii); Assistant Cornell University Counsel or Judge Advocate, United States Marine Corps should not be relied upon to assume that these statements reflect the policy of these organizations.


It is likely not an asset of the debtor and need not be listed. However, you should of been listed as a potential creditor is the person hit your vehicle. To pursue the insurance company of the debtor you would need to file a motion to modify the stay to pursue state court remedies against the insurance company only and not the debtor.

The response given is not intended to create, nor does it create an ongoing duty to respond to questions. The response does not form an attorney-client relationship, nor is it intended to be anything other than the educated opinion of the author. It should not be relied upon as legal advice. The response given is based upon the limited facts provided by the person asking the question. To the extent additional or different facts exist, the response might possibly change. Attorney is licensed to practice law only in the State of Illinois. Responses are answers to general legal questions and the receiver of such question should consult a local attorney for specific answers to questions.

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