Tuesday, August 9, 2011
Can Social Media Sites Like Facebook & Twitter Ruin Your Bankruptcy?
Social Media sites, and Facebook in particular, have changed the practice of law. Because social media sites are public and the information is credible (the owner of the account provides all of the information via posts), many lawyers and governmental officials have created social media investigation departments within their firms. Divorce lawyers regularly review the opposing party’s Facebook profile for evidence of adultery or hidden assets; prosecutors present online photos to juries as evidence of guilty behavior; and collectors troll social media sites looking for assets and debtors. Is it too soon to say that bankruptcy trustees will eventually realize that the social media sites are a good source to find inconsistencies with debtors’ bankruptcy schedules.
Social Media is truly taking over the world by storm. According to Facebook, they have over 750 Millions active users and according to Twitter, they have over 400 million monthly users who send out 200 million tweets a day. Needless to say, both sites have huge audiences. Could some of that audience be members of the United States Trustee’s office or debtor’s creditors?
To the individuals who are privy to the privacy settings of Facebook and Twitter, limiting access to one’s profile to “friends” is not a dead end for investigators. Online information can easily be subpoenaed – so do not assume any right to privacy for online materials.
To give debtors a brief understanding of when careless social media activity can have serious implications, here are 3 instances:
1. Personal Property Not Listed
Debtors are required to list their personal property when filing bankruptcy. Debtors may be able to protect some of their property by using federal or state exemptions. However, the property that is not protected by any exemptions may be seized by the Bankruptcy Trustee to be liquidated in order to pay creditors.
Pictures posted from the holidays or birthdays showing that new flat screen television or sports car without those items being listed in the bankruptcy petition that was filed afterwards may be seized or debtors may be required to pay non-exempt equity in the property.
Or what if debtors file in August, and they forget to list the new engagement ring that they received on July 4th, but on debtor’s Facebook or Twitter page, debtor posted engagement pictures of the ring and changed their dating status from “Dating” to “Engaged to…” for all of their friends to see, the Trustee could (although unlikely) try to come after that engagement ring or make the debtor pay back the non-exempt equity.
2. Vacations and Luxury Spending
Another way your social media could damage chances at a successful bankruptcy filing is if the Trustee or Bankruptcy Court finds out that the debtor has been taking “luxury trips” with credit cards or other funds. If debtor posts pictures of family trips to the Caribbean or a romantic getaway to the Mediterranean, the courts could require the debtor to pay back the expenses incurred on the vacation. When posting pictures to Facebook or Twit pics to Twitter, this could make the Trustee second guess debtor spending habits.
3. New or Unlisted Jobs
If the debtor has filed a Chapter 13 bankruptcy then the debtor should be making monthly payments to the Bankruptcy Trustee. Those payments were largely determined by debtor’s income and the amount of disposable income the debtor had at the end of each month at the time of debtor’s bankruptcy filing.
If the debtor just received a new job offer and is excited to tell family and friends by posting an announcement on their Facebook wall or Twitter feed about their new job and the pay raise the comes along with it, this could be information that the Chapter 13 Bankruptcy Trustee may use to increase the debtor’s monthly payments. Again, the more money a debtor makes should result in more disposable income. The Trustee can then use that extra disposable income to pay back more of debtor’s unsecured creditors.
Along the same lines of getting a new job – what if the debtor has a side business that, in their opinion, does not produce a substantial amount of income so the debtor does not list it on their bankruptcy petition. If a Trustee finds out about this other business through Facebook or Twitter, this income could be recalculated into the debtor’s monthly income which may push the debtor above the Means Test forcing debtor to file a Chapter 13 bankruptcy and pay back at least a portion of what debtor owes to creditors. In addition, a lie of omission is still a lie that potentially carries criminal penalties in bankruptcy court.
Many people have grown to love social media, especially Facebook and Twitter. It allows people to stay in touch with friends and family, meet loved ones, and keep up with the news. However, it has also allowed the world to peer into people’s personal life. Many Trustees are not doing it now, but a time will come when they will. Interestingly enough, according to many reporters, it can take less than two minutes to find out a lot about a person and their assets by simply looking online. Profile privacy is an easy way to keep people from finding out too much information and of course, debtors disclosing all assets and property to their attorney helps as well. If the debtor’s attorney knows about their property and their wishes to save it, then they can almost always protect it, or at least put the debtor in the best situation to keep as much of it as possible.