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Crypto Law/Level IX · Death, divorce and disputes/9.2 Family and money disputes/Lesson 3

Bankruptcy and crypto

What happens to an individual’s crypto when they file for bankruptcy in the US: the estate, the schedules, the exemptions, and the penalties for leaving coins off the list.

Education, not legal, tax or investment advice. Crypto law differs between countries and states and changes often. Check the current rules where you live with a qualified lawyer or tax adviser before you act.

The lean path

The cheapest, lowest-tax, simplest and most private route the law allows, best first. Each step names the rule it rests on and the condition that keeps it lawful.

  1. Check exemptions first: the federal wildcard in 11 U.S.C. §522(d)(5) protects $1,675 of any property plus up to $15,800 of unused homestead exemption, figures in force since 1 April 2025; many states require their own exemption lists instead.
  2. Chapter 7 costs $338 in court fees ($245 filing, $78 administrative, $15 trustee surcharge), payable in installments; 28 U.S.C. §1930(f) waives the filing fee for income below 150% of the poverty line if installments are unaffordable.
  3. Complete credit counselling from an approved nonprofit agency within 180 days before filing, as 11 U.S.C. §109(h) requires; online or telephone briefings count, and without it an individual is not eligible to file.
  4. Below-median-income debtors face no means-test challenge under 11 U.S.C. §707(b)(7); everyone must still list every coin on Schedule A/B under penalty of perjury.
  5. Never hide or move coins before filing: §727(a)(2) denies discharge for transfers within one year made to hinder creditors, and 18 U.S.C. §152 carries up to 5 years in prison.

Materials11 U.S.C. §541 (property of the estate), §522 (exemptions) and §727 (discharge)Official Form 106A/B (Schedule A/B: Property) and Official Form 106Dec (the declaration signed with the schedules)Wallet and exchange records showing holdings and their values on the filing date

Wonder

  1. If I file for bankruptcy, does the trustee get my crypto?
  2. Can any of it be protected as exempt property?
  3. What happens if coins are left off the bankruptcy schedules?

Explore

  1. This lesson concerns a person who files for bankruptcy while holding crypto; when a platform fails instead, see lessons 4.1.1 to 4.1.4 and, on clawbacks, lesson 4.3.6. When a US bankruptcy case begins, an estate is created that, under 11 U.S.C. §541(a)(1), includes all legal or equitable interests of the debtor in property as of the commencement of the case. There is no exception for crypto: coins in a self-custody wallet, exchange balances, staked or lent tokens and NFTs all enter the estate to the extent of the debtor’s interest. Where a platform holds them, its terms decide what that interest is.
  2. Every asset must be listed on Official Form 106A/B, Schedule A/B. The current form, dated 12/15, has no line written specifically for crypto, so holdings must be described under the most fitting heading, such as line 35, ‘Any financial assets you did not already list’, with the current value of the debtor’s share. The schedules are signed with Official Form 106Dec, in which the debtor declares under penalty of perjury that they are true and correct. Volatility creates a practical difficulty: values are stated as of filing, and the price may have moved sharply by the time the trustee questions the debtor.
  3. Some property can be protected by exemptions. Under 11 U.S.C. §522(b), an individual debtor uses either the federal exemptions in §522(d) or the exemptions available under state and local law, and many states have opted out of the federal list. Crypto rarely fits a specific category, so in the federal scheme it usually depends on the ‘wildcard’ in §522(d)(5): the debtor’s aggregate interest in any property up to $1,675, plus up to $15,800 of any unused part of the homestead exemption in §522(d)(1). These dollar figures are adjusted every three years, most recently from 1 April 2025. State wildcard exemptions vary widely.
  4. The chapter matters. In Chapter 7, the trustee collects non-exempt property, sells it and pays creditors, so non-exempt crypto is usually turned over or liquidated. In Chapter 13, the debtor keeps property but pays creditors under a plan, and §1325(a)(4) requires that unsecured creditors receive at least as much, valued at the plan’s effective date, as they would in a Chapter 7 liquidation on that date. A valuable crypto holding therefore raises the minimum a Chapter 13 plan must pay. In either chapter, the price used and the date it is measured can be contested, especially after a sharp market move.
  5. Leaving crypto off the schedules has serious consequences. Under §727(a)(2), a court denies a discharge if the debtor, intending to hinder, delay or defraud a creditor, transferred or concealed property within one year before the petition, or concealed estate property after it. Section 727(a)(4)(A) denies a discharge for a knowingly and fraudulently made false oath, and §727(a)(5) for failing to explain satisfactorily a loss of assets, which is where an unsupported claim that coins were ‘lost’ leads. Criminally, 18 U.S.C. §152 punishes knowing and fraudulent concealment of estate property, and false declarations, with up to 5 years in prison.
  6. A recent prosecution shows the risk. On 8 September 2026 the US Justice Department announced that a federal jury in Alexandria, Virginia had convicted Jihoon Park of three counts of wire fraud and two counts of bankruptcy fraud. Prosecutors said he transferred assets to his wife and concealed millions of dollars in crypto before filing for bankruptcy, while declaring $0.34 in financial assets and no crypto. Sentencing was set for 10 December 2026. A practical check before any filing: export the full history of every wallet and exchange account, record holdings and values on the filing date, and give all of it to the bankruptcy lawyer.

Key facts

  • Under 11 U.S.C. §541(a)(1), the bankruptcy estate includes all legal or equitable interests of the debtor in property as of the commencement of the case.
  • The federal wildcard exemption in 11 U.S.C. §522(d)(5) covers any property up to $1,675 plus up to $15,800 of the unused homestead exemption.
  • In Chapter 13, 11 U.S.C. §1325(a)(4) requires unsecured creditors to receive at least what they would receive in a Chapter 7 liquidation.
  • Under 11 U.S.C. §727(a)(2), a discharge is denied for transferring or concealing property with intent to hinder, delay or defraud creditors within one year before the petition.
  • 18 U.S.C. §152 makes knowing and fraudulent concealment of property from a bankruptcy trustee or creditors punishable by up to 5 years in prison.
  • The US Justice Department announced on 8 September 2026 that Jihoon Park was convicted of bankruptcy fraud after declaring $0.34 in financial assets and no crypto.

Exercise nine, six, three, one

9CollectList up to 9 crypto holdings or rights that a person might have, such as wallet balances, exchange accounts, staked or lent coins, NFTs, airdrops due or claims against failed platforms.
6ClusterSort them into 6 groups: self-custody, custodial exchange, staked or lent, claims in another bankruptcy, collectibles and NFTs, and rights not yet received.
3DistillReduce the 6 to 3 by keeping the groups most likely to be overlooked or misvalued on a bankruptcy schedule.
1CrystallizeWrite 1 sentence describing how you would prove the value of each of those 3 groups on a given filing date.

Fact check

Dates, figures and claims checked against the published sources listed below.

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