Cryptocurrency has become an increasingly popular and profitable investment over the past few years. However, with the rise in popularity comes the question of what happens to these assets in bankruptcy. Listing cryptocurrency in bankruptcy is relatively new. There is confusion and misinformation surrounding it. In this blog post, we will dive deep into crypto and bankruptcy to help you better understand what to do if you find yourself in this situation.
Cryptocurrency is a digital or virtual currency that uses cryptography for security. It operates independently of a central bank and is stored in digital wallets, making it decentralized and difficult for governments to regulate. In the context of bankruptcy, crypto is treated as an asset and, thus, must be reported by the debtor. The good news is that the process of reporting crypto is relatively straightforward.
In most bankruptcy cases, the proper procedure is to list the cryptocurrency with its current market value on the Schedule B section of the bankruptcy petition. In this case, a debtor must list the type of crypto, the amount they hold, and its approximate value. Your local state (or federal) exemptions may or may not cover the amount. Remember, most states do not let you keep large amounts of any form of currency during bankruptcy. This includes cryptocurrency.
When listing your crypto, you must value it using the day and time you filed for bankruptcy. Several websites can help you estimate the value of your crypto, such as CoinMarketCap and CoinGecko. Keep in mind that the value of crypto is highly volatile, so it is vital to get an accurate estimate based on the current market conditions.
Cryptocurrency is not heavily regulated by any government. It is also not a “traditional” asset because it only arguably exists in the digital world. However, it is just as much an asset as stocks or bonds, or even cash in a bank account. Remember, most financial assets have only been on paper or in computers for many decades. Just because it is a less-regulated, digital currency does not mean that it will be treated any differently by the bankruptcy trustee who examines your case.
In conclusion, although cryptocurrency is new in the bankruptcy world, the simple conclusion is that it must be listed in bankruptcy petitions. It is important to remember that failing to report crypto in bankruptcy can have serious legal consequences. Therefore, it is best to consult with a bankruptcy attorney with experience when dealing with crypto assets. They can help guide you through the process and ensure that your assets and rights are protected. Ultimately, it’s always better to be safe than sorry when it comes to bankruptcy.
Do you have more questions about cryptocurrency in bankruptcy? Schedule a free consultation today.