Over the past several years there has been increased popularity of Bitcoin and other types of “cryptocurrency.”
Cryptocurrency presents some unique, and also fairly traditional, issues in a bankruptcy case.
How are these accounts and assets are treated in bankruptcy cases?
Investing in Bitcoin and other cryptocurrency is similar to investing in stocks, bonds and mutual funds.
It seems every day a new investment platform arises for this purpose. According to collegeinvestor.com, these are the current Top 10 cryptocurrency investment companies:
Cryptocurrency Accounts Must Be Listed As Property
When you file a bankruptcy case, you must list all assets you own, including any financial accounts.
Just like with any bank account, cryptocurrency accounts and must be listed with the value of the account stated on the date the bankruptcy case is filed.
As detailed on our bankruptcy exemptions page, you can exempt (protect) a certain amount of assets depending on which state’s exemption laws apply in your case.
How much you can protect depends on what exemptions are available in your case.
Account Statements Must Be Provided To The Case Trustee
In most Chapter 7 bankruptcy cases, you will be required to provide at least the current month’s account statements for any cryptocurrency accounts.
This is sometimes difficult for some of these investment companies do not generate conventional monthly statements.
Some applications, such as Square, Inc’s “Cash App”, do not provide any historical statements at all.
So it is a good idea to take a screenshot of your account balance on the date your case is filed AND print out a bitcoin value quote online (like for any stock) on the date your case is filed.
These should suffice for most Trustee requirements.
Income From Trading Bitcoin
Income is important in bankruptcy. Particularly, income received in the six (6) calendar months prior to filing the case.
For those with primarily consumer debt, it in part determines whether you are eligible to file a Chapter 7 case.
It also determines a base level for payments needed in a Chapter 13 case.
As it is with any stock trading, gains or losses from sales of cryptocurrency in the 6 months prior to filing a bankruptcy case can affect eligibility.
Where it gets tricky is that many Cryptocurrency investment companies do not store or provide the necessary statements from which to determine the gains or losses from sales.
With stocks, your brokerage company will provide a 1099 form showing the calculated capital gains. Easy peasy.
Not so with Crytpocurrency.
Which means it is up to you to keep the necessary records.
This is increasingly becoming an issue in bankruptcy cases.
It is important that you keep accurate records of all transactions relating to your trading (deposits, sales, purchases, etc.).
Image of “Bitcoin, bitcoin coin, physical bitcoin, bitcoin photo” by antanacoins is licensed under opensource.
