Bankruptcy and Your Facebook Account: How Safe Is It?

Although I have not seen this happening much, so far, in the Eastern District of Michigan, where I practice as a bankruptcy lawyer, some of my colleagues around the country are reporting that Chapter 7 bankruptcy Trustees are beginning to review and to ask questions about debtors’ Facebook accounts. In some extreme cases, Trustees have reportedly requested debtors’ user-names and passwords at the 341 Meeting of Creditors hearing that occurs in the Chapter 7 bankruptcy process.

It would be surprising to me if my local Chapter 7 Trustees were not already casually perusing Facebook for the accounts of filing debtors who have neglected to properly set their privacy settings so that “non-Friends” cannot access their accounts and view posted photos of motorcycles, diamond jewelry, comic book collections, or anything else that may (to the Trustee’s mind) not have been disclosed as assets owned in the debtors’ bankruptcy schedules.

While one’s initial reaction may be a sense of general outrage, it is important to remember that anything you post on Facebook is no longer wholly your property. Facebook’s terms of use seem to vary from day to day and they have certainly, if not as of this writing, in the past at least exclaimed an ownership interest of any photo or other item posted on the Facebook site.

It is further important to remember that, if you are in the habit of “friending” anyone who requests it, your privacy is not well-protected to begin with. Is it somehow underhanded for a Chapter 7 Trustee to look at what you have publicly posted on a third-party website open to anyone’s use—particularly if you have not bothered to set your privacy settings to “Friends Only?”

The implication is clear: make sure your privacy settings are adjusted properly on Facebook or any other online social networking or other site.

The bottom-line point, however, is nothing new: make sure that you have disclosed ALL of your assets, wherever they are located, no matter whether you think that they have “no value,” to your bankruptcy attorney so that they can be properly listed, disclosed, and, hopefully, exempted (i.e., protected from the Trustee’s liquidation power) in your bankruptcy petition.

My advice is no different here than it is when clients ask me before the 341 Meeting of Creditors how they should respond to the Trustee’s questions. My answer? “Honestly.” If you have not failed to disclose anything, there is really nothing to worry about.

That said, is everything else on your Facebook page any of a Chapter 7 Trustee’s business? My view is that it is not and that Chapter 7 Trustees have no right to demand passwords, etc. How that plays out in practical terms will depend upon Trustee actions here in my district in the future.

If you are a southeastern Michigan resident considering filing for bankruptcy, please feel free to contact me at (866) 674-2317 or john@hillalaw.com to schedule a free, initial consultation.

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