Several news agencies are reporting that former baseball star Lenny “Nails” Dykstra has been charged with bankruptcy fraud by a federal grand jury. Dykstra filed for Chapter 7 bankruptcy in 2009, declaring $31 million in debts and only $50,000 in assets.

In the criminal complaint, prosecutors allege that Dykstra sold or destroyed over $400,000 worth of property. Among the property that Dykstra allegedly sold – presumably to raise money for his bankruptcy case – were sports memorabilia and furnishings from the home he lost in the bankruptcy.

Obviously most of the Chapter 7 cases filed in Michigan, or in most bankruptcy courts, do not involve millions of dollars of debts incurred by a high profile debtor. However, there is an important lesson that all bankruptcy filers can learn from the charges levied against Mr. Dykstra.

When you list assets on your bankruptcy petition, you are swearing that this list is accurate under penalty of perjury. If your trustee discovers that items have been omitted or worse, that they have been secretly sold, the trustee will refer the case to the U.S. Attorney for criminal prosecution.

Debtors sometimes express frustration with the bankruptcy process or anger at an ex-wife, a former business partner or even a former employer. They sometimes also express frustration with the low dollar limits set out in the Michigan exemption statute. I sense that some bankruptcy filers believe that the circumstances that led to their having to file were unfair and out of their control, and that therefore leaving out inherited jewelry that “no one will ever know about” or selling a few items for cash can be rationalized.

While it is probably true that Chapter 7 trustees generally do not have the resources to thoroughly investigate every Chapter 7 debtor, I caution any bankruptcy filer not to take the risk.

First and foremost, an intentional failure to disclose assets is illegal and constitutes a crime under federal law. No asset is worth your freedom or personal integrity.

Second, you have no way of knowing if the United States Trustee will select your case for a random review which can also mean much more intrusive scrutiny.

Third, it is possible that a third party – often an ex-wife or ex-business partner – might anonymously write the U.S. Trustee to report intentional errors on your petition.

Fourth, you might fall victim to “Murphy’s law” – your trustee or someone from his office might see you walk into a pawn shop or might see your auction on eBay. In my years of practice, I’ve seen stranger coincidences.

Often, issues associated with assets that you cannot protect can be resolved. While the bankruptcy laws can be unforgiving, they will not punish you if you sell assets to raise money for food, shelter and clothing, as long as those sales are disclosed where applicable. This is why I advise anyone who is even remotely considering bankruptcy to speak with a bankruptcy lawyer at the earliest possible date. In my office, I regularly maintain files in “pre-bankruptcy” status for four, six, eight months or longer. Often the delay arises from my client’s need to gain lawful benefit from assets that would be seized if the case was filed early.