What is Bankruptcy Fraud?

The broad term bankruptcy fraud refers to any activity that filers might engage in to gain an unfair advantage during the bankruptcy process. It can lead to a felony that could result in up to five years imprisonment and a non-dischargeable fine of up $250,000.

A quick word about intention

A crime like bankruptcy fraud, for example, requires that the perpetrator has an intent to commit a crime. You’ll be able to see that not all situations can be considered bankruptcy fraud. 

When filling out bankruptcy papers, be thorough, and don’t forget to disclose any information if in doubt. For failing to declare an asset on your tax returns, you won’t be sent to prison. 

If you fail to submit sufficient documentation or refuse to give information to the trustee, it could be a violation of the law and cause more harm than good for your financial future. 

It is important to give the court your full financial picture, as fraud could be charged even if you weren’t intending to. This will not be a case of you concealing information.

Keep your secrets

One of the most common types of bankruptcy fraud is the accusation that filers conceal assets from the court. The United States Trustee names a bankruptcy trustee, who can sell non-exempt assets of the filer to partially settle outstanding debts. 

Filers are required to disclose all assets in bankruptcy petitions, regardless of whether they were given, inherited, won, or purchased.

You can be charged with intentionally concealing assets if you fail to declare them in bankruptcy schedules. The bankruptcy trustee assigned to your case will auction it off, even though it would be protected otherwise. 

You could even be charged for intentionally hiding assets. Under penalty of perjury, you are required to submit your property information under oath. This means that you could face serious penalties if you lie or provide incorrect information.

Keep the value of your property secret

Noting that your asset may be undervalued intentionally is a form of bankruptcy fraud. Do not give false information, or undervalue an item that you know is more valuable. You shouldn’t attempt to determine the value of your clothes or furniture at yard sales. 

You shouldn’t advertise your coffee maker as a $20 item when it is a $600 state-of-the-art espresso machine.

My paperwork was not completed correctly. What is the offense?

A US Attorney won’t prosecute you for “incorrectly filling in papers” or bankruptcy fraud. A federal prosecutor is authorized to open a criminal investigation into perjury. Perjury is lying under oath. 

If you submit incorrect or incomplete information to your bankruptcy petition, and you don’t correct it after it has been brought to your attention, the Department of Justice could prosecute you for perjury. 

If you deliberately provide inaccurate or insufficient information, it is possible to be prosecuted with perjury. If this is the case, it may not suffice to change your paperwork to avoid being penalized for trying to conceal any information.

To keep your property out of creditors’ hands, you can get rid of it

Avoid any actions that could be considered suspect by the bankruptcy court before you file for Chapter 7 bankruptcy or Chapter 13 bankruptcy. Your bankruptcy case may be affected by the actions you take before you file bankruptcy. 

The Bankruptcy Code may consider fraudulent transfers as well as the transfer of significant assets to someone else’s ownership or the giving of valuable property to others. You can also sell specific items before filing for bankruptcy. 

Notify your trustee if you have made significant modifications to assets before filing for bankruptcy. It could appear that you are trying to hide these activities from your trustee. This is against federal law. 

Perjury can not only threaten the success of your bankruptcy but could also be interpreted as fraud. Depending on the circumstances, your trustee might notify the law authorities.

Intentionally taking on debt without the intention of repaying it

Individuals in debt relief are eligible to use the bankruptcy system. If given the chance, they would repay any outstanding loans according to their original loan agreements. Chapter 7 bankruptcy causes an automatic stay, which then releases low-income filers of their qualifying obligations. 

A Chapter 13 bankruptcy automatically imposes an automatic stay. This reorganizes the filer’s obligations and makes payments more reasonable over time. People who have no intention of repaying debts they incur are not protected by bankruptcy. 

A creditor may hire a bankruptcy attorney to file an objection to their discharge if they believe you have behaved in bad faith. Your creditor may file a petition to the court to stop you from getting debt relief. 

Additionally, a US Attorney could accuse you of a white-collar crime. If you are unsure of how you will pay your creditors back, you should be prepared to explain why and which accounts you have taken out.

Conclusion

It’s important to stay focused when filling out your bankruptcy petition or answering questions from your trustee. If in doubt, give information. Refusing to provide information can cause more harm than good for your case and your future.

 

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