Bankruptcy and Fraud

Bankruptcy and Fraud ~ What You Should Know

A lot of people who file for bankruptcy wonder about bankruptcy and fraud--specifically whether or not anything they have done might constitute bankruptcy fraud. It is an important consideration and the reason why filing bankruptcy sometimes takes planning.

What constitutes bankruptcy fraud? Bankruptcy fraud could include anything that has been done to dishonestly manipulate the outcome of a bankruptcy, which is why you absolutely need to talk to a bankruptcy attorney about bankruptcy and fraud as it relates to your circumstances in order to avoid bankruptcy fraud penalties.

That said, below are some of the most common things that can be considered bankruptcy fraud.

Concealment of Assets
Concealment of assets may include selling off, transferring, or hiding assets prior to filing. This may include assets you are expecting (i.e. a tax return). Ask your attorney what assets count here. Typically, your old couch or the clothes in your closet are not worth anything so you want to understand exactly what your assets are.

Using Credit Immediately Before Filing
Using your credit cards, for purchases or cash advances, or obtaining new credit too close to filing bankruptcy can raise huge, flashing, red flags. (Goods and services deemed necessary for living may be exempt) If you have used your credit too recently, it could be argued by your creditors that you knew you were going to file bankruptcy when you used or obtained that credit. Seek the advice of your bankruptcy attorney if this applies to you. You may be advised to wait some time before filing.

Providing False Information On Credit Applications
Providing false information to obtain credit is illegal, and we all know that many people "pad" their income some on credit applications. I do not condone that or claim that it won't be a problem for you, but my lawyer told me that the creditors have a certain responsibility to verify the information that they are provided. Speak to your attorney if you are worried about this.

There are other types of bankruptcy fraud but those are the ones most commonly worried about by filers. The bottom line is that once you know that you are going to be filing bankruptcy, you should not do anything that might jeopardize the successful discharge of your case, or worse, cause you to suffer any bankruptcy fraud penalties.

Bankruptcy Fraud Penalties
Punishment in bankruptcy fraud cases is up to five years in prison and $250,000 in fines. So not worth it.

I know I say it a lot, and I've said it a number of times in this post alone, but it is especially important for the topic of bankruptcy and fraud. If you have concerns, you need to discuss them with your bankruptcy attorney. I am not a lawyer and nothing I say is intended to be legal advice.

Wishing you the fresh start that you need,

ep