Filing Bankruptcy yourself, or with an inexperience attorney could result in a Bankruptcy Fraud allegation.
When most people think of bankruptcy fraud, they think of a nefarious individual trying to skirt the system and take advantage of a situation. They think of a criminal who knowingly breaks the law and attempts to do something in the bankruptcy process that wrongfully benefits them.
Obviously, situations such as this exist. There are people out there looking for ways they can work the system in their favor.
But these are not the only people who commit bankruptcy fraud.
Every day, well-intentioned individuals looking for a way to improve their financial situation could commit bankruptcy fraud. They’ve never intentionally broken laws and they had no intention of breaking bankruptcy laws. Unfortunately, intent doesn’t always matter when it comes to bankruptcy fraud.
What constitutes bankruptcy fraud?
Any time a person filing for bankruptcy conceals assets, makes false statements under penalty of perjury in writing or orally, files a false claim, destroys or conceals financial records, or gives or takes a bribe, they’ve committed bankruptcy fraud.
This is the case whether or not the person committing fraud did so knowingly or otherwise. Criminal fraud requires the state prove the defendant acted intentionally. But even if you made a mistake or made an action out of ignorance that equated to fraud, you can be accused of civil bankruptcy fraud. The penalties are not as severe, but they can cost you your opportunity to use bankruptcy to make a fresh start.
What Does It Mean to Conceal Assets?
One of the most common instances of bankruptcy fraud occurs when someone filing conceals an asset.
When you file for bankruptcy, the court is entitled to know all of your assets. Regardless whether you deem it valuable or you think your creditors have a right to it, you must report every single asset when you file for bankruptcy. Upon filing, the court will inventory your property and put it into a bankruptcy estate. From this estate, the bankruptcy court determines how your creditors will be paid and how much you can afford to pay in bankruptcy repayment plan.
If you attempt to hide any property from the court or you do so accidentally, you are committing bankruptcy fraud. This includes trying to “hide” assets by giving them to a friend or family member. It can also include selling assets or paying off a large debt. The bankruptcy court can look at the transactions you’ve made over the six months to a year leading up to your bankruptcy filing to determine if fraud is present. Make sure you reveal any information about assets and whether or not you’ve sold assets to your attorney during your consultation.
It is possible to exempt assets, but it is part of the process. You must report the asset and request an exemption, you cannot simply pretend the asset doesn’t exist.
At Weston Legal will help you report your assets and help you avoid inadvertent fraud when filing for bankruptcy.
Can I Be Accused of Bribery?
Bribery is another form of bankruptcy fraud. And just like concealing assets, bribery can be unintentional. If you attempt to convince a creditor not to file a claim against you by offering to pay cash toward a debt, you are committing bribery. There are also instances in which your communication or activities involving your bankruptcy trustee could be construed as bribery.
Make sure you work closely with your attorney during the bankruptcy process and follow his or her instructions. Be honest and forthcoming with financial information, even if you believe something is irrelevant. Your attorney will work to protect you from charges of bankruptcy fraud.
Other Types of Bankruptcy Fraud
In addition to concealing assets and bribery, you can also commit bankruptcy fraud by:
- Destroying important documents
- Making false statements to the court or court officials
- Filing for bankruptcy in different states simultaneously
- Starting a business with the intent to buy items on credit and avoid paying by filing for bankruptcy
What If I Accidentally Forget an Asset?
If you truly forgot to include something when you filed for bankruptcy, we can help you revise your paperwork. You should alert us as soon as possible once you realize there’s been an omission.
To be charged with criminal fraud, it will need to be proven that you intentionally attempted to commit fraud. However, it’s possible to be guilty of fraud unintentionally.
What is the Penalty for Bankruptcy Fraud?
Penalties for bankruptcy fraud very, especially based on whether or not the fraud was intentional.
Civil penalties for unintentional fraud include forfeiture of discharge rights, which means your discharge will be denied and your creditors will be able to sue you, foreclose on property, or take other collection actions that would otherwise not be allowed in bankruptcy. Unintentional fraud can also result in loss of exemptions, which means creditors will be able to take property from you that would have otherwise been protected.
Criminal penalties, if it can be shown you intentionally committed fraud, include up to five years in prison, probation, and steep fines up to $250,000.
The bottom line? Bankruptcy fraud is not worth it. Whether you think you can intentionally game the system or you accidentally misrepresent your financial situation, there is no sense in trying to get away with it. The penalties associated with bankruptcy fraud are far worse than anything you might gain from pulling off the crime.
Working with a bankruptcy attorney can go a long way in protecting you against accusations of fraud. If your creditors know you were working with a professional, they are less likely to assume anything you’ve done is fraud, especially of a criminal nature. We know what questions to ask and what actions to review to protect you from charges of fraud.
For more information or to discuss your bankruptcy case, contact 1.800.220.4318.