Most people filing for bankruptcy are honest, hard-working citizens caught in an unpleasant financial situation. However, there are also those looking to abuse the laws and find loopholes that will benefit their selfish goals. People who often try to abuse the law this way usually end up in debt through fraudulent acts. To get out of this debt they resort to other fraudulent acts, in this case, bankruptcy frauds.
But sometimes, even honest debtors tend to make mistakes that the court may misinterpret as an attempted fraud. In order to learn how to avoid making mistakes that could lead to your case being mistaken for a bankruptcy fraud, you should first get to know everything about them.
So what does a bankruptcy fraud entail? There are actually several types of bankruptcy frauds. To put it simply, any dishonest practice people use when filing for bankruptcy is considered fraudulent. This includes not disclosing all assets, falsifying forms, handing incomplete forms, filing for bankruptcy several times over, bribing a trustee or not using real personal information. Moreover, these practices are often used in conjunction with other criminal activities, often to cover them, such as money laundering or identity theft.
Common Bankruptcy Frauds
Not disclosing their full list of assets from the court is the most common way debtors try to play the system. They do this in hopes that the unfiled assets will not be liquidated once the case proceeds. Sometimes, debtors might even transfer some of their assets to their friends and family members so the court cannot trace them.
Sometimes debtors try to deceive the court by filing for bankruptcy several times in several states. They do this either under their real name or by using a false identity, sometimes even both. While the court is not likely to fall for this fraud, it is bound to slow the process down. Because of that, debtors often use it to try and buy themselves more time in order to hide their assets. However, in the majority of cases, bankruptcy courts are not fooled easily.
Another common case of bankruptcy fraud occurs often and on a much larger scale. Agents allegedly representing a consulting agency target individuals in bad financial situations and petition them offering to help. And while they lead people to believe they are offering them financial aid, in reality, they are filing for their bankruptcy. These agencies aim to prolong the cases and charge the victims of this scam insane fees and rob them of their savings in the process.
Why Do Debtors Resort to Bankruptcy Frauds
Debtors looking to hide their assets do so in hopes of filing for Chapter 7 bankruptcy. As you already know, some secured debts may be discharged in Chapter 7 bankruptcy. However, in the case of Chapter 13 bankruptcy debtors are presented with a repayment plan that involves monthly repayments for anywhere between three to five years. While their debts are discharged after this, their bankruptcy case is logged for a decade after the discharge and affects their credit score during that period. To avoid being blacklisted this way, debtors resort to frauds.
What is the Punishment for a Bankruptcy Fraud
If prosecutors can prove that the data was deliberately falsified, the debtor is convicted. Bankruptcy frauds are considered a criminal offense. The punishment for a bankruptcy fraud is a five-year prison sentence or a hefty fine. Furthermore, if the court deems necessary, debtors may even have to serve a prison sentence and pay a fine at the same time.
Bankruptcy courts are always on guard, ready to expose any attempts at fraudulent behavior. However, sometimes even honest debtors make mistakes when filing for bankruptcy that may be misinterpreted as trying to hide their assets or give false information. If you want to make sure this doesn’t happen to you, make sure to hire a reputable San Diego bankruptcy lawyer to help with your case. If you need expert legal representation before the bankruptcy court don’t hesitate to contact the BK Lawyers at (619) 312 – 4900.