Bankruptcy Fraud Is a Serious Charge
Bankruptcy is a legal option that can be a lifesaver if you find yourself in a precarious financial situation. However, there are strict rules about filing bankruptcy, and you must adhere to them. If you make a mistake or intentionally try to get past the rules, you could face charges for bankruptcy fraud. The government takes fraud of this nature seriously and imposes harsh penalties.
You will lose your ability to discharge your bankruptcy, which will mean you have to deal with the financial issues head-on. You also could end up in prison or with hefty fines.
This is not a situation to take lightly. If you face bankruptcy fraud charges, you need legal help. An attorney is the only person who can offer you solid advice and guidance during a situation like this.
Identifying Bankruptcy Fraud
Bankruptcy fraud is not always clear-cut. Sometimes, a person may commit it by accident. However, it does not matter to the government whether you intentionally tried to break the rules or not. It will still seek justice.
If the act was unintentional, you will have a chance to remedy it. You will rarely face criminal charges without any warning in such a case.
If you do face charges, it is a white-collar crime, which means it is a criminal charge but does not follow the typical stereotype of criminal activity. Essentially, the people who commit this type of crime are wealthier and even trusted members of a community with no previous criminal history.
Fraud of this type will usually fall into one of four categories:
- Bribing a trustee
- Filing false information
- Concealing assets
- Filing multiple times
Concealing Assets
The most common fraudulent activity is concealing assets. You may do this unintentionally since there are very formal rules about asset management before you file bankruptcy that you must know and follow. It is rather easy to break one of these rules without knowing it.
Concealing assets causes issues because you file bankruptcy in good faith. You get this opportunity to offer whatever you can to pay back debts to creditors, and creditors get the assurance that you will do this under court supervision. If you conceal assets, you are taking money from your creditors.
Concealing assets can occur in many ways:
- Selling assets before filing for bankruptcy
- Giving away assets to others temporarily
- Not listing assets on your bankruptcy forms
- Transferring ownership of assets
Filing Multiple Times
How many times can you file for bankruptcy? You may also commit multiple acts of fraud. For example, if you forge documents about the ownership of an asset, you are not only concealing that asset but also falsifying documents.
While concealing assets is one type of bankruptcy fraud that may occur before filing bankruptcy, it is not the only thing you might do wrong. Other ways fraud occurs before bankruptcy include:
- Using credit to buy items with no intention of paying back the debt
- Running up debts immediately before filing for bankruptcy
- Creating false documents
- Writing a bad check
- Obtaining credit using false information
The bottom line is that bankruptcy fraud is anything you do that usurps the rules and attempts to prevent your creditors from receiving the maximum amount of money due to them through the process.
The Government Takes Fraud Seriously
When you file bankruptcy, the court expects you to be honest and truthful. You have a legal obligation to provide the court with complete information about your financial situation, including all assets you own.
You must answer all questions truthfully and ensure that you divulge information that could impact your case. Misusing the bankruptcy system is something the court will uncover, and when that happens, the court will take quick measures to hold you accountable.
The reason the government takes such a strong stance is that the bankruptcy process provides help for bad financial decisions or unavoidable financial situations that could lead to serious problems for you and your family. It protects you in good faith.
In addition, when creditors extend you credit, they also rely on your word that you are obtaining it with the full intention of paying it back even though they are fully aware that you could file bankruptcy. Your creditors rely on the court to provide a fair and just system where they can recoup some losses.
When someone commits bankruptcy fraud, it puts a black mark on the whole system.
Bankruptcy Fraud Leads to Legal Consequences
If the bankruptcy court suspects fraud in your case, it will investigate. Your trustee is the one most likely to recognize signs that something is wrong.
If the court finds adequate evidence of fraud, federal prosecutors will step in to file charges. Bankruptcy always occurs at the federal level because it is a federal law, so that is why any criminal charges are at the federal level as well.
To prove the case, the prosecutor must show that you misrepresented a fact of your bankruptcy case and did so with intent. If it was a true mistake and you can show it was, then you may be in the clear.
If a court finds you guilty of bankruptcy fraud, you could face up to 20 years in prison and a fine of up to $250,000.
How an Attorney Can Help
Bankruptcy fraud is not something to take lightly. If your trustee hints there is an issue, you need to make sure you have an attorney who can assist you.
You will have to prove that your actions were not done with the intent to defraud the system. If your attorney can put together a strong defense, then you have the best chance of avoiding prison time and high fines.
You also can prevent any whisper of fraud by using a competent bankruptcy attorney to file your case. If you do everything correctly from the beginning, you can bypass any concerns about criminal accusations. Your bankruptcy attorney can ensure your paperwork is done correctly and that you make all the proper disclosures.
Having legal representation from the start is a smart idea. It can save you from the hassle of defending yourself in criminal court and potentially facing further financial hardship.
Work With an Experienced Local Lawyer
Do not try to handle your bankruptcy alone and leave yourself vulnerable to bankruptcy fraud charges. Hire an experienced attorney to help you through the process and keep you on the right track.
Submit a request online or call us today at (866) 345-6784 to contact an experienced lawyer in your area!
About the Author
Aaron is a professional legal writer with a B.S. in English Education from Southern Illinois University – Carbondale. He has written, published, and edited thousands of legal articles for RequestLegalHelp, which has connected over 5 million people to legal help in the United States.
With over five years of experience writing thousands of legal articles for law firms across the U.S. and Canada, Aaron specializes in covering federal, state, and city-level legal issues ranging from auto accidents to wrongful terminations.
