Types of Bankruptcy Fraud

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Bankruptcy fraud is engaging in any act that misleads the bankruptcy court, the trustee or creditors within the bankruptcy process. If you commit bankruptcy fraud, the consequences can be severe, including the dismissal of your bankruptcy case, denial of discharge, criminal fines and possible jail time. Learning about the possible types of bankruptcy fraud can help you avoid making costly mistakes.

Concealing Assets

Hiding assets is the most common form of bankruptcy fraud. An asset is anything that you own that has any value. An asset can include a home, a car, a business or even money owed to you, such as a personal injury settlement, an inheritance or accounts receivable. When you file bankruptcy, you must disclose all your assets.

Concealing an asset prevents your creditors from receiving as much as they may be entitled to in your bankruptcy case. However, you may not intend to conceal your assets; you may simply forget to list an asset on the appropriate bankruptcy schedule. If you notice that you have made a mistake, contact the bankruptcy trustee immediately to report the mistake. Most likely, you will be able to amend your bankruptcy paperwork to include the omitted asset.

False Statements in Bankruptcy Documents

You also can commit bankruptcy fraud if you provide untruthful information on the forms. When you file for bankruptcy, you must complete a substantial amount of paperwork including a list of your assets, debts and information about your current financial status. Providing false information on bankruptcy paperwork is considered perjury and could result in the denial of your bankruptcy discharge, dismissal of your case and even a criminal investigation.

You can avoid such an occurrence by carefully reviewing your paperwork to confirm that no forms are missing and that the forms provided are filled out completely at least twice before submitting your bankruptcy packet to the court.

Read More: Stages of Bankruptcy

Trustee Bribery

The bankruptcy trustee is the court-appointed individual who handles your bankruptcy case. You will be in contact with the trustee throughout your bankruptcy case, and the trustee is responsible for reviewing your assets and liabilities and administering your estate. The trustee has a fiduciary obligation to your creditors and an obligation to be honest and open with the bankruptcy court.

Bribing the bankruptcy trustee is a form of bankruptcy fraud. The bribery may include offers of money or favors in return for the bankruptcy trustee "looking the other way" in the bankruptcy case. Maintaining a professional relationship with the bankruptcy trustee is essential to avoid any perception of bankruptcy fraud. For example, offering to take the bankruptcy trustee out to lunch following your meeting should be avoided, as such an action can be misconstrued as an attempt to alter the outcome of your case.

Filing Multiple Times

Filing more than one bankruptcy in your life is not fraudulent activity. However, you may be liable for bankruptcy fraud if you file for bankruptcy multiple times in different states with the purpose of taking advantage of the system. This includes filing using the same or different information, such as names and Social Security numbers.

You can file for bankruptcy more than once after you wait the appropriate time after you receive your discharge. For example, to file for Chapter 7 more than once, you must wait eight years between cases, if you received a discharge in the prior case.

References

About the Author

Elizabeth Stock began writing professionally in 2010. Before pursuing a career as a freelance writer, Stock was an editor and note writer for the "Thomas Jefferson Law Review" while attending Thomas Jefferson School of Law in San Diego. Stock recently graduated magna cum laude from Thomas Jefferson earning a Juris Doctor.

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