Types of Bankruptcy Fraud

By Elizabeth Stock

Bankruptcy fraud is engaging in any act that misleads the bankruptcy court. There are several types of bankruptcy fraud including concealing assets and filing for bankruptcy multiple times in different states. If you commit bankruptcy fraud, the consequences can be severe including the dismissal of your bankruptcy case, fines and possible jail time. Learning about the possible types of bankruptcy fraud can help you avoid making costly mistakes.

Bankruptcy fraud is engaging in any act that misleads the bankruptcy court. There are several types of bankruptcy fraud including concealing assets and filing for bankruptcy multiple times in different states. If you commit bankruptcy fraud, the consequences can be severe including the dismissal of your bankruptcy case, 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 or have possession of that has any value. An asset can include a home, car or piece of personal property. Concealing an asset prevents your creditors from receiving as much as they may be entitled to in your bankruptcy case. Concealment of assets can include transferring property to friends or family. 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.

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False or Incomplete Form

You also can commit bankruptcy fraud if you file incomplete paperwork to the bankruptcy court, or 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 may mislead your bankruptcy trustee and cause you to become eligible for bankruptcy when you otherwise would not be. 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.

Bribery

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 to approve the bankruptcy case. 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 in most cases, you are unlikely to meet with another court-affiliated individual, especially if you file for Chapter 7 bankruptcy. Therefore, 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.

Filing Multiple Times

You commit bankruptcy fraud if you file for bankruptcy multiple times in different states. Multiple filing includes filing using the same or different information and can involve the concealment of assets. However, you can file for bankruptcy again in the same state after you wait the appropriate time. For example, to file for Chapter 7 again you must wait eight years from your previous Chapter 7 bankruptcy discharge.

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How to Amend Chapter 7 After it Has Been Filed

References

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How to Reinstate a Dismissed Bankruptcy

At the conclusion of your bankruptcy case, you typically will receive a bankruptcy discharge. A bankruptcy discharge means that all of the debts that are included in your bankruptcy case are erased and your creditors cannot pursue collection action against you to enforce the debts, like filing a civil lawsuit. During the bankruptcy case, you can ask the court to dismiss your case, or the court may dismiss your case on its own, and you will not receive a bankruptcy discharge. However, you can ask the bankruptcy court to reinstate your bankruptcy if it is dismissed by the court.

Bankruptcy Due Diligence Requirements

When you file for bankruptcy, the bankruptcy court needs information about your current financial situation, including a full disclosure of your assets and income. You must act with due diligence in providing the court with supporting documentation regarding your financial situation. Due diligence means that you cooperate with the bankruptcy court to the best of your ability by providing requested documents and answering all inquiries truthfully. Failure to act with due diligence can result in the dismissal of your bankruptcy case or a revocation of your bankruptcy discharge.

Can You Go to Jail if You Get Denied a Bankruptcy Discharge?

A bankruptcy court's discharge releases you from the debts included in it. Federal and state laws don't allow you to include some debts, such as federal taxes, on your discharge. While bankruptcy usually doesn't involve jail time, you may face a criminal sentence if your discharge is denied for an illegal action you took in relation to your case.

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