Honesty is the best policy when dealing with bankruptcy. Bankruptcy Fraud is a very broad term that can be committed in many different ways. Most bankruptcy frauds are based on the deception and lies of the person filing the case, but other parties can also be held responsible. In bankruptcy, intent is a major factor. It is considered accidental bankruptcy fraud if you fail to disclose financial information due to an error or mistake. You will be punished if the evidence you provide does not support the claim that you are legally insolvent.
Bankruptcy Fraud is a Federal Crime punishable by up to five years of federal prison time and a fine that is inevitable but can reach $250,000. Filing for bankruptcy used to be viewed as a shameful and defamatory act, which exposed one’s vulnerability. There has been an explosion in bankruptcy filings following periods of recession, and even the current pandemic. Unfortunately, many people who claim to be bankrupt do so for their own personal gain. A Bruner Wright PA Attorney reveals the different ways that bankruptcy fraud is practiced in our society.
Hiding A Property
Hide your property by providing insufficient information, lying, omitting sections in bankruptcy forms, or falsifying financial data. This is the most common type of bankruptcy fraud. Filers try to hide valuable assets to prevent them from being liquidated.
Devaluing Assets
Lies about the real value of property are another way of getting around court orders for auctions or distribution. Assets can be devalued through forged documents and verbal accounts. You should at least give an accurate estimate of each item that is registered under your name.
Disposal of Assets
Before declaring bankruptcy, some people transfer their money and sell off their assets. Some people give their valuables away to friends and family or transfer ownership to avoid bankruptcy.
Multiple Filings
Another common bankruptcy scam is filing in more than one state. In different jurisdictions, individuals provide both real and fake information. They can then pay off more debts and have extra time to keep their assets.
Petition Mills
A petition mill is a type of bankruptcy fraud perpetrated by a third party acting as a financial adviser. They gather financial information and charge a fee by promising debtors an eviction solution. In reality, the scammers secretly file for bankruptcy in the name of their victims, draining all assets and ruining credit scores.
Maximum Credit/Taking on Major Debt Before Filing
Some people think it’s okay to max out their credit cards or take loans without the intention of repaying them right before declaring bankruptcy. The credit card companies and the legal authorities will not be fooled; they will examine your recent transactions to determine if it is card fraud.
Bribery
Some filers pay their bankruptcy trustee to get their favor or approval. The trustee can use his/her powers to assist their case.
Creditor Fraud
Many creditors take advantage of the debtors’ situation by making false claims about payments already made.
Embezzlement
Some lawyers, court officials, and trustees try to steal money out of the bankruptcy estate.
This post was written by Trey Wright, a Chapter 11 Bankruptcy Lawyer in Jacksonville FL! Trey is one of the founding partners of Bruner Wright, P.A. Attorneys at Law, specializing in bankruptcy law, estate planning, and business litigation.
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