Bankruptcy is a process that allows for a person to reorganize or eliminate their debts in order to gain a fresh start. When you cannot afford to pay your debts, and are under threat of losing your assets; bankruptcy can provide the relief you need to regain control over your financial life. This process is a privilege, not a right. Unfortunately, many people commit bankruptcy fraud and end up in worse circumstances than prior to filing. Because the process can be very complicated, many people end up committing a fraudulent act unknowingly. Fraudulent acts can lead to severe consequences, including legal action.
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What Is Considered Fraud?
There are several actions that are considered fraudulent in the bankruptcy process. Most involve providing inaccurate information or withholding information; however, the way you manage your debts and assets prior to filing can also be considered fraudulent.
Concealment of Assets: When you file the bankruptcy petition, you are required to list all of your debts and assets in detail. If you provide inaccurate or incomplete information on the petition, you may be considered to be concealing your financial details. People may conceal their assets in order to protect them from seizure or liquidation during the process. However, when the bankruptcy court finds out there has been inaccurate or incomplete information provided, you are likely to have your case dismissed.
Multiple Filings: In some cases, people have filed in several states. They may use their real, or fake, personal information in order to obtain the best outcome. This is usually an attempt to get a debt discharged in one state, if it was not accepted for discharge in another state. They may also list certain debts in one state, and other debts in another, hoping to maximize their chances of getting these debts discharged. Trying to "beat the system" in this way will only cause you more financial, and possibly legal, trouble in the end.
Petition Mills: This is an unfortunate example of bankruptcy fraud, in which people scam naïve victims into providing their personal information that is later used to file for bankruptcy without the victims consent. This is a case of identify fraud as well. Typically, a scammer will place an ad in the paper advertising to help keep people from being evicted. Once the victim provides their information the scammer files in their name and charges outrageous fees to their accounts. This results in the victim being placed into bankruptcy without their knowledge or consent, and their credit being ruined.
How To Avoid Fraud?
If you are found to have committed a fraudulent act, you may be subject to legal action. Bankruptcy fraud is considered a felony and carries a sentence of up to 5 years in prison and/or a fine up to $250,000. Additionally, a fraudulent act will result in having your case dismissed. If your case is dismissed, you will be liable for your debts and your assets will be at risk from liquidation by creditors. Further, you are likely to be excluded from filing again for several years.
In order to avoid bankruptcy fraud, always be honest and thorough with your information. Even if you don't think the courts will need to see a specific financial detail, be prepared to document and hand it over to the court. If you are unsure, ask your bankruptcy attorney. In general, it is best to provide too much information than too little. Bankruptcy is a process designed to help you and the best way to benefit from it is to follow the filing guidelines. If your personal information was stolen and fraudulently used to file, contact the authorities right away. Having a police report of the theft will help prove your innocence and you may be able to proceed with your case.
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