How Can I Avoid Accusations of Bankruptcy Fraud?

 Posted on December 21, 2021 in Bankruptcy

If you have significant debts, bankruptcy may be your best option for receiving relief and ensuring that your family will be able to live comfortably and cover your ongoing expenses. However, it is important to make sure you follow the correct procedures when filing for bankruptcy and provide accurate information when submitting bankruptcy forms. Misreporting financial information or other types of activities could lead to accusations of bankruptcy fraud. This could cause your bankruptcy case to be dismissed, or you could even face criminal charges. By understanding the reasons why a person may be accused of bankruptcy fraud, you can make sure you are avoiding these issues and taking the correct steps to discharge your debts.

Forms of Bankruptcy Fraud

Criminal charges for bankruptcy fraud usually require prosecutors to show that a person intentionally provided false information or took improper actions to abuse the bankruptcy system. These actions may include:

• Failing to report assets - In a Chapter 7 bankruptcy, a debtor’s non-exempt assets may be seized and liquidated. In some cases, debtors may not report certain assets to avoid turning over some of their property, or they may undervalue assets with the intent of protecting property through the applicable exemptions. Intentionally concealing or misreporting assets is considered to be perjury, and an offender who is convicted of this offense may face significant fines or be sentenced to multiple years in prison.

• Illegal purchases or transfers - In some cases, debtors may obtain credit or make large purchases in advance of filing for bankruptcy, with no intention of paying back the amount owed. Debtors may also attempt to protect assets by transferring them to friends or family members. In these cases, creditors may object to the discharge of debts, and a person may not be able to eliminate debts that they took out fraudulently. A bankruptcy trustee may also take action to recover any payments or transfers that were made in anticipation of bankruptcy and ensure that these assets are used to repay a person’s debts.

• Preferential treatment to creditors - A debtor must treat all creditors equally during the bankruptcy process, and a person may be accused of fraud if they choose to repay one or more creditors prior to filing for bankruptcy. In general, if a person repays debts owed to a family member, makes extra payments to pay off an auto loan, or otherwise shows preference to a creditor before filing for bankruptcy, this may affect their ability to complete the bankruptcy process.

Contact Our Kerrville Bankruptcy Attorney

When preparing to file for bankruptcy and during the bankruptcy process, it is important to abide by the law and ensure that you are avoiding any actions that could be interpreted as fraud. By working with an experienced attorney, you can make sure you meet all of your legal requirements, and you can address any issues that may affect your ability to discharge your debts or that may lead to accusations that you have acted illegally. The Law Offices of Chance M. McGhee can provide you with the legal help you need during this process, ensuring that you provide the right information and follow all of the necessary steps to receive relief from your debts. Call 210-342-3400 for a complimentary consultation with our New Braunfels bankruptcy lawyer today.

Sources:

https://www.law.cornell.edu/wex/bankruptcy_fraud

https://www.journalofaccountancy.com/issues/2020/oct/fraud-red-flags-during-bankruptcy-process.html