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Bankruptcy Fraud

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Bankruptcy is a quick way to wipe out certain debts and obtain immediate financial relief. However, a Chapter 7 bankruptcy comes with a catch: in exchange for eliminating debts, the trustee might sell some of your property and give the proceeds to your creditors. Some people attempt to avoid losing property by engaging in bankruptcy fraud.

Fraud Before Bankruptcy

Generally, you can have unsecured debts discharged in a Chapter 7. Nevertheless, creditors might object to discharge of a debt if they believe you committed fraud in one of the following ways:

  • You misrepresented your income or assets on your application for a credit card or other debt
  • You bought items without any intention to ever pay back the debt
  • You took out large cash advances before filing for bankruptcy
  • You bought luxury items right before filing
  • You wrote a bad check intentionally
  • You submitted falsified documents in support of a request for credit

If you committed fraud, the judge can deny your attempt to discharge any associated debt.

Fraud when Filing for Bankruptcy

In order to keep the trustee from seizing property, some creditors hide assets when they file for bankruptcy. They wrongly believe that they will not get caught. Common fraud connecting with a bankruptcy filing includes:

  • Not listing an asset on the bankruptcy schedules you submit to the court
  • Transferring property right before filing for bankruptcy and hiding that fact
  • Destroying documents
  • Making a false statement knowingly in your bankruptcy filings

Note that simply making a mistake in connection with a bankruptcy filing does not constitute fraud. Nevertheless, even innocent mistakes can raise eyebrows, and the trustee might investigate you closely to see whether omitting property was intentional or not.

Punishments for Fraud

If you knowingly make a false statement in your bankruptcy filing, you can face stiff punishments. In particular, you can be fined up to $250,000 and face up to 5 years in prison. These punishments are reserved typically for the worst offenders. If the trustee suspects fraud, he can make a criminal referral to the FBI or the U.S. Attorney’s Office.

If you made a fraudulent transfer before filing for bankruptcy, then the trustee can try to avoid it by filing an adversary proceeding. The purpose of the proceeding is typically to get the property back from the person you gave it to. A creditor can also bring an adversary proceeding to prevent the debt from being discharged if you procured it through fraud.

Protect Yourself by Hiring a Florida Bankruptcy Lawyer

Criminal fraud prosecutions are fairly rare in bankruptcy, but you can never be too careful. Protect yourself by hiring a skilled bankruptcy attorney who will fill out your paperwork thoroughly and accurately before filing it with the court.

At Nowack & Olson, our team of Plantation bankruptcy attorneys have helped thousands of people successfully go through Chapter 7 or Chapter 13 bankruptcy. We are very familiar with all the requirements of the bankruptcy court, and we are anxious to hear from you. Please call 866-907-2970 or send an online message.

Resource:

law.cornell.edu/uscode/text/18/157

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