What Is Bankruptcy Fraud? - Frank J. LaPerch, PC

What is Bankruptcy Fraud?

Bankruptcy fraud is a serious offense and can cause your bankruptcy case to be dismissed. Worse yet, it can get you into legal trouble. Unfortunately, people filing for bankruptcy are accused of committing fraud even if their actions were unintentional. This is why it is so important to work with an experienced bankruptcy attorney who can help you keep your filing organized and on track.

In most cases, bankruptcy fraud occurs when someone filing conceals income or other important information. It can also arise if a false statement is made in an effort to mislead or slow the proceedings. In addition to these two examples, fraud can also occur if a filer:

• Fails to disclose assets
• Takes on a massive debt immediately before filing
• Fails to answer certain questions or provide certain information in paperwork
• Files tax returns that are different from recent financial statements

Though many people commit fraud intentionally, assuming they can get away with it, sometimes people stumble into fraud without realizing they are doing something wrong. If they can prove it was unintentional they might alleviate the charge, but it can be difficult to prove your intention to a judge. A misstep can easily look as if you were trying to take advantage of your situation.

Transparency is the Best Policy

When you file for bankruptcy, you must be upfront and honest about your assets. If you own property the bankruptcy court must know about it. Furthermore, the value of an asset must also be accurate. And finally, you are not permitted to transfer ownership of an asset to another person right before bankruptcy.

Another instance of fraud occurs when someone files for bankruptcy in more than one state. There are certain rules governing your ability to file for bankruptcy multiple times, so make sure you share previous or other current bankruptcy filings with your attorney.

Filers are not permitted to leave spaces or not answer questions on their bankruptcy petition. If this occurs, your case is likely to be dismissed.

Also, the more “missteps” or mistakes one makes, the more likely it looks like a pattern and “smells” like fraud. That is why it so important to have an attorney thoroughly review your case and be very detail oriented. Often, a good interview by the attorney will jog a client’s memory as to items they might actually innocently omit. A client might not consider an asset to be theirs, but an experienced bankruptcy attorney will know how the court and bankruptcy trustee will view the situation.

It’s important to be accurate about the value of items and have an explanation for how that value was arrived. The more information you provide, the easier you make the job for the trustee to evaluate and hopefully close your case so you can receive a discharge from the court. The less information you provide will only complicate your case. If it is actual fraud, or is so sloppy as to look like fraud, you invite having your case dismissed without a discharge, or in a worst case scenario, face criminal charges.

The bottom line is you must give full disclosure and be very diligent in filling out the bankruptcy petition accurately with your attorney.

If you have decided to pursue bankruptcy or you are concerned about filing correctly, contact us via our website or by phone at 845.942.5500.

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