Understanding And Avoiding The 4 Types Of Bankruptcy Fraud

Posted on: 30 April 2020

When a bankruptcy law firm works with a debtor, one of the big goals is to make sure the client stays on a straight and narrow path. Although it's a fairly rare allegation to come up in a bankruptcy proceeding, fraud accusations can derail your petition or even lead to criminal charges. It's important to understand what counts as bankruptcy fraud so you can avoid it.

Hiding Assets

Of all the potential temptations the average person or business might engage in, hiding assets is the most common one. If you're currently filing for protection or thinking about it, make sure you have a complete accounting of all of your assets.

Yes, it can be a bit scary, especially if you're facing liquidation, to think you'll lose a lot of your stuff. However, the system allows petitioners to hold on to many types of essential assets. For example, you'll be able to maintain ownership of a reasonable car. No, you won't be able to keep a whole garage of sports cars, but a daily driver is acceptable.

This exception applies to many practical items, including clothes, kitchen wares, furniture, and even a house. Be aware that any of those items that you don't own outright or that are considered secured debt, may be taken outside of bankruptcy. For example, a bank can repossess a vehicle you owe money on.

Intentionally Filing False or Incomplete Forms

Knowingly submitting forms that leave out or fudge details is considered as bad as hiding assets. In fact, it can lead to perjury charges. Work with your bankruptcy law firm to make sure you accurately submit every piece of paperwork required.

Filing Multiple Times Concurrently

You are required by law to submit your petition for relief in a single jurisdiction. This can get tricky for companies that have operations in multiple states. Before you submit your petition, it's prudent to meet with an attorney and figure out where you need to file.

Note that concurrency is the issue here. Consecutive filings, such as pursuing Chapter 13 after you've completed a Chapter 7 case, are sometimes acceptable. In most cases, though, you'll need to wait several years before you can file again. The worst that happens in these scenarios is that the petitions will be rejected.

Corruptly Influencing the Trustee

The court will appoint a trustee to oversee the process. Attempts to bribe, coerce, or otherwise influence the trustee are illegal. If you must communicate with the trustee, have your lawyer set up and conduct the communication.

For more information, reach out to a bankruptcy law firm in your area.