Filing for bankruptcy can alleviate your severe financial burden. Whether you are considering filing Chapter 7 or Chapter 13 bankruptcy, it is important to consult an experience financial planner and attorney who can protect your rights while guiding you through the bankruptcy process. If you knowingly omit required information from your filing or use the bankruptcy process to prevent creditors from receiving the money they are owed, you can be found guilty of fraud.
What is Bankruptcy Fraud?
Bankruptcy fraud is a white-collar crime that can range from concealing assets to avoid having to forfeit them to intentionally falsifying forms on your filing. According to Cornell Law School, bankruptcy fraud is most commonly committed through the concealment of assets.
Bankruptcy provides debt relief by allowing creditors to receive a portion of a debtor’s property in exchange for eliminating debt. The debtor gets to keep exempt assets, such as a home or car, but all other property can be liquidated (sold for cash) to pay outstanding debts. However, during the Chapter 7 bankruptcy process, the court-appointed trustee assigned to oversee the liquidation of assets may only liquidate the property and assets that are disclosed by the debtor. As a result, if the debtor does not disclose all his or her assets, he or she may be able to fraudulently keep the undisclosed assets despite owing creditors an outstanding debt.
Rather than asset liquidation, Chapter 13 gives creditors a share of your nonessential assets in exchange for clearing your debt. By deliberately concealing your assets, you would artificially lower the value of the non-exempt property you own, which would in turn lower your monthly repayment amount.
Some examples of bankruptcy fraud include:
- Failing to list an asset to prevent it from being sold
- Concealing property transfers that occurred prior to filing for bankruptcy
- Providing a false document or statement to the bankruptcy court or trustee
What are the Consequences of Bankruptcy Fraud?
A debtor who knowingly commits bankruptcy fraud may face criminal charges. The bankruptcy schedules, which list your assets, are signed under penalty of perjury. Your signature indicates that you confirm that the documents submitted to the court are accurate to the best of your knowledge. The penalty for bankruptcy fraud is a fine of up to $250,000 and imprisonment for up to 20 years.
In addition to a potential criminal record, a debtor who commits bankruptcy fraud risks having their discharge revoked and will continue to owe the debt owed prior to filing for bankruptcy.
Avoiding Bankruptcy Fraud
It is unlikely that you will find yourself guilty of fraud if you are transparent about your property and assets when disclosing them to the court. However, if you realize you have genuinely forgotten to disclose an assert, such as lottery winnings or a retirement account, you should disclose the asset immediately.
Seek Legal Guidance From a Twin Cities Bankruptcy Attorney
Bankruptcy is stressful enough without having to worry about additional legal trouble during the process. At Martin and Hedervare PLLC, we can help you achieve financial stability in a manner that ensures your safety. If you are struggling financially in the Twin Cities, Minneapolis, and St. Paul area, call our firm at (651) 383-4725 or contact us online today to schedule your risk-free consultation.