Bankruptcy, at its very basic, is when a debtor is declared insolvent either on their own accord or by their creditor. Bankruptcy can offer immense relief when you are struggling with debt.
However, while bankruptcy offers a great start when you are unable to pay your debts, it is important to understand that honesty and good faith are paramount. It is important that you are forthright while declaring bankruptcy. Failure to do so amounts to bankruptcy fraud and it can greatly impact the outcome of your case.
Why bankruptcy fraud is a big deal
Under the U.S Bankruptcy Code, bankruptcy fraud is a serious federal offense with severe penalties. A conviction can lead to an imprisonment of up to five years as well as a fine of up to $250,000. To convict you, the prosecution will have to establish that you were inclined to deceive the bankruptcy court, the trustee as well as any other party of interest in your bankruptcy claim. Here are some of the actions that may amount to bankruptcy fraud:
Hiding assets to avoid forfeiture – It is not uncommon for an individual to try to hide some assets with the goal of engaging in fraudulent conveyances. Gifting your family or friend some of your assets with the goal of reclaiming them later will be treated as fraud.
Providing incomplete or falsified information – Bankruptcy comes with lots of paperwork. While filing your bankruptcy claim, you will be required to make full disclosure of what you own as well as what you owe. Knowingly providing false information or failing to disclose your interest in a business can be deemed as fraud.
Bribing the trustee – Any attempt to buy the trustee or court official’s favor is, in and of itself, a crime. It also amounts to fraud as far as the bankruptcy court is concerned.
Fraud can lead to the denial of your bankruptcy claim. Find out how you can avoid this costly mistake while declaring bankruptcy.