Types of Bankruptcy Fraud That Hurt Your Bankruptcy Case

NORWOOD, MA, April 15, 2013

Since the purpose of bankruptcy is to give filers a fresh financial start, it makes sense that the system is based on the theory that a debtor will make full disclosure.

Unfortunately, there are times when people try to get more than they are entitled under the Code, and there are severe penalties that severely punish the wrongdoer.

Ten percent of bankruptcy cases have some element of fraud associated with it. With over one million people filing bankruptcy each year, that translates to 100,000 people committing bankruptcy fraud annually.

Committing bankruptcy fraud is a federal crime. Some 341 creditor meetings have large signs posted that state, "The FBI investigates bankruptcy fraud." As a general rule, acts of fraud, conversion, embezzlement, larceny, breach of fiduciary duty and willful and malicious injuries to persons or property are some of the ways that you could get your case dismissed. More specifically, you should beware of the following:

1. Hiding or underreporting your assets is the number one way that people commit bankruptcy fraud. According to the FBI, which investigates bankruptcy fraud, concealment of assets is the cause of nearly 70% of bankruptcy fraud cases. You need to report the full value of all your property to the court-appointed bankruptcy trustee.

2. Transferring property to another person - such as family or friends - to "protect" it from being liquidated in bankruptcy

3. Failing to disclose a source of income

4. Credit card abuse: if you spend large amounts of money on your lines of credit or credit cards just before bankruptcy, it may be viewed as fraud. This is because, if proved that you made purchases or credit line advances knowing your debts will be discharged (thus not needing to pay it back), it would be unethical on its face.

5. Multiple filings: courts only allow people to file bankruptcy every several years. Some people try to get around this rule by filing in different jurisdictions, allowing them to file several times while continuing to increase their debts. They might use fake names or their real name in the hope that courts in different areas do not communicate with each other.

6. In corporate bankruptcy fraud scheme, "bustouts" are common. A bustout is conducted by a company that is setup to fail from the beginning. The goal is to obtain merchandise from creditors, dispose of the goods, and never pay suppliers for the merchandise. Most often, the wrongdoer buys an existing company and uses that company's good credit to buy the goods without any intent to pay from the onset.

7. Another way to cheat in bankruptcy is by bribing the officials involved in your bankruptcy case, such as the bankruptcy trustee or even the judge.

How are Innocent Mistakes Handled by the Bankruptcy Court?

If it appears that your mistake is an honest one, chances are that the trustee assigned to your case will allow you to either fix the mistake (by amendment) or take the gracious way out of the case by asking for a voluntary dismissal.

Avoid Bankruptcy Fraud by Hiring a Bankruptcy Attorney

Bankruptcy fraud can cause you trouble when you situation is already quite bad. If you are concerned about the consequences of bankruptcy fraud, you can discuss your case with a Massachusetts bankruptcy attorney.

Patriot Law Group
11 Vanderbilt Avenue
Norwood, MA 02062
Toll Free: 888-453-3453
Website: http://www.irwinpollack.com