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Bankruptcy Fraud


Bankruptcy was created as a way to give well intentioned families, who were over their head in debt, a way out. Using the courts, they could file for bankruptcy. If they were successful, most of their assets would be sold with the proceeds distributed among the creditors. Most of his debt would be cleared from the books and he would be able to start to put his financial life back in order again without the huge debt weighing on him. Many families have successfully used bankruptcy to start again.

Some people considering debt settlement vs bankruptcy, decide on bankruptcy because they think that they can hide some of their assets with no penalties. Bankruptcy fraud, however, is a federal offense. And if a person intentionally misrepresents his assets, debts, and so on during the filing - he can be convicted of bankruptcy fraud and possibly go to jail.

Most cases of bankruptcy fraud occur because the person filing attempted to conceal his assets. An example would be transferring substantial amounts of money from your bank account or investment portfolio to a family members account in order to hide it. If it can be proven that the money was moved in order to avoid being liquidated and distributed to the creditors, the courts would have little difficulty bringing a credible bankruptcy fraud case. Business owners are probably on of the biggest users of this method of bankruptcy fraud when they try to hide assets before filing for bankruptcy.

Multiple filings are another type of bankruptcy fraud. This occurs when a person files for bankruptcy in more than one state.  Since bankruptcy is filed at the state level, the thinking is that the deception won't be discovered. Even if both filings are done using the person's real name and Social Security number, this is still considered bankruptcy fraud.

Committing bankruptcy fraud can result in both jail time and huge financial penalties. The jail time could be as long as 5 years. The fine could be as much as a quarter of a million dollars.

If bankruptcy fraud is suspected, it will be investigated and prosecuted by the Department of Justice. If the case against the filer is successful, the government has a choice as to how to confine the person. Choices include federal prison, halfway houses, home detention, or a combination of the above. The average time served by a person convicted of bankruptcy fraud is about 36 months.

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