What is Bankruptcy Fraud?

Bankruptcy is a process that offers individuals who are unable to repay their debts the opportunity for financial relief. But what happens when someone makes false claims when it comes to their finances, deliberately hide assets, or intentionally leaves out relevant information when filing for bankruptcy? This is known as bankruptcy fraud and comes with serious consequences if found guilty.

To learn more about bankruptcy fraud, continue reading below.

Types of Bankruptcy Fraud

Bankruptcy fraud can take many different forms. However, today we will discuss five common types of bankruptcy fraud.

  1. Concealing Assets — At almost 70% of fraudulent cases, concealment of assets is the most common form of bankruptcy fraud. This form of fraud occurs when an individual deliberately fails to list every asset of theirs on bankruptcy forms. People do this because they know a creditor cannot liquidate assets of which they know nothing. Additionally, this type of fraud occurs when individuals transfer money, assets, or property into their friends’ or family members’ names, so they cannot be surrendered. 
  1. Multiple Filings — This type of fraud occurs when an individual files for bankruptcy in more than one state, using their real name and information, using an alias name and information, or combining the two. In most cases, these individuals will list the same assets on each of their claims but choose to purposely leave out some of their assets on the claims to protect themselves from total liquidation.
  1. Intentionally Filing False Information — When an individual deliberately files incomplete forms or false information, they can be found guilty of bankruptcy fraud. Additionally, the person can be found guilty of perjury. 
  1. Petition Mills — This form of bankruptcy fraud scheme is becoming common in the U.S. This occurs when an individual poses as a consultant or advisor claiming to help tenants who are experiencing financial difficulties avoid eviction. The posing individual uses the tenant’s name and information to file bankruptcy, charge service huge fees, and drag the case out for months. While the tenant believes they are getting help, their accounts are actually draining, their credit is worsening, and will eventually be evicted. 
  1. Bribing Court Officials — This type of bankruptcy fraud occurs when an individual who has filed for bankruptcy tries to bribe court officials, such as their trustee, to conceal assets.

Legal Consequences of Bankruptcy Fraud

Bankruptcy is known as a white-collar crime and is a federal offense that can result in significant consequences. These consequences can include the denial of discharge, fines, and imprisonment. If a person is proven guilty for bankruptcy fraud, they can serve up to five years in prison and/or up-to $250,000 in fines. An individual can be punished for even intending to commit bankruptcy fraud. 

Contact The Law Offices of Charles W. Daff

Avoid making mistakes like bankruptcy fraud with the help and guidance of a knowledgeable bankruptcy attorney. Charles W. Daff has more than 40 years of experience in bankruptcy law and wants to represent you or your business during this difficult time. If you are in Santa Ana, CA or the surrounding area and need help filing for debt relief, contact The Law Offices of Charles W. Daff today to schedule your free consultation.

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