The Consequences of Bankruptcy Fraud
When facing overwhelming debt, some may be tempted to manipulate the bankruptcy system as a shortcut to financial relief. However, bankruptcy fraud is a serious federal offense that carries severe penalties, including imprisonment and hefty fines. This article aims to provide a comprehensive understanding of bankruptcy fraud, common methods of committing it, and the legal repercussions of this particular financial violation.
What is Bankruptcy Fraud?
Bankruptcy fraud occurs when an individual knowingly and fraudulently misrepresents or conceals assets, files false or incomplete forms, or otherwise tries to manipulate the bankruptcy system. It is a criminal offense and is primarily governed by federal law, although certain state-specific ramifications may apply.
The charges incurred from state prosecutors will often be perjury or grand theft. As an example, under California Penal Code Section 118, perjury is punishable by imprisonment for between two to four years, while grand theft could be either a misdemeanor or felony charge, with penalties ranging from one to three years in the county jail or in prison.
Federal Penalties for Bankruptcy Fraud
Bankruptcy fraud is punishable under various sections of the United States Code, specifically 18 U.S.C. §§ 152, 157, which make it illegal to knowingly and fraudulently conceal assets, make false oaths, or perpetrate bankruptcy fraud schemes. Violators can face:
- Up to 5 years in prison per offense
- Fines up to $250,000
- Forfeiture of assets
Common Ways Bankruptcy Fraud Occurs
Bankruptcy fraud can take a variety of forms, with some types being more rare than others. Here are some ways in which bankruptcy fraud occurs:
- Concealment of Assets: The most prevalent type of bankruptcy fraud, where debtors hide assets to avoid their liquidation. As a hypothetical example, this would be concealing the ownership of a vacation home in your financial documentation.
- Multiple Filings: Some people file multiple petitions under different identities or jurisdictions to exploit the automatic stay against debt collection.
- Petition Mills: In this fraud scheme, a third party poses as a consulting firm to exploit those facing eviction, ultimately leaving the victim with even more debt and a bankruptcy filing they did not intend.
- False Information: Providing misleading or incorrect information in bankruptcy documents.
How to Protect Yourself from Accidental Fraud
Given the complexity of bankruptcy laws, it’s all too easy to make an error that could be interpreted as fraud. Here are steps to prevent accidental fraud:
- Consult a Bankruptcy Attorney: An attorney can help you understand the legal requirements and pitfalls associated with filing for bankruptcy, ensuring that a qualified professional is overlooking your preparations, practically eliminating the possibility of a grave error in your filing.
- Be Transparent: Full disclosure of your assets and liabilities is not just ethical but a legal requirement. Purposely obfuscating your finances to either your lawyer or the judge presiding over your case is an easy way to, at best, have your bankruptcy dismissed and, at worst, be charged with fraud.
- Double-Check All Documents: Ensure all forms, schedules, and declarations are accurate. Having an experienced attorney as an extra pair of eyes can be the difference between a faulty filing and a successful bankruptcy.
The Grave Seriousness of Bankruptcy Fraud
Bankruptcy fraud is a grave matter that has the potential to irrevocably damage your life and financial future. With severe federal penalties and the possibility of state-level prosecution, attempting to manipulate the bankruptcy system is a risky proposition with life-altering consequences. This is why it’s important to consult with an experienced bankruptcy lawyer who can overlook your bankruptcy filing, double-check your financial documentation, and ensure that there is no possibility of the appearance of fraud in your claim.