Committing a bankruptcy fraud is a federal offense. Anyone found guilty of bankruptcy fraud can be sentenced to five years in prison and/or fined $250,000. Bankruptcy fraud is a serious offence because bankruptcy is meant to give a debtor, who is under severe financial stress, a fresh start.
Concealment Of Assets
There are several types of bankruptcy frauds. The most common ones are related to concealment of assets. This type of fraud accounts for nearly 70 percent of fraudulent cases related to individual bankruptcy. This type of fraud occurs when an individual or a company fails to disclose all his/her assets with the purpose of preventing the liquidation of their assets.
An individual might conceal his/her property by not listing all his/her assets or by transferring the assets to another person before filing for bankruptcy. Companies usually conceal their assets by transferring money or properties to their relatives or business associates. Concealed assets could include properties, country club memberships, watches, cars, jewelry, or any other asset that would have been liquated if listed.
This type of fraud can be found out by the trustee during the course of the bankruptcy proceedings or later on. If the fraud is found out during the course of bankruptcy proceedings, your petition would be dismissed and you would face bankruptcy fraud charges.
Very often bankruptcy fraud relating to concealment of assets is found out when the bankruptcy discharge has been given to the debtor. The debtor thinks that he/she is no longer under watch and goes on to live a lavish lifestyle or a lifestyle that does not fit in with his/her bankruptcy status. He/she might then be reported by his/her neighbors or relatives. Upon investigation if it is then found that the debtor had not fully disclosed his assets, then criminal proceedings are started against him/her.
Petition Mills
The second type of bankruptcy fraud is known as the petition mills. Petition mills refer to schemes that are designed to keep financially strapped tenants from eviction. Usually what happens is that a rental-property tenant answers a local ad known as typing service. This service advice tenants how to avoid getting evicted.
However, what this service really does is that without informing the tenants it files bankruptcy in their name. Moreover, it charges the innocent tenants high fees and tries to drag the case for months. the tenant is under the belief that he/she is getting much needed help, but in reality his/her credit is being ruined, his/her savings is being drained, his/her financial situation is being further ruined and his/her eviction is being merely postponed.
Multiple Filings
The third type of bankruptcy fraud is known as multiple filings. When an individual files for bankruptcy in more than one state using their real name and information or using false identity or a combination of the two, it is referred to as multiple filings. The filers also often list under different names and conceal their assets.
End Up Committing Other Frauds
Sometimes when people commit bankruptcy fraud they also end up committing other frauds, such as identity fraud, credit card fraud, embezzlement, and making false statements. For example, when an individual is filing multiple bankruptcies using different identities, he/she is also committing identity fraud. This can lead to additional criminal charges. This also means that bankruptcy frauds can include both criminal and civil courts.
If you are under severe financial stress and you are thinking about filing bankruptcy, it is best to do it the right way. You should not think about concealing your assets or how to avoid getting all your assets liquidated. Once your fraud is discovered it will only add to your financial stress; moreover, you will not be getting the relief that you would have got by getting bankruptcy discharge. Remember that bankruptcy can give you a fresh start provided that you do it the legal way.