Financial struggles can affect every area of your life, including your physical health and your personal relationships. If you are dealing with overwhelming debt, you have probably tried several ways to get your budget back in the black, including bankruptcy. A successful bankruptcy process could result in the discharge of most of your unsecured debts, such as credit cards, medical bills and personal loans.
However, following the rules for the bankruptcy process is essential, and mistakes can lead to delays or even rejection from the courts. More serious than either of these can be allegations that you committed fraud in some way during the application process. Bankruptcy fraud is a serious offense with harsh penalties, so you will want to understand what it involves and how to defend yourself.
What does bankruptcy fraud look like?
Your creditors take a loss if your bankruptcy is successful, and they forgive your debt. Therefore, authorities carefully monitor the bankruptcy process to ensure those who apply are truly eligible and are honest in their disclosures. You may feel scared and uncertain about the process, and you may worry about the possibility of liquidating your assets. However, the law requires you to list all your assets, including anything you have purchased, inherited or received as a gift. Fraud can include any of the following:
- Making false statements about the money or property you own
- Misrepresenting the true value of your assets
- Hiding your property, financial accounts or other valuables
- Gifting money to family members or friends to hold for you
- Transferring the title to your vehicle, boat or home, or selling it to a friend for much less than its value so you can buy it back
- Perpetrating a cycle of accumulating debt and filing for bankruptcy
- Making extravagant purchases on credit just prior to filing for bankruptcy
Mistakes are not the same as fraud, but there is no guarantee that a bankruptcy court will not perceive an honest mistake as an attempt to commit fraud. It is always a good idea to seek legal advice when taking on a process as complex and risky as bankruptcy.
Bankruptcy fraud is a federal crime, and if a court convicts you, you may be facing years in prison and hundreds of thousands of dollars in fines. Therefore, if authorities are investigating you because they suspect your bankruptcy involved fraud, you would be wise to deal with this matter with the assistance of a skilled legal representative.