When you are in financial distress, one of the options you may consider is declaring bankruptcy. Ideally, personal bankruptcy can help you to restructure your debts or have them forgiven.
But while bankruptcy can be a great idea if you are unable to pay off your debts, it is important to understand that honesty and good faith are paramount. If you are not forthright while filing for bankruptcy, your petition may be refused. But that’s not all. You might also be charged with bankruptcy fraud – and this can worsen your financial and legal woes.
So why is bankruptcy fraud such a big deal?
Basically, bankruptcy fraud happens when you lie or engage in some form of malpractice while declaring bankruptcy. This is a federal offense that carries serious penalties if you are convicted.
Proving bankruptcy fraud
To secure a conviction, the prosecution must present evidence that you were inclined to mislead the bankruptcy court, trustee or other interested parties like creditors for personal gains. Here are some of the circumstances when you can be charged with bankruptcy fraud:
- If you attempted to hide assets– When declaring bankruptcy, you will be required to declare your assets (including what you wish to protect from creditors). If you hide your assets (through gifting family and friends), then you may be accused of bankruptcy fraud
- If you attempted to bride a trustee– This is pretty straightforward. Any attempt to win the favor of the trustee is, in and of itself, a crime. As far as the bankruptcy court is concerned, this could lead to fraud charges.
Bankruptcy fraud may not only result in the denial of your claim but also criminal charges. Learning more about federal white-collar crime statutes can help you protect your rights and defend yourself if you are charged with bankruptcy fraud.
