Among the strongest arguments for hiring a bankruptcy lawyer is the risk that you'll be accused of filing a fraudulent case. Bankruptcy fraud usually occurs when someone willfully misrepresents their financial circumstances while asking the court to modify and/or discharge their debts. Let's look at the types of fraud that can occur and how a bankruptcy attorney will steer you clear of them.
Hiding or Transferring Assets
When someone submits a petition for bankruptcy relief, they have to fully represent all of the assets that are within their control. This includes assets in foreign countries, not just ones located in the U.S. When you submit your petition, it is considered a sworn statement, and failure to disclose all assets is punishable under criminal law as a form of perjury.
Notably, moving assets before you file may also be a form of fraud. If you sell your car to your best friend, that may be considered a fraudulent transfer if it occurs right before you file for bankruptcy.
The court takes a similar attitude to spending down financial accounts. For example, taking a $10,000 vacation right before you file might be seen as fraudulent conduct.
As much as possible, try to hold onto assets and money in the months leading up to filing for bankruptcy. This doesn't mean you have to stop paying bills or buying food, but you'll definitely want to show the court you're being sensible.
Misrepresenting Your Income
Another area of concern you'll want to discuss with a bankruptcy lawyer is income disclosures. Generally, if you make a buck, the court wants to know about it, and there will be a close study of your tax records and pay stubs. If you're on hard financial times, such as being recently laid off from a job, you can present documentation showing the drop in income. This may include showing information from your bank accounts or from the unemployment insurance system to note when the drop occurred. It's also a good idea to include any letters you received from your employer.
Questioning Under Oath
It's worth mentioning that your creditors will have the legal right before the process is over to put you under oath and ask about your finances, assets, and debts. Most creditors don't exercise this right, but they can if they believe you're trying to pull a fast one. Although the truth is always your shield in a court of law, it's a good idea to have a bankruptcy lawyer present while you're being questioned.
For further details, reach out to a local bankruptcy attorney.
