Is Bankruptcy Fraud A Real Risk Of Filing For Relief?

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.

About Me

Goodbye Bad Debt. Hello Good Life.

Debt is not always your fault. Sometimes something unexpected happens, like job loss or a bad illness, and the bills just pile up faster than you're able to handle. Eventually things settle down and you think your life is back on track again, but you still find yourself unable to pay those sky-high bills. Declaring bankruptcy is usually an option. It can help you move on, not only financially, but mentally. There are several types of bankruptcy that are allowed under U.S. law, and you'll need to meet with a bankruptcy attorney to find out which one you are most likely to qualify for. We share more information about this and related bankruptcy attorney topics on this website, so dig right in and start reading.



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