Bankruptcy allows people from all walks of life to clean their financial slate and start all over again, namely by either reorganizing their finances or having their debts discharged. This entire legal process is something you can consider to be one of your rights as a citizen of the United States. The bankruptcy process, however, is not something you can consider to be a privilege i.e. it isn’t something to be manipulated for your own means.
The process of filing for bankruptcy involves a full declaration of all your existing debts, but you must also disclose all of your assets. This declaration of your assets can allow creditors to recover at least some of the money owed to them.
Some people choose to attempt hiding some of their assets from the bankruptcy process, in the hope of keeping them in their possession after their debts have been discharged. This is an obvious manipulation of the bankruptcy process, for fraudulent reasons, and there are consequences for these actions, involving the Federal District Court system. Simply put: committing bankruptcy fraud is a criminal offense, which often carries a jail sentence.
The Basics
There are a number of things you can do to find yourself involved in a criminal investigation for bankruptcy fraud:
- If you deliberately don\’t disclose assets of any kind, including cash, jewelry or real estate interests
- The transfer of any non-exempt assets to another party prior to the bankruptcy filing, in an obvious effort to conceal them
- Using bribery, of any kind, to prevent a creditor from filing a claim against you
- The destruction of documents in relation to your Chapter 7 or Chapter 13 filing
- The falsification or concealment of important documents
- Using credit to buy items you never intended paying for
In addition to the above anyone complicit in these types of activities, including partners or spouses can also face bankruptcy fraud charges. There have been a number of high profile cases recently, where even celebrity couples have been jailed for committing bankruptcy fraud. Unfortunately sometimes even trustees and attorneys can be found guilty of this type of fraud, which for them will carry the maximum possible criminal punishment.
Penalties
If a court finds that you are guilty of committing bankruptcy fraud, then there are two different types of legal punishments which could be used – civil and criminal.
Civil
In cases were a civil punishment is deemed to be sufficient the court can deny you a discharge of you debts, which would then allow creditors to foreclose on your real estate, and take collection actions against you.
A court may also choose to make all your assets exempt from the bankruptcy process, allowing creditors to repossess that property from you.
Criminal
In the most serious cases of bankruptcy fraud you could face criminal proceedings which involved either of the follows:
Prison time
You could serve up to 5 years in prison, and be fined an additional $250,000 for each detected act of fraud. If other laws have been violated as part of your fraudulent activity it could lead to additional prison sentences being handed down.
Probation
A more ideal, but far rarer, outcome is that you\’re given a probationary sentence. You will then be required to not commit any more crimes while you\’re on probation; failure to do so would result in a prison sentence being handed down.
Defense
If you believe, or even suspect, that you might be accidentally involved in a bankruptcy fraud case you should immediately seek the counsel of a criminal defense attorney. Your personal freedom, and financial standing are at risk if you don\’t take immediate action.