Bankruptcy is a great financial relief program for people who’ve fallen on hard times. When debt becomes overwhelming – due to medical bills, interest or late fees – debtors often consider one of two forms of bankruptcy: Chapter 7 and Chapter 13 bankruptcy.
Chapter 7 bankruptcy liquidates assets to pay off some or all of someone’s debt. Chapter 13 bankruptcy refinances debt so debtors can easily pay off a sum of their debt. Both of these forms of bankruptcy work in different ways but, ultimately, end the same – with a person’s debt mostly or completely wiped away.
It’s not a hidden fact that bankruptcy is a long and complicated process that requires honesty and responsibility to complete a claim. However, needless actions during a bankruptcy claim can lead to legal trouble. People, oftentimes unknowingly from an honest mistake, commit bankruptcy fraud.
What is bankruptcy fraud?
Fraud is the deceptive act of taking advantage of an established system or a person’s goodwill with criminal intent for personal profit. Some commonly known forms of fraud include tax evasion, money laundering, wire fraud, credit card fraud and bankruptcy fraud. Fraud can lead to heavy criminal charges including, but not limited to, legal fines and incarceration.
How does bankruptcy fraud happen?
Any form of fraud happens when facts are misrepresented. In bankruptcy fraud, for example, the debtor may have hidden assets or property or the value of said assets and property through what’s known as the concealment of assets. Other ways bankruptcy fraud can occur is by creating false asset statements, transferring money to family or friends or taking on debt repeatedly only to file for bankruptcy.
To avoid bankruptcy fraud, it’s often best to act honestly, such by doing the following:
- Be open about your property and assets
- Don’t use bankruptcy as a means to take advantage of a system
- Completing paperwork when requested
- Understand that there are consequences to bankruptcy
- Don’t create more debt during a bankruptcy claim
Despite this, bankruptcy fraud can occur even when a debtor is trying to be entirely transparent about their assets and actions. People looking for debt relief may need to know their legal options when protecting themselves from unlawful actions.