Understanding Bankruptcy Fraud and Why You Need A Lawyer
Bankruptcy fraud is a federal crime. Many people turn to bankruptcy to relieve them of unpaid debts. The common civilian can file either a chapter 7, which is a total liquidation, or they can file a chapter 13. A chapter 13 will allow them to retain their property and work out a payment plan with the court’s supervision. The laws regarding bankruptcy have changed over the past decade. No matter how many mandates that the court puts on the process, there are always those people who try to sidestep the law to get out of debt.
Fraudulent Reporting of Assets
The court recognizes three types of bankruptcy fraud. They are concealing assets, filing multiple times, and petition mills. The first is self-explanatory. The most common type of fraud found in the bankruptcy court is not disclosing all income and or assets. Some people feel that if they leave off an asset they will be able to retain its possession. However, this category can also include things like transfer ownership of an asset to a friend or family member. To keep from losing an item, transferring it to another person is the oldest trick in the book. However, the court wants to know about any transfers within a specific period before the bankruptcy is filed. All it takes is one look into asset transfers to find the transaction.
Another commonly used scheme is to transfer money into offshore accounts to protect it from the United States Bankruptcy Courts. Since it is in the jurisdiction of another country, the US doesn’t have any control over it. Beware, this is a fraudulent way to handle money and keep it hidden from the courts. It is easy to see when large amounts of money disappear from a bank account that cannot be accounted for. The court is aware of such schemes. The trustee will often check and double check accounts to ensure they have been truthful with all disclosures.
Another commonly used trick is to file multiple petitions in various states. The goal is to avoid liquidation of assets, but submitting an incomplete list of assets in both state filings is also fraudulent. A person may only have one active bankruptcy petition at a time. Since a party can only file a chapter 7 once every eight years, and chapter 13 every five years, these rules extend across state borders. The act of filing two simultaneous petitions is fraud alone, not to mention selectively putting different information on the petitions. The bankruptcy court is a federal court and not a state matter. Though individual states handle things differently, in general, all proceedings are protected at a federal level.
Some people will also use different names to file the various petitions. This is specifically true of a woman who has been married and has a maiden name. She may try to file under the maiden name in one area and the married name in another. This sort of falsification is not tolerated within the court and is fraud.
Petition Mill Fraud
The other two types of fraud are done by the petitioner with intent to scam the courts. A petition mill is a very different type of fraud. This type of bankruptcy petition is done by a third party. It often happens in poor communities or for those who are facing the eviction process. It starts with an ad being placed to help those who are in the process of being evicted. A firm will take all the debtor’s information. They charge significant fees to fight the eviction on their behalf. What they do is file for bankruptcy and ruin the person’s credit. They take what precious money a person has left.
Understanding Bankruptcy and Fraud
Under the new laws, a means test must be taken. This test will determine disposable income. If a person has disposable income greater than $183.50 left over each month, they do not qualify for a chapter 7. They must file a debt reorganization plan under a chapter 13. Most people want a chapter 7 because it liquidates and forgives all debts. The repayment plan, under a chapter 13, lasts anywhere from three to five years. Regardless of which chapter is filed, bankruptcy stays on one’s credit for up to 10 years. Committing a federal crime, like bankruptcy fraud, can carry a sentence of up to five years in prison and a fine of $250,000. Additionally, restitution must be made to the court for any amounts fraudulently listed.
If you find yourself facing a fraud case of this type, you need a bankruptcy fraud attorney by your side. A simple oversight on your part may end up costing you big time. As NYC attorneys that specialize in this area of law, we want to help you settle this matter. When dealing with the federal courts, it’s no small matter. You need protection.