Bankruptcy is a legal proceeding that one goes through when they are unable to pay their debts. The person’s debts are evaluated and measured. People may either get their debts wiped out completely or use their assets to pay off their debts. One can file for chapter 7, chapter 11 and chapter 13.
Chapter 7 bankruptcy is often referred to as straight bankruptcy. Your assets will be liquidated in order to pay off your debts. You will likely be able to get through bankruptcy within three to six months.
Chapter 11 bankruptcy is filed by a large corporation. It typically requires that the organization set up a payment plan with their creditors. Chapter 13 bankruptcy is similar to chapter 11 bankruptcy. However, it is filed by an individual and not companies. You will set up a payment plan with the creditors. It typically takes three to five years to complete this form of bankruptcy.
Fraud can occur before or after bankruptcy. Here is a list of ways that fraud can occur before you file for bankruptcy.
- Getting credit under false pretenses. For example, you lie about your assets or income in order to get approved.
- Falsifying documents
- Purchasing items on your credit card and not have any intention of paying it back.
- Writing a bad check
- Charging expensive items on your credit card and then filing for bankruptcy
How fraud can occur after bankruptcy.
- Failing to list all of your assets on your application.
- Hiding a property transfer
- Providing false documents to the trustee or court
- Paying someone to hide the documents from the court
Fraud Has to Be Intentional
You won’t automatically get charged with bankruptcy fraud if you make a mistake on the application. However, if the fraud was intentional, then you will likely face charges. Here are examples that show the difference between intentional and unintentional fraud.
You probably won’t get in trouble if you do not list all of your assets correctly. However, if you intentionally left your vacation home off of your application because you wanted to hide assets, then you may face fraud charges.
Civil Vs. Criminal Fraud
The type of punishment that you get for bankruptcy fraud will depend on whether it is civil or criminal. A civil case is filed when one creditor accuses one of fraud. The court will decide to dismiss the case, deny the discharge or impose another sanction.
If you have attempted to de-fraud multiple creditors, then they may file a criminal case. Criminal cases are investigated by the U.S. Department of Justice And Federal Bureau of Investigation.
Defenses for Bankruptcy Fraud
A simple mistake is not the same thing as intentional fraud. If you did not include certain information because you forget to list, then you can let the court know that.
If you have proof that your actions were taken for a legitimate purpose, then you may be able to get your charges dropped. For example, you sold one of your assets because you wanted to get a tax deduction. This is considered lawful.
Statute of Limitations
There is a Statute of Limitations that applies. Bankruptcy fraud typically cannot be prosecuted if five years have passed since it has occurred.
You have to be able to prove that you attempted to correct the mistake after the fraud occurred. You can argue that you discovered the error and attempted to correct it.
Why It Is Important to Hire An Attorney
There are steep penalties associated with bankruptcy fraud. If you are facing civil charges, then you will likely get your cases dismissed. You can also be held in contempt of court.
The penalties for criminal bankruptcy fraud include 20 years in federal prison, a fine of $250,000 and community service. You may also be put on probation. Furthermore, you may have to pay restitution.
Because there is a lot at stake, you will need to hire an attorney. Your attorney can defend you against the charges that are brought against you. They can also help you move forward with your bankruptcy case.