You likely have absolutely no intention of committing bankruptcy fraud – you simply want to get a fresh financial start. However, if you do not follow the filing guidelines to the letter, or accidentally miss important information bad things can happen. If the bankruptcy trustee suspects you intentionally tried to deceive the court, you could lose your bankruptcy discharge or even face criminal charges.
Fortunately, accusations of bankruptcy fraud are rare. Chances are, if you are truthful and thorough in your petition, and you work with an experienced attorney, your case will be problem-free. That said, learning more about fraud may be beneficial.
Common Forms of Bankruptcy Fraud
Most fraud cases – nearly 70 percent, according to the Cornell Law School Legal Information Institute – involve the concealment of assets. This occurs when a debtor gives assets to someone else or fails to disclose assets on their bankruptcy petition.
Other actions that may be considered fraudulent include:
- Undervaluing assets on the petition
- Buying luxury items on credit before filing
- Paying off some kinds of debt prior to filing a petition
- Making a false statement to the court
- Providing a false document to the court
- Destroying or withholding documents
- Filing a claim in more than one state
- Bribing the court-appointed trustee
Bankruptcy Fraud Penalties
Debtors who commit fraud do not go unpunished.
Those whose fraudulent actions are deemed civil – which is typically the case for acts that are small in scope and involve less deception – may lose both their bankruptcy exemptions (which protect assets) and the discharge or their debt.
Criminal fraud cases, in which debtors are dishonest or knowingly take actions with a fraudulent intent, come with stiffer penalties. If proven guilty, debtors may receive a federal prison sentence of up to five years and/or a fine of up to $250,000 per offense.
What if You Make an Honest Mistake?
To be guilty of bankruptcy fraud, a debtor’s actions must be intentional.
Bankruptcy trustees understand that mistakes can happen. So if you genuinely forget to list an asset on your petition or unknowingly submit a faulty document, for example, your action may not be considered fraudulent. However, you need to be able to explain why the mistake occurred – and you need to do so as soon as you notice the mistake – to avoid an accusation of fraud.
Get Expert Advice on Bankruptcy Law
If you work with an experienced bankruptcy attorney, you have no reason to worry about being accused of fraud.
The Law Office of Davis & Jones, P.C., located in Salt Lake City and serving residents in the surrounding northern Utah region, can guide you through the bankruptcy process. Our legal team has decades of combined experience helping people obtain debt relief, and we can offer expert advice on every aspect of Utah bankruptcy law.