While a vast majority of people declaring bankruptcy are honest individuals, there will always be some people who will stop at nothing just to find some loopholes to abuse the system in order to use credit cards even more, with the intention of not repaying the money they are using. Also, some people use this as a means of getting out of debt as a result of their fraudulent acts. Individuals who are a victim of this fraud can seek help from a trusted and professional bankruptcy attorneys Nashville TN.
So what exactly are actions that constitute bankruptcy fraud? Basically, there are several types of bankruptcy cases around, but these still hold the same definition of fraud. It generally considers four actions to be fraudulent: first, when debtors try to hide their various assets so that they will not have to give them up; second, when they try to file falsified or incomplete forms deliberately; third, when these people try to file for bankruptcy multiple times while using either their real information or fabricated data in different states; and lastly, when they try to bribe the bankruptcy trustee. Still, it is more common for people to involve any of the four actions with another criminal activity, like the nefarious identity theft, money laundering, corruption and mortgage fraud.
Among these four actions, more or less three-fourths of the bankruptcy fraud cases will involve debtors trying to hide away some of their assets from the court. The reason for this is that once the bankruptcy case proceeds, creditors are only given the chance to liquidate the assets that the debtor provided. The goal of deliberately neglecting to give information about some assets is to save them from getting liquidated to pay for their debts. Most of them will take even more precaution and transfer these undisclosed assets to the people they trust, like friends or family members in order to make sure that the assets will never be traced.
On the other side of the story, petition mills, a type of bankruptcy fraud scheme, is gaining more popularity in the United States. Basically, petition mills target various financially challenged individuals—especially those who are in danger of getting evicted from their home—by posing as an agency that offers consultation services. These people are being driven by the belief that they are receiving aid to save them from eviction, but in actuality, the petition mill is filing for the individual’s bankruptcy, dragging out the case for as long as possible. They will then charge their victim with large service fees, all the while ruining their credit score and siphoning away all their savings.
Another kind of fraud is called the multiple filing fraud. As its name implies, this scheme is done when an individual files for bankruptcy in several states with the use of his own name and information, or with aliases or falsified information. Some people might even use a combination of the two. It is very harmful to the court, since it will certainly slow down the system’s capability in processing bankruptcy cases, as well as the liquidation process. Actually, most debtors who want to cheat the bankruptcy court will use this tactics in order to buy them more time to cover up their assets.
The reason why concealing assets fraud increased significantly through the years is because of the fact that the bankruptcy laws became stricter in its terms. Basically, with the implementation of the new law, debtors will not be able to get debt relief through Chapter 7 bankruptcy if their disposable monthly income is greater than 183.50 dollars. Therefore, that will force them to file for a Chapter 13 bankruptcy instead.
Debtors find Chapter 7 more desirable because it allows all dischargeable debts to be forgiven. Because if they are only allowed to go for its Chapter 13 variant, they will be forced to make monthly payments for three to five years. After which, their debts are discharged but their bankruptcy is logged on their credit file for a decade from the date they got their discharge. Some people do not find this very favorable, so they resort to these fraudulent acts to avoid the latter at all costs. They will even try to spend more money for a while just to make sure that the amount of disposable income they report will always be less than the actual amount.
When a person is charged with bankruptcy fraud, their proceedings will always be criminal. Actually, prosecutors for these cases need to prove that the debtor deliberately falsified or twisted the facts pertaining to their bankruptcy case. Once this is proven, the debtor will then be convicted with bankruptcy fraud, which is a criminal offense. As such, they will be punished with a maximum of five years imprisonment or pay a fine of up to a quarter million dollars. Furthermore, depending on the severity of the case, they might even need to do both.
Article Source: http://www.articlesbase.com/bankruptcy-articles/what-is-bankruptcy-fraud-explained-7039064.html
About the Author
The author of this article is a federal prosecutor. He used to work as a bankruptcy lawyer in a firm before he went to try criminal cases in the federal court. He has more than two decades of experience as a lawyer. He wrote this article to inform people and give light to the various bankruptcy fraud schemes around, especially those who are not aware of the very common schemes around.