As you may already know, you can file for many kinds of bankruptcy. People popularly file for Chapter 7 bankruptcy, an asset liquidation plan that serves to reduce or entirely eliminate debt by selling assets. Alternatively, people may go for a Chapter 13 bankruptcy that looks to reestablish how much debt someone has to pay based on how much debt they’ve accumulated and their disposable income.
The bankruptcy process is confusing no matter what kind of plan is being filed. There are lots of rules and regulations to prevent people from misrepresenting their debt and breaking the law. Yet, despite people’s best efforts, because of the confusing nuances of bankruptcy, many people are charged with bankruptcy fraud. Here’s why
You should be entirely transparent about your debt, transactions and assets when filing for bankruptcy. Your bankruptcy forms shouldn’t include any misrepresented or excluded facts, which may lead trustees to believe you’re committing fraud.
Creating new debt
It’s discouraged to incur more debt immediately after filing for bankruptcy. This may make it seem as if you’re committing bankruptcy fraud by doing so. Instead, you should seek permission to create more debt, while limiting what that debt is used for; as such, filing for a loan, purchasing a vehicle or going on a spending spree may not be permissible.
Filing too many times
You are limited in how often you can file for bankruptcy. For example, you’ll have to wait eight years between two Chapter 7 bankruptcy filings. Filing for bankrupt in another state, for example, to try to hide the fact that you’re not legally allowed to seek that avenue of relief yet could be construed as fraud.
You may have done everything to avoid bankruptcy fraud, however, you’re still facing serious criminal charges. You may need to reach out for legal help when creating a strong defense.