Bankruptcy fraud is a serious federal offense that can result in serious consequences, including fines and imprisonment. While it is possible to inadvertently commit bankruptcy fraud due to misunderstanding or misinformation, ignorance of the law is not a valid defense.
Understanding the actions that could lead to bankruptcy fraud is crucial for individuals going through financial difficulties. Some common examples of potential bankruptcy fraud include the following.
Misunderstanding asset disclosure
Disclosure is an important aspect of the bankruptcy filing process. Failing to fully disclose assets or providing false information about assets can constitute bankruptcy fraud. This includes omitting bank accounts, property, vehicles, investments or any other valuable assets from the bankruptcy filing. Even if the omission is unintentional, it can still be considered fraudulent.
Improperly transferring assets
Transferring assets out of your name or into someone else’s name shortly before filing for bankruptcy can raise suspicions of fraud. This includes selling property for significantly less than its value or transferring assets to avoid having them included in the bankruptcy estate. Such actions can be deemed fraudulent even if the individual is unaware of the legal implications.
Multiple simultaneous filings
Individuals filing for bankruptcy are generally required to disclose any other bankruptcy cases they have filed within a certain timeframe. Failing to disclose previous filings or filing for bankruptcy in multiple jurisdictions simultaneously can be considered fraudulent. Even if the individual did not realize they were required to disclose this information or believed they could file multiple cases, it can still be viewed as bankruptcy fraud.
Unduly influencing a court-appointed trustee
While this will rarely happen unknowingly, attempting to unduly influence a court-appointed trustee or manipulate the bankruptcy process can constitute bankruptcy fraud. This includes providing false or misleading information to the trustee, offering bribes or kickbacks or engaging in any other actions to improperly influence the outcome of the bankruptcy proceedings. Even if the individual does not fully understand the legal implications of their actions, attempting to manipulate the bankruptcy process can still result in serious consequences.
The bankruptcy process is complex, and it’s essential to seek competent legal guidance to ensure compliance with all legal requirements and to avoid inadvertently committing fraud.