Types of Bankruptcy Fraud


When you filed for bankruptcy, it may be required that some of your assets be sold off, with the proceeds used to pay creditors. Bankruptcy fraud arises when the petitioner employes falsehood or otherwise deliberate attempts to mislead the bankruptcy court during the bankruptcy process.

Types of Bankruptcy Fraud

Forms of bankruptcy fraud include:

Hiding Assets

Asset concealment usually involves deliberately failing to provide all the information concerning your assets with the aim of preventing the bankruptcy court from liquidating those particular assets. Concealment may also involve the transfer of ownership of some of their assets to relatives or friends with the hope of hiding the same from creditors. Concealing assets prevents creditors from making the recovery that they would have otherwise received had the concealed assets been properly declared.

In the event that a debtor mistakenly omits some assets in their declaration, the trustee should be contacted when the omission is recovered in order to try to correct the mistake.

Multiple Applications

Multiple application for bankruptcy refers to the filing of bankruptcy in more than one state, using real names or aliases as well as real or falsified documents. Perpetrators of this form of fraud have may also conceal details of their assets with the goal of preventing the their assets from being liquidated to clear debts.

Petition Mills

Bankruptcy petition mills typically target tenants in poor neighborhoods who are on the verge of being evicted from their homes. Targeted homeowners are lured into hiring a typing service that promises to help them avoid eviction. The typing service proceeds to file for bankruptcy on behalf of the tenant without their knowledge or consent at inflated fees. The victim only discovers the fraud when their savings have been wiped clean and are they left with a bad credit and an inevitable eviction.

Incomplete and False Paperwork

It is important that those filing for bankruptcy fill all the related paperwork, provide accurate information concerning creditors, all assets and liabilities, financial standing among others.  The paperwork once completed should be reviewed to ensure accuracy and completeness. Presenting incomplete or false information mislead the bankruptcy court into declaring you bankrupt when you are not in fact eligible for bankruptcy.

Bribery

Once filing of bankruptcy is completed the court appoints an official called a trustee to handle the matter. It is important that the relationship between the applicants remains strictly professional. Any attempts to favors, financial or otherwise calculated to influence the decision of the trustee is totally and unacceptable and constitutes bankruptcy fraud.

Credit Card Fraud

The making of purchases using credit cards before or after filing for bankruptcy may constitute bankruptcy fraud. If such credit card purchases are discovered by the appointed trustee they may be cause for denying the petitioner's request for bankruptcy.

Penalties for Bankruptcy Fraud

Offenders found culpable in cases of bankruptcy fraud may end up serving prison terms of up to 5 years, paying hefty fines or even probation

Copyright © 2017 Richard S. Ravosa, All rights reserved. No portion of this article may be reproduced without the express written permission of the copyright holder. If you use a quotation, excerpt or paraphrase of this article, except as otherwise authorized in writing by the author of the article you must cite this article as a source for your work and include a link back to the original article from any online materials that incorporate or are derived from the content of this article.

This article was last reviewed or amended on May 13, 2017.