Bankruptcy is meant to help when your debts become overwhelming. It is a tool to manage personal or business debts and start life on a clean financial slate. However, people misuse this crucial tool out of malice or a desire to avoid facing their financial responsibilities. Bankruptcy fraud is a grave offense under federal law. It can result in lengthy prison time, a high court fine, and other life-altering consequences.

However, you can avoid fraud charges and the many other life-changing consequences of a criminal conviction. A skilled bankruptcy attorney can help you avoid making mistakes that can result in grave criminal charges. They will also assist you in navigating the complicated legal process as you fight for a favorable outcome for your case.

An Overview of Bankruptcy Fraud

Filing for bankruptcy entails seeking a court’s help managing your overwhelming debt. The judge handling your case considers the bankruptcy law when determining your eligibility for bankruptcy. You have several bankruptcy options depending on your individual or business’ financial situation. Individuals who file for Chapter 13 have a steady income from which they can repay their debt using a repayment plan developed by a bankruptcy trustee. Those who file for Chapter 7 must forgo their assets (except those exempted under the law) for the bankruptcy trustee to liquidate and use the money to pay their debts.

Though the bankruptcy process is overwhelming, it can help individuals and businesses in serious need of managing debt. However, you must carefully reconsider your actions to avoid committing bankruptcy fraud. You can commit fraud when filing for bankruptcy by omitting crucial information or providing false information in your bankruptcy petition. The law expects you to come clean if you need legal help to handle your debts. This includes doing the following:

  • Listing all your earnings.
  • Listing your properties.
  • Listing everything you own.
  • Mentioning even the assets you have sold or otherwise transferred to friends or family within a particular period.

You can commit bankruptcy fraud in many ways, including omitting some financial transactions, assets, or investments from your petition, intending to benefit more from the process. You could also face charges for omitting some creditors to avoid repaying them. Here are examples of actions that will result in fraud-related charges:

  • Forging or changing some financial statements to hide part of your income.
  • Providing outdated financial details or providing misleading information to the creditors to avoid repaying them.
  • Failing to disclose or claim your lottery winnings and other winnings of a substantial amount within the bankruptcy period.
  • Providing wrong documentation or documents with misleading or false information when preparing your bankruptcy petition.
  • Transferring some money from your account to a different location to hide your profits, earnings, or investments.

If you are suspected of committing bankruptcy fraud, federal investigators will start an investigation against you. They will follow every detail of your petition and compare it with your financial records to gather evidence. Prosecutors have handled many cases of bankruptcy fraud. Therefore, they know what to look for when seeking evidence to prosecute you for bankruptcy fraud. It is difficult to defraud the system or to avoid repaying some of your debts through fraud and tricks.

Thus, taking advantage of the bankruptcy tool for personal gain is terrible. Bankruptcy should help you correct your financial mistakes for better decision-making in the future, not an opportunity to avoid being accountable for those mistakes. Your bankruptcy attorney will advise you to do the following to prevent grave federal charges:

  • To avoid dishonesty when providing your financial details,
  • To look out for and immediately report suspicious and fraudulent activity you come across.
  • To work closely with your lawyer to avoid making mistakes that can result in fraud charges.
  • To hire a skilled and trustworthy bankruptcy attorney.
  • To be open and forthcoming with your lawyer and federal agents.

Some mistakes are inevitable when going through a challenging legal process like bankruptcy. For example,making an error when filing your petition, like providing the wrong information or omitting crucial information. Contact your lawyer immediately after you realize the error. Your lawyer will alert the court so the judge can allow you to correct the error. If you do not take any action, convincing the jury that the mistake was genuine or that you did not intend to defraud the government will be challenging.

How The Federal Government Deals With Bankruptcy Fraud

Fraud is, in itself, a grave offense. Since bankruptcy is a federal law provision, bankruptcy fraud becomes a federal matter. It means you will likely face graver penalties upon conviction than you would if the offense was a state matter. The U.S. Trustee Program, (USTP), is the body that handles all bankruptcy-related matters in bankruptcy courts across the country. When filing a bankruptcy petition, you ask the government for help managing your overwhelming debts. The government takes these requests seriously, including bankruptcy fraud.

To avoid legal issues, use bankruptcy only when it is essential. You can try other ways to manage debt and only use bankruptcy as your last option. Even though bankruptcy is a beneficial debt management tool, much is at stake. You lose control over your finances and assets as your trustee takes over everything you own to repay your debt. If you are not ready to let go of some of your assets, filing for bankruptcy could be a mistake. Many people commit bankruptcy fraud because they still want to keep some unprotected assets.

Accepting your financial situation is the first step in avoiding mistakes that can result in fraud-related charges. You can make rational decisions that could improve your situation once you accept the mistakes you have made in the past. If not, you will be tempted to omit crucial information or falsify information that will misrepresent your financial situation. The USTP responds quickly and aggressively if it suspects you of bankruptcy fraud. If, after the investigation, a jury finds you guilty, you could face the following penalties:

  • A maximum of five years in state prison.
  • A court fine of not exceeding $250,000.

The federal government can also file a civil suit against you in civil court. That can result in grave penalties and other life-altering consequences.

It is important to first understand bankruptcy requirements and the processes involved. Hiring a skilled bankruptcy lawyer at the beginning of the process is helpful. Your lawyer will ensure you have all the required documents. They will also cross-check your petition to ensure it is correct before filing. Some of the details of your petitions, which your lawyer will pay special attention to, include your assets, earnings, savings, and debts.

Different Ways People Commit Bankruptcy Fraud

Bankruptcy fraud occurs in many ways. Typically, your actions become fraudulent if you willfully do or fail to do something to gain against another person. The prosecutor must demonstrate your fraudulent intent so that the jury can deliver a guilty verdict. Many people commit fraud, hoping not to be caught. However, the police, prosecutors, and the federal government always look for signs of fraud when handling bankruptcy-related cases. Here are some common ways people commit bankruptcy fraud today:

Petitioning for Bankruptcy in More Than One State

You are only allowed to file for bankruptcy in your state of residence or where your business is located (if filing for your business). It is unlawful to move to another state to file for bankruptcy, hoping to take advantage of that other state’s laws for personal gain. Some people declare bankruptcy in multiple states to benefit from various state laws. This serious violation will result in severe penalties under federal law.

Additionally, it is unlawful to use different IDs to file several bankruptcy petitions. Some people use their maiden name in one petition and their surname in another, hoping to protect as many assets as possible from bankruptcy. All these will result in grave fraud charges that will result in a five-year prison sentence.

Willfully Filing False or Incomplete Documents

Bankruptcy courts rely on the documents you file to understand your financial situation and develop a plan to help you manage your debt. Filing incomplete or false documents does not provide the information the court requires to grant or deny your petition. Incorrect documents are also misleading and could cause the judge to make a mistake when determining your case.

These are some of the errors that people make all the time. However, correcting the error immediately after you realize it is advisable. You could also allow your lawyer to review your documents before filing to ensure they are correctly filled.

If you make an intentional mistake when filing for bankruptcy with fraudulent intent, the prosecutor will file fraud charges against you.

Credit Card-Related Fraud

You can also commit bankruptcy fraud through credit card fraud. There are many ways you can do this. For example, obtaining more debt on your credit card right before bankruptcy to avoid repaying the credit card company is a grave offense. Credit card debts are examples of debts that bankruptcy can discharge. Sadly, some people take advantage of the system to benefit more at the expense of credit card companies. If the prosecutor demonstrates your fraudulent intent, you will face severe penalties.

Your bankruptcy trustee will investigate your spending behavior right before bankruptcy. If anything seems unusual, federal agents will conduct an in-depth investigation to obtain solid evidence against you.

Willfully Concealing Property or Assets

In most bankruptcy cases, trustees use your assets and properties to pay off your debts. You can only keep exempt assets, which the judge will determine after reviewing your petition. After realizing they will lose some of their favorite assets or property, some conceal or fail to disclose them in their bankruptcy petition. They do so to gain more from the process than they should. Even though this sounds less harmful, it can result in severe penalties after a bankruptcy fraud conviction.

Once you submit your bankruptcy petition, you must come clean about everything you owe and own. It makes it easier for bankruptcy trustees to develop a repayment plan and help you start over. Willfully concealing some of your property or assets is a severe mistake.

You Can Avoid Bankruptcy Fraud Charges

Bankruptcy is very beneficial if you use it well and with the right intention. If you have made several financial mistakes as an individual or business, you can start over on a clean slate after bankruptcy. Filing a petition in court also stops your creditors from collecting their money from you. It lets you strategize how to pay them with what you own or earn within a particular period.

You can avoid bankruptcy fraud charges if you are honest about your financial situation. You must also be willing to let go of your debt and property to start over. Most people commit fraud due to greed and the desire to exploit the system. Consequently, they lose more, including years of their freedom. Here are some of the strategies that could help you avoid bankruptcy fraud charges:

  • Hiring a trustworthy and reputable lawyer at the beginning of the legal process.
  • Being open to your lawyer regarding everything you own and owe.
  • Working together with your lawyer, including preparing and filing your petition.
  • Reviewing all the documents and your petition before filing.
  • Reaching out to the trustee any time you have a question or concern about your petition.

Find a Trustworthy Bankruptcy Lawyer Near Me

Filing for bankruptcy in San Diego has advantages and disadvantages you must consider before deciding. After reviewing your financial status, a skilled bankruptcy lawyer can help you weigh your options. They will also advise you on the dos and don'ts to avoid mistakes, errors, and omissions that result in criminal charges.

A conviction for bankruptcy fraud is life-changing. In addition to a prison sentence and a court fine, you will also have a damaging criminal record that will continue to impact your life for years. But we can help you avoid bankruptcy fraud charges at the San Diego Bankruptcy Attorney. We can also go through bankruptcy and fight until you are happy with the outcome. Contact us at 619-488-6168 for more information about bankruptcy fraud and our services.