What To Know About Bankruptcy Fraud

The bankruptcy process is not always easy for consumers to navigate. Because of all the strict rules and requirements it isn't uncommon for a consumer to make a mistake, some of which could be costly. In some cases, people unknowingly engage in an action that the court deems to be fraudulent. When this happens, a debtor may find themselves in hot water or even without the help they needed to begin with.

The Actions

There are two types of bankruptcy fraud; intentional and mistaken. There are many instances in which people intentionally commit bankruptcy fraud in efforts to get away with the best outcome. Fearing the worst, some people are tempted into such actions and make things worse for themselves in the end. In the case of mistaken fraud, people were unaware that their actions are considered fraudulent until it was too late. The biggest problem with either is that they both result in serious consequences.

Actions that are considered fraudulent fall into several categories:

(1) withholding information,

(2) providing inaccurate information, and

(3) breaking the rules.

Withholding information is the most common fraudulent act committed by filers. This includes withholding information about one's income, assets, debts or creditors. Some people may even withhold information about their recent financial transactions or sale of assets. Bankruptcy laws maintain strict rules about charging debts prior to filing bankruptcy and debts accumulated within 90 days of filing are not eligible for discharge and may be considered fraudulent if the court becomes suspicious.

Providing inaccurate information is another form of fraud in which people either lie about their financial details or fail to correct mistakes once they become aware of inaccurate information. Some people even go so far as to file under false names or use other people's personal information when filing. Both of these actions are serious business and the court does not tread lightly on these type of offenders. Breaking bankruptcy rules can also be deemed fraudulent if the court feels the debtor avoided paying the required fees or completing the necessary paperwork in order to take advantage of the system.

The Consequences

Bankruptcy fraud is no laughing matter. Regardless of whether the acts were intentional or mistaken, the court has the power to apply the consequences they deem appropriate. In general, those who intentionally defraud the system receive the harshest punishment, which can include penalty fees and even jail time. In lighter instances of fraud, the court may simply dismiss the case and prohibit the filer from re-filing for bankruptcy again in the future.