In California, bankruptcy is a legal proceeding that offers relief for individuals and businesses overwhelmed by debt. However, one can commit bankruptcy fraud when you intentionally provide false information.
A successful bankruptcy petition allows you to reorganize your financial life. Unfortunately, not all individuals are eligible for bankruptcy. You must meet the income or asset requirements for each type of bankruptcy. Additionally, you must be within the allowed timeframe. These regulations are put in place to avoid the misuse of bankruptcy.
Offering incorrect information or attempts to conceal some information to gain the upper hand in a bankruptcy petition can result in an arrest and charges for bankruptcy fraud. Bankruptcy fraud is a felony that can result in incarceration and hefty fines. Therefore, familiarizing yourself with different instances of bankruptcy fraud is critical to ensuring you don’t make mistakes.
Understanding Bankruptcy fraud
Bankruptcy fraud is a severe form of fraud committed by the parties involved in a bankruptcy case, including creditors, debtors, and bankruptcy attorneys. Fraud can be discovered through reports by employers, family members, colleagues, and ex-spouses. Additionally, creditors can report fraudulent behavior in your bankruptcy petition.
Different acts in your bankruptcy process can result in an arrest and a charge for bankruptcy fraud. Some of these acts could be intentional, while others could result from honest mistakes, and they include:
Concealment of Assets
Facing bankruptcy can be a scary experience. Individuals who face bankruptcy often have accumulated debts, and their income is insufficient to pay the creditors. Therefore, it is expected that you want to retain ownership of your vehicle and home. Hiding assets from your bankruptcy trustee to save them from liquidation is a decision that could have a grave impact on your bankruptcy case and your life.
When you file for bankruptcy, the court will appoint a trustee who reviews your case to ensure that all the information provided is factual. It is easy for a trustee to notice instances of asset concealment. This is done by reflecting on your history for up to ninety days before you file your petition. If you face a bankruptcy fraud charge, the court may look further.
Some of the acts that constitute asset concealment in bankruptcy include:
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Gifting large sums of money to other people. If you give money or property as gifts to family or friends before filing for bankruptcy, you can be accused of bankruptcy fraud. This is because the court assumes your reason for gifting the money is to avoid losing it in bankruptcy.
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Transfer of assets to family members. When you file Chapter 7 bankruptcy, your assets can be liquidated to pay your creditors. Some attempt to protect these assets by transferring them to family members, hoping to recover them after the bankruptcy.
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Selling property for a significantly lower amount. If your bankruptcy trustee discovers that you sold the property for a lower amount than its value to protect it from bankruptcy, your petition could be dismissed.
Multiple Bankruptcy Filings
California bankruptcy law does not limit the number of times you can file for bankruptcy in your lifetime. However, before filing for bankruptcy again, you must wait for a specific period to elapse. The timeframe within which you have to wait varies depending on the type of bankruptcy you file and the fate of your petition.
If you previously filed a chapter 7 bankruptcy, you need to wait 8 years to file another chapter 7 bankruptcy and receive a discharge; the time you need to wait for a chapter 13 filing and receive a discharge is 4 years. If you previously filed a chapter 13 bankruptcy, you need to wait 6 years to receive a discharge in a new chapter 7 bankruptcy and 2 years for a new chapter 13 filing.
You could be cited for bankruptcy fraud when you attempt to obtain a discharge in another state before the stipulated time elapses. Additionally, filing for bankruptcy in multiple jurisdictions with fake names could result in bankruptcy fraud and criminal charges.
Bankruptcy Petition Mills
A bankruptcy petition mill is a form of bankruptcy fraud committed by a third party in your bankruptcy case. This occurs when the perpetrator pretends to be a credit counselor or financial advisor and charges hefty fees for their services. Additionally, they can use your information to file for bankruptcy, ruin your credit score, and leave you in a worse financial situation.
As California's bankruptcy filing rate increases, many filers may fall victim to these schemes. Therefore, hiring and retaining a lawyer throughout your bankruptcy case would be wise.
Making False Statements
When you file for bankruptcy in California, you must disclose all information about your financial life. Some of the information that you must include when filing your bankruptcy petition documents includes:
- Your income. When filing for bankruptcy, you must indicate the amount you earn from your job or business. This helps determine your eligibility for the specific type of bankruptcy you are filing.
- Your expenses. When filling out your bankruptcy petition forms, the court expects you to indicate your expenses. With this information, your bankruptcy trustee can determine whether the amount left after paying for basic needs is enough to pay your creditors.
- Your assets. You must disclose all your assets and their value when filing for bankruptcy. Some bankruptcy filers may omit some assets or include incorrect information about asset value to save the assets from bankruptcy liquidation. Unfortunately, if your trustee discovers the omissions and false statements, you can be charged with bankruptcy fraud. This could cause you to miss the bankruptcy discharge and lose the assets you intended to protect.
- Bank statements. In addition to listing the number of bank accounts and indicating the amount, you must present bank statements to back your claims.
Although some omissions are based on fraudulent intent, it’s also know that you can make an honest mistake when filling out your bankruptcy forms. Filing for bankruptcy is a tedious process prone to mistakes and human error. Therefore, you must hire a reliable bankruptcy attorney to help you provide all the required information and avoid unnecessary mistakes.
Credit Card Fraud
Most bankruptcy filers can discharge their credit card debt through bankruptcy discharge. If you file for bankruptcy under Chapter 7, you can have all your debt eliminated. For Chapter 13 bankruptcy filers, the credit card debt not covered in the repayment plan is discharged. For this reason, some people are tempted to stack up credit card debt.
If you use your credit card to purchase unnecessary items while on the verge of bankruptcy, you could be cited for bankruptcy fraud. If you are granted bankruptcy relief after such an instance, the court may order you to pay the debt you accumulated with fraudulent intentions.
You can use your credit card while on the verge of bankruptcy to purchase necessities like food and clothes and pay utility bills. However, charging luxury items on the credit card could raise suspicions about your intentions with the company. This is after examining your transactions to determine whether you made significant purchases before bankruptcy. A credit card company can challenge your bankruptcy based on attempted credit card fraud.
You should stop using your credit cards if you are on the verge of bankruptcy and cannot pay your debts. This could save you from bankruptcy dismissal and bankruptcy fraud criminal charges.
Consequences of Bankruptcy Fraud
You may be cited for bankruptcy fraud when your trustee discovers that you engaged in any form of bankruptcy fraud. The consequences of bankruptcy fraud can have devastating effects on your life, and they include:
Dismissal of Your Bankruptcy Petition
Filing for bankruptcy helps you reorganize your finances and discuss some of your debts. Additionally, bankruptcy can protect you from constant calls from creditors demanding you pay your debts. You can keep your home, vehicle, and other valuable assets in bankruptcy. However, you could lose these privileges if you attempt to commit bankruptcy fraud. When your false statements or attempts to conceal assets are discovered, the court can dismiss your bankruptcy petition.
If you are cited for minor instances of bankruptcy fraud, you may be eligible to file another petition for a while. However, you may completely lose your right to bankruptcy relief in severe cases.
Criminal Charges
In addition to a dismissal of your petition, bankruptcy fraud is a severe criminal offense. Depending on the circumstances of your case, bankruptcy fraud can attract felony charges in state court or federal criminal charges. Often, federal bankruptcy fraud arises when your case is an elaborate scheme to commit fraud.
You can be found guilty of bankruptcy fraud if the prosecution in your case proves that you engaged in any of the acts that constitute bankruptcy fraud. Additionally, it must be clear that you acted with fraudulent intent.
A conviction for bankruptcy fraud in California is punishable by a prison sentence of up to five years and fines that do not exceed $250,000. However, if you face federal charges for the offense, you could serve up to twenty years in federal prison.
Working with a reliable bankruptcy attorney helps you avoid the mistakes that could result in an arrest for bankruptcy fraud.
Ways to Avoid Bankruptcy Fraud
A successful bankruptcy petition will give you a fresh financial start. This allows you to dismiss unsecured debts or create a repayment plan to pay your debts in manageable installments. However, some mistakes you could make when filing your petition can land you in serious legal trouble.
The consequences of bankruptcy fraud could devastate your freedom and ability to receive bankruptcy relief. Therefore, you should avoid these mistakes at all costs. Some of the simple ways through which you can prevent fraud and bankruptcy include:
Ensure Accuracy in your Petition
A common reason you could be cited for bankruptcy fraud in California is filing incorrect or wrong information on the bankruptcy forms. You can avoid the legal repercussions of bankruptcy fraud by ensuring that all the information you offer in these forms is accurate and truthful.
Avoid Transfer of Assets Shortly Before Filing
Sometimes, bankruptcy filers are tempted to transfer assets and properties to friends and family to avoid losing them in bankruptcy. While you can take these steps in good faith, they can land you in severe legal trouble. Therefore, avoiding the transfer of assets when you plan to declare bankruptcy could help you avoid the impact of bankruptcy fraud on your petition and freedom.
Consult a Bankruptcy Attorney
Bankruptcy fraud could result from intentional fraudulent acts or honest mistakes you make when filing your petition. While you may notice some of these mistakes, a competent bankruptcy lawyer can point out any mistakes you have made in your documents. Before signing your bankruptcy petition, you must go through it with your lawyer.
Filing your bankruptcy forms within the required timeframes could give you more time to review them and correct the mistakes. In addition to helping you avoid bankruptcy fraud, your attorney can offer legal representation to ensure a fast and less stressful bankruptcy process.
Avoid Excessive Spending
Some people are tempted to stack their debts since their credit card debts are dismissed in liquidation bankruptcy. Such an act is considered bankruptcy fraud and can result in the dismissal of your petition and criminal charges.
You can avoid excessive spending and stacking up on credit card debt by recognizing youth expenditures and creating a budget. This allows you to cut unnecessary expenditures that could translate into credit card fraud. Cutting back on expenditures could include:
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Skip going on vacations.
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Sell luxury vehicles that you do not need.
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Move to a smaller home.
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Avoid purchasing unnecessary items.
Find a Reliable Bankruptcy Lawyer Near Me
Bankruptcy offers relief for individuals in financial crises by dismissing the debt in Chapter 7 bankruptcy and creating a debt repayment plan in Chapter 13 bankruptcy. The bankruptcy process involves complying with numerous paperwork and disclosing the details of your financial life.
While filing for bankruptcy, you must list all your assets and their value. Additionally, you must list your creditors and the amounts you owe them. Acts like providing false information, an attempt to conceal assets or credit card fraud will result in denying your petition and land you in legal trouble for bankruptcy fraud.
Seeking legal guidance is critical to ensuring that your bankruptcy forms are filed correctly to avoid charges for bankruptcy fraud. At Sacramento Bankruptcy Lawyer, we offer expert legal guidance for our clients seeking bankruptcy relief in Sacramento, CA. Contact us at 916-800-7690 to discuss the details of your bankruptcy case.
