Many people and businesses file for bankruptcy each year because they are unable to meet their financial obligations. It can provide them with a fresh start and help when they need it most. However, if they are involved in bankruptcy fraud it can carry serious penalties.
Bankruptcy fraud
Bankruptcy fraud happens when a person or business provides false information, hides assets or acts deceptively to qualify for bankruptcy. For example, if the person applying for bankruptcy protection transfers assets to a family member or friend so they are not counted by creditors or a bankruptcy trustee, this would be fraudulent.
Bankruptcy fraud can also include trying to file for bankruptcy in multiple jurisdictions. Finally, if the applicant does not disclose their income accurately or intentionally underestimates how much income they have, that is also fraudulent.
Potential penalties
If a person is accused of bankruptcy fraud, they can face a prison sentence of up to 5 years and a $250,000 fine for each count.
In addition to criminal penalties, the court may dismiss the bankruptcy case or deny the debtor’s request for discharge, also known as releasing them from personal liability for the debt. As a result, the applicant will then be responsible for paying all of their debts and no longer will qualify for bankruptcy.
The court may also order them to pay restitution to anyone that they have defrauded in the bankruptcy process.
If a person has been accused of bankruptcy fraud and needs assistance, it’s important to remember that there is help available, and that all must be presumed innocent until proven guilty in a court of law.