What Is Bankruptcy Fraud?
If you are planning to file for bankruptcy, you might have encountered information about bankruptcy fraud, or risks of being accused of bankruptcy fraud or having your case dismissed as a result of bankruptcy fraud allegations. Yet it can be difficult to understand precisely what constitutes bankruptcy fraud, and whether a mistake could lead to issues involving bankruptcy fraud. In short, it is essential to be completely honest when you file for bankruptcy and to provide all required documents and information to the bankruptcy court. Providing incorrect information, or failing to provide all required information (i.e., omitting details or information) could ultimately result in bankruptcy fraud. However, with assistance from a bankruptcy lawyer in West Palm Beach, you can avoid bankruptcy fraud allegations in your case. Consider the following information.
Defining Bankruptcy Fraud
Bankruptcy fraud can take many different forms, and it can occur in any type of bankruptcy case — involving an individual or a business. The range of acts or omissions that may constitute bankruptcy fraud under the U.S. Bankruptcy Code include but are not limited to the following:
- Knowingly and fraudulently concealing property;
- Knowingly and fraudulently making a false oath or account;
- Knowingly and fraudulently making a false declaration or verification or statement; or
- Knowingly and fraudulently concealing or destroying or falsifying documents concerning your property or financial affairs after filing for bankruptcy.
There are also ways in which other parties, such as creditors, can commit bankruptcy fraud. As you can see, bankruptcy fraud typically requires intent. Under the U.S. Bankruptcy Code, any act that constitutes bankruptcy fraud listed above is done “knowingly and fraudulently.” Accordingly, if you make a mistake and conceal property or make a false statement, for example, you will not have committed bankruptcy fraud according to the law. However, even allegations of bankruptcy fraud could lead to an investigation and could put your bankruptcy case in jeopardy. In addition, there are ways of committing “presumptive fraud,” such as by charging significant purchases on a credit card prior to filing for bankruptcy.
Signs of Potential Bankruptcy Fraud
Even if you are not ultimately charged with or convicted of bankruptcy fraud due to a lack of knowledge or intent, you could still face a bankruptcy fraud investigation that could impact your ability to receive a bankruptcy discharge in a timely manner. Bankruptcy courts, bankruptcy trustees, accountants, and other parties involved in bankruptcy cases are routinely on the lookout for bankruptcy fraud. According to an article in the Journal of Accountancy, in general, the following are common signs of bankruptcy fraud that could give rise to an investigation:
- Assets that appear to be undervalued, including for business and individual debtors;
- Messy financial documents or records, such as business payroll issues or missing financial documents for individuals;
- Recent asset transfers, especially of high-value property; and
- Financial staff departing the business in notable numbers prior to a business bankruptcy filing.
Contact a Bankruptcy Attorney in West Palm Beach
If you have any questions about a business or individual bankruptcy filing, or any concerns about bankruptcy fraud, it is important to get in touch with a lawyer who can help. An experienced West Palm Beach bankruptcy attorney at Kelley Kaplan & Eller can speak with you today about your case.
Sources:
law.cornell.edu/uscode/text/18/152
journalofaccountancy.com/issues/2020/oct/fraud-red-flags-during-bankruptcy-process.html
