What is Bankruptcy Fraud?


Bankruptcy law is extremely complicated, and it is important to work with an Oak Park bankruptcy lawyer no matter how straightforward you think your case may be. Indeed, failing to work with an experienced advocate could result in significant difficulties in your case. In particular, omitting certain information can look like bankruptcy fraud. If you are considering Chapter 7 bankruptcy or Chapter 13 bankruptcy, it is important to learn more about bankruptcy fraud and how the failure to provide details about assets may result in bankruptcy fraud allegations.
 
Understanding Bankruptcy Fraud
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was designed, in part, to reduce the rate of bankruptcy fraud in consumer bankruptcy cases. One of the ways in which the law is supposed to prevent bankruptcy fraud is through the use of the “means test” to determine whether an individual is eligible to file for Chapter 7 bankruptcy. What does bankruptcy fraud actually look like in practice?
According to the Cornell Legal Information Institute (LII), bankruptcy fraud generally falls into one of four different categories:
  • Debtor fails to list assets in order to prevent them from being liquidated;
  • Debtor intentionally files false or incomplete bankruptcy forms;
  • Debtor files for bankruptcy multiple times, unlawfully, by filling out false forms or attempting to file for bankruptcy in multiple jurisdictions; and/or
  • Debtor attempts to bribe a court-appointed bankruptcy trustee.
Hiding or Concealing Assets in a Bankruptcy Petition
In an overwhelming majority of bankruptcy fraud cases (about 70%), the fraud involves a debtor attempting to hide or conceal assets. Since assets that have been properly listed by the debtor are the only things that can be liquidated in order to repay creditors in a Chapter 7 bankruptcy case, debtors sometimes try to avoid listing assets that are not exempt or might hastily transfer property to another party before making a list of assets for bankruptcy purposes.
For example, let us say that a debtor in Oak Park plans to file for Chapter 7 bankruptcy but realizes his art collection—or at least most of it—will not be exempt. As such, he is required to list it as an asset that can be liquidated in order to have a bankruptcy discharge. However, the debtor does not want to lose the art pieces he has spent years collecting. In one scenario, he may decide simply to avoid listing the pieces as assets, hoping that they will not be discovered. In another scenario, he may transfer ownership of the paintings to a sibling in order to avoid having the collection liquidated. In either scenario, because the debtor hides or conceals the assets with the intent to do so, he may end up facing bankruptcy fraud charges.
What happens if a debtor honestly forgets to list an asset? Under the Bankruptcy Code, bankruptcy fraud only exists if a debtor knowingly misrepresents a material fact in the case. In other words, the debtor has to have the intent to hide or conceal the asset(s), and must do so knowingly.
Contact an Oak Park Bankruptcy Lawyer
If you have questions about properly listing assets as you prepare your bankruptcy petition, you should speak with an Oak Park bankruptcy lawyer. Contact the Emerson Law Firm for more information.
See Related Blog Posts:

Comments

Post a Comment

Popular posts from this blog

Payday Lending and Predatory Lenders in Illinois

If you are in substantial debt in the Chicago area and are living in a paycheck-to-paycheck cycle, you may have taken out a payday loan to make ends meet. While payday lending is illegal in a number of states due to the predatory nature of these loans, it remains legal in Illinois. As a result, many debtors in the state have used payday lenders, and far too many of those borrowers cannot repay what they owe. According to a recent article from Progress Illinois , consumers have filed complaints about payday lenders in the state, illuminating a need for federal rules that address harmful lending practices . Predatory Payday Lenders and Protections for Consumers Due to the perceived predatory nature of payday loans, twelve states in the country have banned these lenders from operating completely, according to a fact sheet from loans.org . The states that currently have laws prohibiting payday lenders from operating include Arkansas, Arizona, Connecticut, Georgia, Mary...
Read more

Phantom Debt Collection Scams on the Rise in Illinois

Have you been contacted by a person claiming to be a debt collector who is seeking to recover a debt you allegedly owe? If so, you are not alone. According to a recent report from CBS Chicago , such parties claiming to be debt collectors are on the rise, and they are scamming Chicago-area residents. These alleged debt collectors are part of schemes known as “phantom debt collection scams,” since they involve the attempt to collect on a debt that the consumer does not actually owe. How can you avoid becoming a victim in a debt-collection scam ? What should you do if you have been targeted by a fake debt collector? How Do Phantom Debt Collection Scams Work? Now, you might be thinking to yourself: I would never agree to make payment on a debt that I did not owe. But the scam is not always that simple. Parties at the center of debt-collection scams often target consumers who do actually owe debts (to someone or to some entity), and they prey on the fact that these c...
Read more

New Information on Debts That Bankruptcy Cannot Discharge

If you are thinking about filing for bankruptcy in the Oak Park area, it is important to know that certain kinds of debts cannot be discharged in a bankruptcy case. Under U.S. bankruptcy law, these are known as non-dischargeable debts, or exceptions to discharge. There are certain types of debts that have long been identified clearly as non-dischargeable debts, while there are misconceptions about other types of debts that may or may not be dischargeable. As an article in CNBC discusses, the U.S. Supreme Court recently issued a ruling in the case of Bartenwerfer v. Buckley , which clarifies that debts incurred due to another party’s fraud cannot be discharged in an individual’s bankruptcy case. Our Oak Park bankruptcy attorneys can explain the Court’s recent ruling and provide you with additional information on dischargeable and non-dischargeable debts. Supreme Court Says Debt Incurred Due to Another’s Fraud is Non-Dischargeable The recent Bartenwerfer case involved a debtor attempti...
Read more