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What is Bankruptcy Fraud?

Listing false information on a petition is a form of bankruptcy fraud, which is a federal offense in the United States.
Concealing assets during the bankruptcy process is a form of bankruptcy fraud.
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  • Written By: Carol Francois
  • Edited By: Bronwyn Harris
  • Last Modified Date: 13 October 2014
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In the United States, bankruptcy fraud is a federal crime. Bankruptcy is a legal process which allows a business or individual to be discharged of all their debts due to an inability to pay. There are multiple types of bankruptcy, but all have the same definition of what types of actions constitute bankruptcy.

There are three methods of committing bankruptcy fraud: concealment of assets, multiple filings and petition mills. The number of cases rises in proportion to the number of bankruptcy filings each year. Convictions for this crime can result in a fine up to $250,000 US Dollars (USD) and/or up to five years in prison.

Concealment of assets is the most common type of bankruptcy fraud. This type of fraud occurs when the debtor hides his assets during the declaration phase of the bankruptcy process, in an attempt to keep them from being liquidated. Debtors may fail to include them on the list of assets, transfer ownership to family or friends and move assets into off-shore accounts.

Multiple filing occurs when debtors file for bankruptcy in more than one state. They submit incomplete lists of their assets on both filings, in an attempt to avoid liquidation of those assets. This type of bankruptcy fraud also covers situations in which the debtor files for bankruptcy under a false or assumed name.

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A petition mill is a particularly cruel type of bankruptcy fraud. Unlike concealment of assets or multiple filings, the fraud is not perpetrated by the debtor, but by a third party. This is common in poor neighborhoods and takes advantage of people facing eviction.

In a petition mill scheme, the debtor typically responds to an ad for firm who will help tenants avoid eviction from their rental accommodations. The firm takes all the debtor's information and charges large fees, claiming they are fighting the eviction. In reality, they have filed for bankruptcy, ruined the debtor's credit, and drained the cash resources.

Changes to the bankruptcy law have resulted in a significant increase in the number of bankruptcy fraud cases for concealment of assets. In the new law, a debtor cannot file for Chapter 7 bankruptcy if their disposable income is greater than $183.50 USD per month. He is forced to file for Chapter 13 bankruptcy.

Under Chapter 7, all debts are forgiven, while under Chapter 13, the debtor must make monthly payment toward a portion of her debt for three to five years. Once this period is complete, the debtor is discharged from bankruptcy. The bankruptcy stays on the credit file for 10 years from the date of discharge.

In order to avoid Chapter 13, debtors attempt to under report their income for the last six months. They increase their expenses to reduce the amount of disposable income reported. These steps both fall under concealment of assets and are considered bankruptcy fraud.

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anon136640
Post 6

I have the exact same issue as anon31953. My dad owns a house in another state and it wasn't until I started considering bk that he told me my name was on the title, and apparently has been for years. It's his house, not mine. He owns it free and clear and handles all of the taxes and insurance.

anon89400
Post 5

We purchased furniture four months ago and were misled, lied to, coerced and ripped off. The company gave us three "loaner" pieces until ours were received by them from the manufacturer, in "two weeks." "Only two more weeks." "Just two more weeks." "For sure in mid May," etc., etc. Needless to say, we never received it and they filed bankruptcy, chapter 11 two weeks ago.

We have not been told this by the company and have received nothing in that regard. We have it in writing from them that they would be providing our furniture to us, so we have proof they made the promises in february. I believe they knew all along they wouldn't be giving us our furniture. The pieces they provided are damaged pieces, and we are really upset.

They will not return calls, and the bank is investigating. We have enough documentation to safely say we are convinced this is fraud (selling us these, under false pretenses). What recourse do we have? We spent thousands.

anon41494
Post 3

The problem is with attorneys and trustees. 2 BR, one personal, one business.

Shortly after filing crt converted to sevens. Neither crt or lawyer informed me of crt hearing, and the assets are triple the debts. Trustees attempted to sell even before assigned, BLM is attempting to buy property illegally.

Discovered accidentally the second crt date to convert to 7. I showed up, surprising trustee and lawyer. Fired lawyer who was 2 1/2 hours late, He asked the judge for a 30-day extension to allow me time to get new lawyer. Also informed judge i was unable to hear in court room.

Judge denied. Two trustees, one openly discusses my case at a health club. The two trustees have one real estate agent for adjacent and joining properties, (conflict of interest) Also I own a company that converts veh to 4x4.

It has contracts with US and other countries, mil contractors. One of our conversions is a president's vehicle. Sole source provider for parts. etc.

Trustee real estate agent entered office without notification and announced he was selling the company. Panic among employees. Trustees listing property for as much as 20 percent of FMV. Trustees allow no money for my living expenses. take any checks I receive. Lawyers want money up front even though i have assets. They are moving so fast to steal property BLM must have. The IRS also involved, but i had to get taxpayer's advocacy group to have them overturn a huge tax bill. lied about not receiving tax return. Millions...

I am decorated USN naval aviator and I am proud to say I am an eagle scout. Since leaving the military I have found corruption at all levels of government. I am sick and tired of the good guys losing. Been working since i was 12, took 10 years of my life caring for my mother with Alzheimer's. Now the judge and all the other leeches are stealing it from me. I need some advice. Are there any honest people left.

jeffreyc
Post 2

Go to a lawyer and have your name removed from the deed. Write a letter explaining the circumstances under which you were added to the deed. The complication arises if you used this property as security for a loan, or if you enjoyed any benefits of ownership. If you did not use the home or live there at any time, it is fairly simple and a letter will suffice.

If you lived there for any period of time, or used it as a security, then you need legal advice on how to separate yourself from this asset.

Remember that bankruptcy filing requires a trustee and a judge. As long as you have a reasonable explanation of your actions and don't attempt to hide anything, it should be fine.

anon31953
Post 1

I am thinking about filing for chapter 7 bankruptcy. My aunt has a house free and clear of any mortgages, but my name is also on the deed of the house. On paper it looks like I am a part owner when the truth is that her children and grandchildren are in another country and, at the time, it made sense to put my name on the deed. How do I fix this issue without it looking like fraud?

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