A 64-year-old bankruptcy debtor who pleaded guilty to federal bankruptcy will go to prison for three months. The debtor filed for bankruptcy in 2007 but did not disclose that she had a 50 percent interest in a $150,000 home and had $3,000 cash in an out of state bank account. And only a month after the debtor filed bankruptcy, she received a transfer of her interest in the property. Even at that point she did not disclose to the bankruptcy trustee that she has received assets.
The impact of being convicted for bankruptcy fraud could be long-lasting and widespread in this woman's life. It will be impossible to pay debts and tend to the everyday demands of life from a jail cell. If she is not retired already, how will she find gainful employment? How will this bankruptcy fraud conviction impact her social status and relationships? Debtors considering hiding assets need to seriously consider all the implications of doing so. It is very difficult and completely unnecessary to hide assets during bankruptcy.
First of all, we are in a very digitally connected world where even a bank account outside of the country could be revealed to the bankruptcy attorney. Also, there are so many exemptions available to debtors filing bankruptcy, that most debtors filing Chapter 7 bankruptcy don't have any of their assets seized during the process.
Remember, transferring assets to friends or family before filing bankruptcy could constitute bankruptcy fraud. Also, failing to disclose assets during bankruptcy in an attempt to avoid paying creditors could also be considered bankruptcy fraud. If convicted of bankruptcy fraud, a debtor could spend years in prison. The woman mentioned above was lucky she only got 3 months.