When it comes to declaring Chapter 7 or Chapter 13 bankruptcy, you know the right steps you must take to make it happen. Declare all your income and liabilities. Put your credit cards away. Work with your bankruptcy attorney to ensure a successful petition. Breathe a sigh of relief when you finally have that messy financial slate wiped clean.
While there's certainly a right way to file for bankruptcy, there's no doubt that many petitioners seek to go about it the wrong way. In other words, a small minority of petitioners try their best to hide assets, ramp up massive credit card debts, or commit other acts that are considered bankruptcy fraud. The penalty for bankruptcy fraud is nothing to sneeze at: maximum sentences can include up to five years in prison and/or a $250,000 fine.
So what's considered bankruptcy fraud - and what are the consequences?
Take a look:
Concealment of Assets
When filing a Chapter 7 or Chapter 13 bankruptcy, many fraudulent petitioners attempt to hide some of their assets in other states, or even abroad. Concealing assets gives the petitioner an unfair advantage over debtors, as bankruptcy courts will only dismiss the debts or form repayment plans based on the declared assets and liabilities. It is no exaggeration to say that if a bankruptcy court discovers that you have concealed some assets, you will be in serious trouble with the law.
Racking Up Credit Card Debts
As soon as you decide to declare bankruptcy, you will need to tuck aside your credit cards and leave them alone until your debts are discharged. Some petitioners consider bankruptcy an opportunity to spend up to the maximum limit on their credit cards, as they think the debts will be discharged anyway. However, if a bankruptcy court believes that you are fraudulently using your credit cards, they will dismiss your petition and may take legal action against you. The only exception to this rule is if you need to use the credit cards to purchase necessities for your family.
Bribing a Court Trustee
In very rare cases, bankruptcy fraud is committed when a petitioner attempts to bribe a court trustee. This will certainly result in the maximum penalty!
When declaring Chapter 7 or Chapter 13 bankruptcy, be sure to stay on the right side of the law - or else rather than alleviating your money worries you will be increasing them as well as possibly facing more.
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