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Bankruptcy is a legal proceeding involving a person or corporation that can not repay debts.
Generally, the bankruptcy process starts with the filing of a petition by the debtor. However, on rare occasions, it can start with a petition filed on behalf of creditors. There are various kinds of bankruptcies that may be filed by a corporation or person, ranging from Chapter 7, the liquidation of assets; Chapter 11, the reorganization of the company or individual; and Chapter 13, which includes redemption of debt with lower debt agreements. The debtor's assets are assessed and evaluated as of the petition-filing date in order to repay a
portion of the debtor's outstanding debt. While bankruptcy is structured to provide a debtor with temporary relief while formulating a plan to repay creditors, it may also provide the opportunity for a dishonest debtor to defraud others. Bankruptcy fraud is growing and can be manifested in several different ways by both corporations and individuals. The main forms of fraud involving bankruptcy include:
● Asset concealment
● Asset Undervaluing
● Fraud by Credit Card
● Incomplete False Form (making false oaths or declarations)
● To bribery
● Filing (in several states) multiple times
● Pre-payment of debts (preference of creditors)
During the bankruptcy phase, there are many different forms a fraudulent debtor may commit fraud, these are a few of the most popular.
Concealment of Assets
Asset concealment is the most common form of bankruptcy fraud that occurs in the United
States. The petitioner's assets must be specified in Schedule A of the bankruptcy petition when filing for bankruptcy. Debtors often, in a generic way, list small items, such as household products, and assign an aggregate value. However, for large properties, such as a house or a truck, this approach does not work.
Undervaluing Assets
In particular, if the debtor has ample evidence to support claims and asset amounts specified in Schedule A of the bankruptcy petition, undervaluing assets is easier to defend than accusations of concealment of assets. One example is valuing the primary residence of the debtor. The house will not be excluded under applicable law, depending on the source used to calculate the fair value of the house, whether it is the website of the local tax assessor or some similar source.
Credit Card Fraud
Credit card fraud is a tactic used by debtors to try to buy products on credit before filing for
bankruptcy, in which the debtor bought these things knowingly and fraudulently without any
intention of ever paying them back. When an individual makes substantial credit card charges close to the time of the bankruptcy filing, the common red flag for credit card fraud is; the higher the amount and the newer the credit card charges, the greater the probability that fraud will be claimed by a borrower.
The following also includes other forms of bankruptcy fraud:
● Giving false claims before the tribunal. Even leaving questions unanswered in your
petition for bankruptcy can be seen as making a false statement.
● Filing several petitions in many states for bankruptcy. Often, cheats use real names and
details or a mixture of true and false data. If you're trying to conceal assets, this will
provide further protection. It also slows down the processing and liquidation of properties
in bankruptcy.
● Starting a company and buying goods on credit. That's fraud if you do so with the
intention of filing for bankruptcy instead of paying for the products.
● Bribing the trustee appointed by the judge. Filers promise money or favours if their case
is accepted, one of the most heinous types of fraud. Debtors often attempt to bribe
creditors, forcing them not to file claims in return for money.
● A lying creditor. Creditors often commit fraud, filing false statements or lying about the
debtor's repayments they have already paid.
● Embezzling. Any of the money in the bankruptcy estate of a debtor may be embezzled by
trustees, lawyers or court personnel.
Penalties for Bankruptcy Fraud
If you go to prison or not depends on whether the fraudulent acts are considered to be civil or criminal acts. Generally, civil acts are small in nature and require less deceit. The standard
penalty is the loss of your immunity from bankruptcy and the forfeiture of your rights to
discharge. Any of your properties will be excluded from the proceedings when you apply for bankruptcy, meaning you can keep the products. If your exemptions are stripped away, it is now possible to sell the property to pay off your creditors. When the bankruptcy proceedings are over, debt discharge rights are granted to you. A debt release means you are debt-free; you can no longer try to get money from your creditors. Your creditors will also sue you if your rights of discharge are forfeited because of civil fraud.
Penalties for criminal fraud are much stiffer. It must be shown that you behaved with a
competent and dishonest motive, misrepresenting relevant evidence, to be charged with this
felony. If that happens, you'll face up to five years in federal jail, a fine of up to $250,000, or
both. The five years are per crime, by the way. So if you've done three bankruptcy fraud actions, you're looking at slammers for up to 15 years. Ditto with the fine, which per fraud act can be imposed. You could only be put on probation if you are lucky.
Bankruptcy in the world of Hollywood
Bankruptcy fraud is not usually considered a crime worthy of sensational media attention, but
every so often a case breaks through and shows that even the rich and famous can not get away from the bankruptcy chopping block (or avoiding prison) by unlawfully protecting their
properties. Teresa Giudice, a star of Bravo's hit reality show "The True Housewives of New Jersey," and her partner, Joe Giudice, pleaded guilty to 41 fraud charges, including bankruptcy fraud, for failing to file tax returns for five years, failure to disclose the earnings of Teresa's "Real Housewives," and other charges.
The court directed the Giudics to do the following:
● Pay a fine of 200,000 dollars
● Restitution of pay (a sum which refunds actual losses)
● The bankruptcy trustee's turnover asset, the official responsible for managing the case,
for the benefit of creditors and
● To spend time in jail.
Teresa completed a 15-month term for eleven months. Joe is serving a sentence of 41 months as of the time of this writing (October 2017), and, since he is not a U.S. citizen, after his release, he may face deportation. Reportedly, after her release from federal prison, Joe gave Teresa a welcome home gift: a $90,000 SUV.
Funny how reality TV stars could afford a luxury worth thousands of dollars despite being
locked behind bars. But, I guess that’s just the advantages these famous personalities have being Hollywood Stars of a hit reality TV show.
Consider another case, the case of Abby Lee Miller, another reality television star, whose inept efforts to conceal assets ran afoul of her bankruptcy judge. "She filed a Chapter 11 lawsuit in 2010, but the allegations against her stemmed from her failure to disclose her television profits and the money she earned from retail and clothing sales during her bankruptcy case. Ms Miller owed a dance studio featured in the Lifetime show" Dance Moms. In fact, when he saw an episode of the show shortly before the hearing date that would have all but settled her Chapter 11 case, it was her bankruptcy judge who suspected fraud. Ms Miller was convicted of bankruptcy fraud, asset concealment, and making false claims (committing perjury in papers she had to file with the court). Ms Miller managed to find new ways to secrete money even after concerns came to light by getting checks made out to other people and through funneling her income into companies she set up to avoid being deposited into established accounts.
Ms Miller received a federal prison sentence of one year and one day, two years of supervised release after the prison term, a fine of $40,000, and $120,000 in restitution for a charge of unlawfully bringing Australian money to the United States.
Conclusion
Those committing bankruptcy fraud, as in any crime, are not working in a vacuum. Their deeds hurt others. Bankruptcy fraud casts blame on everyone, even responsible people, using the procedure. This pushes credit card and loan charges up. It might even increase our taxes. And who wants taxes to be higher? It's easier to pay what you owe to get the best out of your new start.
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