Bankruptcy Fraud: People Really Do Go to Jail!
What Is Bankruptcy Fraud?
Bankruptcy Fraud is a charge that can be leveled at someone who has filed Chapter 7, Chapter 13, or, like Abby Lee Miller of Dance Moms fame, Chapter 11. It is the allegation that a person has engaged in some lack of disclosure or misbehavior prior to or in the process of filing a bankruptcy case. Specifically, however, the filing of a petition for bankruptcy with the Federal Bankruptcy Court carries with it a number of onerous obligations. The potential benefit of a bankruptcy discharge---the discharge and elimination of a most if not all of your debt---is great. It is one of the last truly effective legal remedies remaining available under US law to help consumers deal with impossible debt entanglements. However, it requires some things of you when you file. First, you must disclose all of your assets. Anything you own, are owed, have a mere claim to own (i.e., the right to sue someone for damages or collect on a debt owed to you), no matter where on the face of the Earth or elsewhere the property may be located MUST be disclosed and assigned a value in your bankruptcy petition. Second, you must disclose property you no longer "own" under certain circumstances. The last question you want to ask your Michigan bankruptcy attorney is, "Can I title my Maserati to my ex-wife's cousin's girlfriend?" Transfers of property within certain time-frames prior to the filing of the bankruptcy case can be considered fraudulent transfers. That is one type of fraud that can result in a loss of that property by whomever possesses it when the bankruptcy is filed. The bankruptcy petition documents will actually ask if you have cash or other types of property within certain time periods prior to the filing of the case. Failure to honestly answer those questions is Bankruptcy Fraud also. Third, you cannot forge documents, file false or dishonest papers and statements with the Bankruptcy Court, or destroy or withhold documents from the Court. When you voluntarily enter a bankruptcy process, you are asking the Federal government for a great benefit. It comes with strings. You will be under scrutiny, and your statements and your actions will be viewed with suspicion. It is simply something you have to be comfortable with before filing. There are other forms of "fraud" that can emerge from a bankruptcy process (such as using a credit card or incurring new debt prior to filing), which can result in a debt being declared non-dischargeable and loss of your discharge generally, but this article is more concerned with the sorts of fraud that have now landed Abby Lee Miller in prison.
What Are the Consequences of Bankruptcy Fraud?
As Abby Lee Miller discovered, who was this week sentenced to 1 year and 1 day in prison for bankruptcy fraud, the charge can carry Federal criminal consequences. That is---actual prison time. 18 U.S.C. 157 provides that a person found to have committed fraud can be fined or imprisoned for up to 5 years---or both. It almost goes without saying that the loss of the discharge of the debt sought by the bankruptcy petitioner is also at risk if fraud is committed, as well as findings by the Bankruptcy Court that individual debts may not be discharged due to fraud.
How Can You Avoid Committing Bankruptcy Fraud?
The best way to avoid Bankruptcy Fraud if you are considering filing for bankruptcy is simply to retain the services of an experienced bankruptcy attorney, such as The Hilla Law Firm, PLLC. At The Hilla Law Firm, from our first initial consultation meeting with a potential client, we work to ferret out any potential issues. We work with our clients rigorously prior to filing to ensure that all documents and information required to be disclosed under the US Bankruptcy Code is indeed disclosed. It is possible to accidentally commit Bankruptcy Fraud by way of simply doing a shoddy job with the petition preparation---but this has never happened to a client of The Hilla Law Firm, PLLC. If you are a Michigan resident and would like to explore your options for a Chapter 7 or Chapter 13 bankruptcy with an experienced Michigan bankruptcy attorney, please contact us at (866) 674-2317 or click the button below to schedule a free, initial consultation.
If you enjoyed reading "Bankruptcy Fraud: How to Avoid Abby Lee Miller's Fate," please browse our other articles on our main Michigan Bankruptcy Blog.