Bankruptcy fraud is a federal crime that involves hiding assets or providing false information to avoid creditors or gain an unfair advantage in bankruptcy proceedings. It is a serious offense that can carry heavy fines and prison time.
According to the United States Department of Justice, there are several types of bankruptcy fraud. These include the concealment of assets, fraudulent transfer of assets and making false statements under oath.
Concealing or transferring assets
Concealment of assets involves hiding or transferring assets to hide your net worth. This could include transferring property to a relative or friend, or hiding cash or other valuables. Fraudulent transfer of assets involves transferring ownership of assets to someone else to avoid paying creditors. Examples include transferring the ownership of a business or selling property for less than its fair market value before declaring bankruptcy.
Making false statements
Making false statements under oath is another form of bankruptcy fraud. This involves lying or providing incorrect information during bankruptcy proceedings, such as about income or asset value. Additionally, the U.S. Department of Justice considers any false statements made before or after a bankruptcy filing as fraud. A seemingly harmless omission might lead to a prison sentence of up to five years.
Bankruptcy fraud is a federal crime because bankruptcy proceedings involve federal courts and bankruptcy laws. You might think some lies are harmless, but bankruptcy fraud involves deception and the intent to defraud creditors. In addition to fines and prison time, you might have to pay back creditors. You must be honest and transparent during bankruptcy proceedings to avoid the consequences of bankruptcy fraud.