The Gray Area Of Bankruptcy Fraud

: Chris Lee Law Firm

  Filed under: Bankruptcy

bankruptcy fraudNot everyone is aware of the actions that may be considered bankruptcy fraud. In fact, there is a lot of confusion as to what is considered fraudulent and how it can be avoided. However, in the case of transferring assets the line becomes even more blurred for many people.

In general, it is best to not attempt to sell or transfer any assets prior to filing for bankruptcy. These actions may be viewed as fraudulent by the bankruptcy court, which could result in serious consequences. The problem is that many people don’t know the rules of selling or transferring assets, resulting in many people committing potentially fraudulent acts without even knowing it.

Be Still and Wait

Any purposeful or intentional effort to hide assets or defraud creditors is automatically considered fraudulent. Many people have tried to get away with giving assets to friends or family members to hold until after a bankruptcy case, only to find their case dismissed and facing serious charges. The court defines actual bankruptcy fraud as (1) the transfer of an asset that is made within one year before the date of filing for bankruptcy and (2) the transfer is made with the intent to hide the asset of defraud the creditor. Proving actual fraud lies on the shoulder of the court as it is their responsibility to prove the debtor intentionally withheld information about a transferred asset.

A  lesser known, but more common, type of bankruptcy fraud is constructive fraud. This type of fraud occurs when a debtor (1) sells the asset for less than the asset is reasonably valued at and (2) the debtor was unable to pay their debts at the time the asset was sold. This usually occurs when people attempt to sell an asset to alleviate their financial burden, but do not receive fair market value for the item. While many people may do this thinking they are helping, they may actually be hindering their case. To avoid potentially committing bankruptcy fraud, seek counsel from a bankruptcy attorney to review any questions about selling or transferring of assets prior to filing a case.




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