Bankruptcy Fraud: It's Not Always On Purpose

The bankruptcy process is full of very specific requirements and detailed procedures that must be followed. This makes it easy for those who know little about the process to get into trouble unknowingly. There are three common actions that can result in suspicions of bankruptcy fraud, which could end in a case dismissal.

Don’t Be An Offender

The most common type of fraudulent act that many  people unknowingly commit is accumulating more debt prior to filing for bankruptcy. The rules about filing state that any debts over $550 and cash advances of $825 or more acquired within 90 days of filing will not be eligible for discharge. Further, charging lots or high amounts of debt prior to filing can be suspicious and may lead to fraud charges.

Another problem occurs when people sell an asset prior to filing for bankruptcy. Although laws dictate that selling of assets is allowed, many people fail to follow the contingency requirements of the sale. Any assets that are sold prior to filing for bankruptcy must (1) be sold for fair market value and (2) report the income from the sale on the petition. In general, it is best to avoid any sale of assets within the six  months prior to filing.

The last issue concerns inaccurate statements or information provided to the court. While this happens intentionally in many cases, there are instances in which people mistakenly report a financial detail in their filing paperwork. The important thing to remember is that debtors are free to make changes to missing or inaccurate information for correction purposes, but should be done so as soon as the discrepancy comes to light.