Making False Statements in Bankruptcy Filings: Don’t Do It!

What is Bankruptcy Fraud?

Bankruptcy fraud basically means providing false information or withholding information on your bankruptcy paperwork. This could include:

• Lying about your assets, income, expenses, debts, or property ownership
• Hiding money, valuables, or other assets from the bankruptcy court
• Transferring property to friends or relatives so it appears you don’t own it
• Concealing prior bankruptcy filings
• Making up fake creditors or inflating amounts owed
• Falsifying records and documents given to the bankruptcy trustee

Even if it seems harmless at the time, any intentional false statement or omission made under penalty of perjury constitutes bankruptcy fraud.

Why Do People Commit Bankruptcy Fraud?

There are a few common motivations for bankruptcy fraud:

• To hide assets and protect property from liquidation
• To qualify for Chapter 7 when Chapter 13 is more appropriate
• To get a debt discharged that otherwise wouldn’t be
• To get more favorable repayment terms with creditors
• Out of desperation due to poor financial circumstances

While the intentions may not seem malicious, any type of fraud still corrupts the bankruptcy process.

What Are the Consequences of Bankruptcy Fraud?

The penalties for bankruptcy fraud can be severe:

• Criminal charges – Bankruptcy fraud is a federal crime under Title 18 U.S. Code § 157. If convicted, penalties include fines up to $250,000 and imprisonment up to 20 years.
• Civil lawsuits – The bankruptcy trustee may file a civil lawsuit to recover assets and funds from the debtor. The court can levy additional fines and penalties.
• Denial of discharge – The bankruptcy court may deny the discharge of debts due to the fraud. You lose the benefits of filing.
• Dismissed case – The court may completely dismiss your bankruptcy case for providing false info. You’d have to start over.
• Bar from re-filing – Those caught committing fraud may be prohibited from filing again for up to 10 years.
• Loss of property – Any assets hidden from the court may be seized and liquidated.
• Damaged credit – Your credit report will show a bankruptcy dismissal, making it harder to get loans.
• Fees and costs – Legal fees, court costs, and trustee charges add up quickly when fraud is found.

The risks simply aren’t worth it. Being transparent from the start, while painful, allows the legal process to work as intended.

Protect Yourself and Your Future

Filing bankruptcy provides a valuable opportunity to resolve debt and get a fresh financial start. However, it comes with great responsibility. Always provide complete, accurate information and disclose everything up front. Attempting to hide assets or otherwise mislead the court only leads to trouble. Consult an attorney, follow their advice, and think twice before trying to game the system. In the long run, honesty really is the best policy when seeking bankruptcy protection.