Bankruptcy is becoming a more frequent type of protection sought by Americans who have become victims of the recent economic downturn. Job loss, unfair mortgage practices, rampant credit card debt and medical bills are forcing many people to seek legal ways of getting rid of debt.
However, some petitioners, fearing loss of personal property, will often leave certain assets off of the bankruptcy petition, or transfer property to family or friends in an effort to deceive the court. This is known as bankruptcy fraud and carries with it not only potential for a case to be dismissed, but potentially criminal charges as well.
Hiding Assets
Many bankruptcy petitioners are tempted to hide assets from the court by not listing them on schedule b of the petition. This is often a big mistake, as every few bankruptcy cases will be audited, and the deception will be uncovered.
Petitioners who are found to be hiding assets from the court will have their case dismissed, and in some cases, can be charged with criminal fraud which carries with it potential jail time.
Illegal Transfer of Property
Another means of defrauding the bankruptcy court is to “give away” property to friends or family, only to get it back upon completion of a bankruptcy case. This is also a type of fraud, and the bankruptcy court will not tolerate it.
The bankruptcy trustee is charged with uncovering such deceptive actions, and will almost always uncover the truth.
Can Property be Transferred Legally?
In order to avoid a fraudulent transfer, the property must be sold at fair market value. This ensures the equity remains part of the bankruptcy estate. Often, this is something one would do to raise money necessary to go through a bankruptcy case.
Fraud is Almost Always Completely Unnecessary
In the great majority of bankruptcy cases, the petitioner will wind up keeping all of their personal property. It’s a common misconception that once you file for bankruptcy, you will lose your property, but this is not the case in reality.
Especially when an experienced attorney is involved, there are a lot of legal ways to protect non-exempt assets in a bankruptcy case.
Talk to a bankruptcy lawyer before making any decisions regarding bankrutpcy. It’s a complicated legal process that is best handled by an experienced professional.
