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Bankruptcy fraud: a white collar crime

Bankruptcy fraud takes several forms and is a white-collar crime. Bankruptcy is a condition when you declare yourself financially insolvent. And you do so legally. Bankruptcy is a federal court proceeding and is designed in such a manner so that you get an opportunity to reorganize your debts or distribute your non-exempt assets equally among your creditors. The bankruptcy system assumes that you will disclose all your assets to the court appointed trustee so that a fair judgment can be reached.

Often it is seen when bankruptcy is filed, there is an attempt either from the debtor or the creditor to retain/get more than what they are entitled to. Such anomalies fall within the purview of bankruptcy fraud if it is done intentionally.

What are the different types of bankruptcy fraud?

Some of the common forms of bankruptcy fraud are as follows-

Petition Mills

Petition mill is a type of bankruptcy fraud that is rapidly increasing in United States. Petition mill claims to help you avoid eviction if you are a tenant and financially stranded. If you are a tenant facing eviction and financially stranded you can be a target of petition mill. If you happen to come across newspaper listings of advertisers suggesting different ways to avoid eviction, don’t respond to these gimmicks. If you respond, the advertisers (perpetrators) file bankruptcy in your name. You think that you are receiving the help they promised. In reality, they are prolonging the process and extracting money from you. Your credit rating also gets damaged in the process.

Concealing assets

Concealment of assets constitutes approximately 70% of all bankruptcy fraudulent activities. This happens when you don’t disclose all your assets to the court appointed trustee. By not disclosing assets, you tend to retain them when you file bankruptcy. Majority of the debtors transfer property rights in someone else’s name to protect assets from liquidation. This is not acceptable as per bankruptcy laws.

Multiple bankruptcy filings

Multiple bankruptcy filings occur when you file bankruptcy in different states. You use your real name and Social Security number or use fake names and provide wrong information about yourself. You don’t declare your assets with the hope of retaining them and preventing them from liquidation.

Perpetrators are booked as per standard criminal procedure

Perpetrators found to be involved in bankruptcy fraud are booked as per standard criminal procedure. As Proof of fraud, you are required to establish that there was an intentional misrepresentation of factual information and material facts.

Culprits can be imprisoned for a period of up to 5 years or fined up to USD$250,000. A perpetrator may also be entitled to both forms of punishment.

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