Bankruptcy can be an extremely helpful avenue of financial relief for certain debtors. Navigating the bankruptcy process is not always easy, though, and it is important to work with an experienced attorney to ensure everything is done correctly and that any issues that arise in the process can be effectively addressed.
One of the issues debtors have to watch out for is accusations of fraud. Bankruptcy fraud comes in different forms. It can be concealing assets to avoid having to liquidate them in the bankruptcy process, intentionally filing false or incomplete forms, filing multiple times, or bribing a trustee. Such accusations are very serious and need to be effectively handled when they arise in the bankruptcy process.
In Chapter 7 bankruptcy, some assets are liquidated to help pay off creditors while others may be retained by the debtor. Creditors are only able to liquidate assets listed by the debtor in his or her filing, so not listing assets is a way for dishonest debtors to keep them. Sometimes debtors do this by transferring assets to friends, relatives or hidden locations so they cannot be detected.
Concealing assets may be tempting for debtors who have possessions they don’t want to lose to bankruptcy, but it can have serious consequences. Under the U.S. Bankruptcy Code, trustees are allowed in some circumstances to avoid transfer of a debtor’s interest in property or an obligation incurred by the debtor if the interest or obligation was made incurred on or within two years before the date of the bankruptcy filing.
In future posts, we’ll look at these circumstances, as well as the importance of working with an experienced bankruptcy attorney to avoid problems in the bankruptcy process.
Sources:
Cornell University Law School, “Bankruptcy Fraud: An Overview,” Accessed June 7, 2009.
11 U.S. Code § 548 – Fraudulent transfers and obligations
