If a Mississippi consumer is struggling with debt, bankruptcy can help them through liquidation or repayment. However, the FBI estimates 10% of bankruptcy cases are fraudulent. Bankruptcy fraud involves attempts to falsify information, and it takes several forms.
Ways consumers commit bankruptcy fraud
A common type of bankruptcy fraud is the consumer attempting to conceal assets to avoid losing them in Chapter 7 bank. Creditors may only claim the assets the filer lists on the petition, so the filer may purposefully not reveal them. Assets transferred to a third party within a year before filing may be viewed as fraudulent, unless creditors are paid first.
If a filer takes out a debt close to the bankruptcy and tries to discharge it, it may be considered fraudulent. Filing multiple bankruptcies is not always illegal, but if the consumer files in multiple states, it may count as fraud.
Sometimes, fraud is committed by lenders in the form of petition mills that promise to help with foreclosure. However, the consumer must pay a small fee for the services, and the lender files bankruptcy in their name.
Bankruptcy fraud penalties and investigation
Bankruptcy fraud is commonly charged under federal crimes with a possibility of up to 20 years in jail and a $250,000 fine. Federal prosecution may also add separate additional charges, such as money laundering, ID theft, conspiracy, and money laundering. In civil cases, the filer may lose their property exemptions and the right to discharge debts.
The FBI investigates suspected fraud, and the IRS, and the Department of Justice’s trustee program look out for it. If the U.S. Trustee Program suspects fraud, they report it to the correct U.S attorney general and the FBI.
Making a simple mistake on a bankruptcy form commonly will not lead to penalties. If a person feels unfairly charged, a good defense can help them.
