Approximately 10% of all bankruptcy filings in the United States contain bogus claims. The four most frequent types of fraud schemes include asset concealment, petition mills, multiple-filing schemes, and bust-out scams. Asset concealment involves thieves trying to hide their identity by using stolen credit cards to purchase items that high-value goods. This way, the thieves will be able to take advantage of reduced reporting requirements for used goods. Petition mills produce many fraudulent petitions in order to increase their profits. For example, a mill might file 1,000 cases per year at $15,000 each or even more if they can get away with it. Multiple-filing schemes occur when more than one person files for bankruptcy simultaneously. Bust-out scams involve perpetrators who falsely claim that someone else is responsible for a debtor's debts. They do this by filing a lawsuit against the debtor or by claiming a creditor is not willing to negotiate a repayment plan.
The average cost of filing bankruptcy in the United States is $1,500. However, filing fees can vary depending on how much debt you have and where you live. For example, people who live in states that allow voluntary filings (such as California) may be able to file for bankruptcy for free. On the other hand, individuals who live in jurisdictions that require court approval before a case can be filed (such as Virginia) may have to pay a filing fee.
Bankruptcy fraud is a type of white-collar crime that can take many different forms. It can be used to conceal assets in order to escape forfeiture. In bankruptcy fraud schemes, some persons purposefully file incomplete or incorrect paperwork, or they file many times in different states with fake or legal information.
Bankruptcy fraud can also include attempts to defraud creditors out of their rightful claims. For example, someone might try to hide money from creditors by having it taken out of the country before the bankruptcy is filed.
Finally, bankruptcy fraud can involve false statements made to a court during proceedings related to filing for bankruptcy. For example, someone could make a false statement under oath when answering questions from a creditor or at a hearing where other people's debts are being discussed.
Filing for bankruptcy is an attempt to start over with a clear financial slate. If you have been working on a business plan or marketing strategy and want to keep these efforts moving forward even after filing for bankruptcy, then hiring a bankruptcy lawyer is recommended. A good bankruptcy lawyer will help you determine how filing for bankruptcy may affect your existing plans and strategies.
Bankruptcy lawyers also help clients understand what happens during the bankruptcy process and whether any actions are needed prior to filing for bankruptcy.
Bankruptcy fraud is a federal offense punishable by up to 5 years in federal prison and a $250,000 fine. The fine is not dischargeable in bankruptcy. Bankruptcy fraud also can be grounds for annulment of the debtor's discharge.
The consequences of bankruptcy fraud include having your discharge denied under section 727(a) of the bankruptcy code, which would leave you with all of your pre-bankruptcy debt still owed after the bankruptcy; having your estate fully administered as if there had never been a bankruptcy; and losing any benefit you may have received from your bankruptcy filing, such as the protection it provides from harassment by creditors.
Filing a fraudulent bankruptcy petition could also result in an indictment for perjury if you lied about something in your petition, such as whether you had been convicted of a crime. A false statement on a bankruptcy form requires only that you knowingly make a false statement, not that you do so willfully or intentionally. If convicted, filing a fraudulent bankruptcy petition is a felony punishable by up to 5 years in federal prison.
Bankruptcy fraud can affect you even after you have discharged your debts in bankruptcy. For example, a creditor might refuse to accept a payment from you after the bankruptcy, which could cause you to lose your job.
No, not exactly. In fact, declaring bankruptcy may be the worst thing you could do. Medical costs are the top one reason individuals file for bankruptcy, according to Snopes.com. Every year, over 643,000 Americans declare bankruptcy due to medical debt. That's more than any other cause except for job loss or change in employment status.
Bankruptcy will also hurt if you have existing mortgage payments, taxes, and other loan obligations. During your bankruptcy case, a trustee will be appointed to oversee these debts and others. The trustee will try to collect as much money as possible to pay off creditors. If they are unable to collect enough, then the debtor might be able to keep some of their property by agreeing to certain terms with their creditors. However, under some circumstances, it may be necessary to sell property to cover filing fees, administrative expenses, and any remaining unsecured claims.
Finally, bankruptcy can be a crime. Certain actions can lead to criminal charges including perjury, fraud, destruction of evidence, and abuse of the bankruptcy system. A person convicted of a felony related to bankruptcy would lose many of their rights including voting, holding public office, and serving on a jury. They could also be banned from filing for bankruptcy for several years.
Thus, bankruptcy is really the last resort when other options have been explored.
Bankruptcy fraud is punishable by a fine of up to $250,000, imprisonment for up to twenty years, or both. How do people conceal their assets? People try to conceal assets in bankruptcy proceedings in a variety of ways, and bankruptcy trustees are well-versed in all of them. Here are a couple such examples:
– One method involves transferring or hiding assets using third parties. For example, one may use a straw buyer to transfer ownership of an asset to another person before filing for bankruptcy. The debtor may also hide assets by placing them beyond the reach of creditors by storing them in a safe deposit box or some other location where they are not easily found. Creditors have no right to these hidden assets; therefore, they cannot be used to satisfy debts. Bankruptcy courts will only release funds that are available after all debts are paid, so hiding assets is never advisable as it could lead to bankruptcy.
– Another common method for concealing assets is by changing how things are reported on financial statements. For example, one may report an increase in value for an asset that has not been sold yet, even if no money has changed hands yet. This is known as "marking to market" and is allowed under certain conditions. If there is no market for the asset, such as a stock of goods being held for sale by a retailer, then it is appropriate to mark it to market every time it is used. This ensures that it is taken into account when calculating profits or losses.
There are six chapters in all, although only six of them apply to the vast majority of bankruptcy proceedings in the United States. Let's take a look at the four options for filing for bankruptcy: 7th Chapter
Chapter 7 Business Bankruptcy: Liquidation Chapter 7 bankruptcy is the most prevalent kind of bankruptcy, accounting for around 80% of all consumer filings. Consumers and companies of all sizes can file for Chapter 7 bankruptcy. Filers seeking to discharge business debts are not required to demonstrate any income restrictions. However, discharging business debts through Chapter 11 requires proof of financial distress or failure.
Chapter 11 Reorganization: Companies can use Chapter 11 of the Bankruptcy Code to restructure their finances while continuing to operate their businesses. Chapter 11 bankruptcy allows a company to propose a plan of reorganization that will be approved by creditors and the court. The company then has several years to come up with a viable exit strategy from its bankrupt status. Citing an inability to continue operating as a going concern, large corporations often file for Chapter 11 bankruptcy protection in order to obtain more time to find a buyer or go out of business.
Companies can also use Chapter 11 to avoid having their assets sold off at a foreclosure sale. In this case, the company seeks to restructure its debt so that it can continue operating under chapter 11 until a reorganization plan is put together that will allow it to emerge from bankruptcy as a stable business.
Bankruptcies are the only way to get a fresh start after filing for bankruptcy. All your personal property becomes property of the estate, which means anyone can take action against it.