Many Americans are struggling with overwhelming credit debt in today's economy. Those who have suffered severe circumstances find themselves without the means to pay for their debt. Job loss, divorce and endless medical bills leave hard-working people stuck in difficult times. Bankruptcy is one option that may help people alleviate their debt, protect their assets from creditors and regain control over their finances. Although bankruptcy laws are fairly lenient when it comes to protecting the debtor's assets, many people abuse the system and commit bankruptcy fraud in efforts to protect their assets.
Hiding one's assets and making false statements on a bankruptcy petition account for the majority of bankruptcy fraud. The two main forms of bankruptcy fraud are:
Concealment of Assets: is a type of bankruptcy fraud where an individual withholds or incorrectly lists all assets on the bankruptcy petition. Creditors can only attempt to seize assets that are made known and, by withholding the existence of assets, the debtor may be able to prevent a creditor from liquidating their assets. This type of bankruptcy is common among businesses, where assets may be hidden or dispersed in efforts to protect them from seizure.
Multiple Filings: is a type of bankruptcy fraud in which individuals file a bankruptcy claim in more than one state. The same assets are listed on the multiple bankruptcy petitions and individuals may attempt to conceal some assets by withholding their information on the claim forms. Some individuals also use fake name and social security numbers in attempt to fraudulently file claims.
Bankruptcy fraud can take many forms, all of which can result in serious consequences for the offender and have a devastating impact on our tax system. The negative impact of bankruptcy fraud affects how the public views bankruptcy laws and the reputation of honest individuals looking for debt assistance through a difficult time.
Bankruptcy fraud isn't limited to a devious criminal with a checkered past, anyone is capable of committing fraud. A recent example is former MLB player Lenny Dysktra, who was indicted in early May for bankruptcy fraud. Dykstra is accused of stealing and ruining 0,000 worth of marble countertops, appliances, and fixtures in his million home in Los Angeles, before it could be liquidated to repay creditors. If convicted, Lenny Dysktra could serve up to 80 years in prison.
Punishment for Offenders
Bankruptcy fraud is not resolved without a price, as the crime is considered a criminal offense. It is considered a felony and is prosecuted to the fullest extent of the law. In efforts to protect the current leniency that is provided by the State and Federal bankruptcy laws, the court system is out to make an example of bankruptcy fraud offenders.
The bankruptcy petition filed by the offender will be denied and debt dismissal or reorganization requests will not be granted. Additionally, offenders will be required to forfeit all of their assets and will be denied opportunity to claim liquidation exemptions. Convicted offenders can also face jail time and are usually required to pay restitution fees up to hundreds of thousands of dollars.