Bankruptcy can be a welcome relief if you are overwhelmed by debt. However, while declaring bankruptcy, honesty is not only a prudent idea, it is a requirement. Being forthright about everything you own or what you have an interest in can save you from claims of fraud.
While incidents of bankruptcy fraud are rare, they still happen. Even if it is a computational error, an accusation of bankruptcy fraud can still result in severe consequences such as the denial of your bankruptcy claim, a fine and a criminal conviction.
What actions could be considered bankruptcy fraud?
Bankruptcy fraud happens when a debtor intentionally conceals certain assets in order to avoid forfeiting them. It can also happen when a debtor submits false or incomplete information while declaring bankruptcy. Examples of fraudulent behaviors that can prompt your creditor to petition the court to investigate you include:
- Failing to disclose your assets
- Undervaluing your assets
- Declining to answer certain questions or disclose certain information to the court
- Lying about your tax returns
Tips for avoiding bankruptcy fraud
Of course, to err is human. If you notice any inaccurate information in your paperwork, it is important that you report and rectify this as soon as possible. Here are some other tips that can help you avoid fraud while filing for bankruptcy:
- Double check everything – be sure to read and reread every disclosure before submission
- Make sure you provide documentation for your petitions, whenever necessary.
- Communicate with your bankruptcy trustee. If you are asked questions, be sure to answer them as truthfully as possible.
- Discuss any questions you have with your attorney — in detail — before you make any filings.
If you are declaring bankruptcy, it is in your best interest that you avoid costly mistakes that can hurt your prospects. Experienced legal guidance can make the entire process easier.