In many cases, there are individuals that will consider filing for bankruptcy in order to escape an imposing debt, even though there are not any financial problems in place that would necessitate such an action. Bankruptcy fraud can be generally defined as any kind fraudulent filing for bankruptcy in order to get rid of an existing debt.
Bankruptcy fraud can be said to occur in three general ways: concealing information of assets, filing multiple applications, and petition mills. All of these types of fraudulent bankruptcy situations are considered to be a Federal crime in the United States, which can carry fines as high as $250,000 and up to five years in prison.
The most common type of fraudulent bankruptcy is the concealment of assets. This simply entails not providing all of the information required during the filing process and failing to declare all of one’s assets. Oftentimes, this can also include simply transferring ownership to other people, such as family and friends, or moving the assets to accounts in off-shore locations.
Multiple filings for bankruptcy can be considered to be fraudulent in the case that the filings occur in more than one state. This oftentimes also involves the concealment of assets in order to avoid the liquidation of all assets. This fraudulent type of bankruptcy also includes multiple filings under different names.
A petition mill involves the commission of bankruptcy fraud by a third party and will usually not actually involve the debtor. A third party will file for bankruptcy under a given name for the purpose of some kind of gain. This situation is most common in poor neighborhoods. It usually takes place in eviction situations, where a fee is charged to fight eviction, and all of the financial information is taken and used to siphon money from these unsuspecting people’s accounts and then filing for bankruptcy under that person’s name.
