How Can Creditors Show That Debtors Have Committed Bankruptcy Fraud?

 Posted on September 30, 2022 in Bankruptcy

It is estimated that bankruptcy fraud costs creditors billions of dollars each year. Bankruptcy fraud is a serious offense that can come with harsh penalties. However, creditors may be less worried about the laws that debtors have violated than about the losses they experience due to these actions. It is important for creditors to be able to identify instances of bankruptcy fraud so that they can take appropriate legal action. In some cases, creditors may be able to request that a bankruptcy case be dismissed, or they may be able to have the automatic stay lifted so that they will be able to proceed with the collection of debts.

Forms of Bankruptcy Fraud That Creditors May Address

Creditors may be able to show that debtors have committed bankruptcy fraud in one or more of the following ways:

• Material misstatements on bankruptcy petitions or schedules - If a debtor provides incorrect information on the forms submitted when they file for bankruptcy—such as listing false information about their assets or income—creditors may be able to show that the debtor committed bankruptcy fraud. To do this, creditors will need to obtain copies of the debtor's original bankruptcy petition and schedules as well as any amended versions of these documents. Creditors should then review these documents closely to look for any discrepancies between what was originally stated and what is true.
• Destruction, concealment, or falsification of records - If a debtor takes illegal actions related to the records in their bankruptcy case—such as financial records or asset records—creditors may be able to show that the debtor committed bankruptcy fraud. To do this, creditors will need to obtain copies of all records related to the debtor's bankruptcy case, both before and after the filing date. Creditors should then review these records closely to look for any evidence of destruction, concealment, or falsification.
• Transfer, sale, or concealment of property within one year before filing for bankruptcy - If a debtor disposes of property prior to filing for bankruptcy—such as by transferring ownership of a car or selling jewelry—creditors may be able to show that the debtor committed bankruptcy fraud. To do this, creditors will need to obtain copies of all documents related to the transfer or sale of property within one year before the filing date. Creditors should then review these documents closely to look for any evidence of fraudulent activity.
• Untruthfulness under oath during bankruptcy proceedings - If a debtor lies under oath during their bankruptcy case—for example, by making false statements to the bankruptcy trustee—creditors may be able to show that the debtor committed perjury and therefore committed bankruptcy fraud. To do this, creditors will need to obtain transcripts or recordings of all statements made by the debtor during their deposition or hearing. Creditors should then review these statements closely to look for any evidence of untruthfulness.

Contact Our Cook County Creditors' Rights Lawyers

Creditors should be on the lookout for signs of bankruptcy fraud so that they can take appropriate legal action. If you suspect that a debtor has committed bankruptcy fraud, you should consult with an attorney to discuss your legal options. At Dimand Walinski Law Offices, P.C., our Chicago bankruptcy defense attorneys can provide you with representation during bankruptcy cases, assist with debt collection, and help you minimize your losses. Call 312-704-0771 to set up a consultation today.

Sources:

https://www.law.cornell.edu/wex/bankruptcy_fraud

https://www.journalofaccountancy.com/issues/2020/oct/fraud-red-flags-during-bankruptcy-process.html

https://www.fbi.gov/news/stories/bankruptcy-fraud