Chapter 7 Bankruptcy Fraud Laws

• Chapter 7 bankruptcy fraud is the act of using the federal bankruptcy system to avoid paying debts that a petitioner has the ability to repay. Bankruptcy fraud is a federal offense which anyone can report by contacting the United States Department of Justice. The Department of Justice is able to pursue fraud after a discharge is granted and can lead to the discharge being revoked. Understanding the Chapter 7 bankruptcy fraud laws can help individuals avoid unintentionally committing bankruptcy fraud.
  
  

Not Intending to Repay

• Obtaining debt without intending to repay it is part of the Chapter 7 bankruptcy fraud law. This includes applying for loans, credit cards, and other debts with the intention of filing for bankruptcy immediately after using the extended credit line. Luxury purchases in amounts exceeding $550 made three months prior to filing, and cash advances of $850 made 70 days prior to filing for bankruptcy are automatically excluded from bankruptcy petition filings.
  
  

Concealing Assets

• Information associated with assets owned by the bankruptcy petitioner must be provided to the bankruptcy court trustee. The court appointed Chapter 7 bankruptcy trustee is responsible for determining how the petitioners assets should be disposed of to ensure creditors receive any available proceeds. Transferring property to another individual or selling property secretly and hiding the proceeds are all part of the bankruptcy fraud law.
  
  

Hiding Lines of Credit

• The bankruptcy petition must include a complete list of creditors, not just the ones the petitioner wants to pay off. When filing for Chapter 7 bankruptcy, the petitioner must not agree to pay one creditor while refusing to pay another. This includes listing several credit cards on a bankruptcy petition while keeping a separate credit card and paying on it secretly to continue being able to use it.
  
  

Hearing Disclosure

• The bankruptcy petitioner must disclose all information related to his or her bankruptcy case and financial situation to the bankruptcy court. This includes telling the bankruptcy court about potential sources of income such as tax refunds, pending lawsuit settlements, and money owed from private parties or corporations. A court appointed bankruptcy trustee will ask the petitioner about possible sources of income during the bankruptcy hearing, giving the petitioner one last chance to disclose all information. Failing to give the court vital financial information while under oath is perjury and bankruptcy fraud.
  
  

Receiving Concealed Assets

• In addition to concealing assets, receiving assets that are being concealed from a Chapter 7 bankruptcy trustee is bankruptcy fraud. Receiving assets involved in a bankruptcy include having real estate, bank accounts, or personal property (jewelry, vehicles) transferred to your name. Receiving assets fraudulently can occur before, after, or during a bankruptcy proceeding.