What is bankruptcy fraud and how do you avoid it?

On Behalf of | Jul 29, 2022 | Bankruptcy

Bankruptcy can be a life-defining undertaking. However, if you want a positive outcome, it is important that you know what to do, and what NOT to do before and while declaring bankruptcy. It is not uncommon for consumers to try to skirt the law when filing for bankruptcy.

One of the common ways consumers try to cheat the system is through bankruptcy fraud. However, it is important to understand that the courts do not take kindly to this. The consequences of committing bankruptcy fraud can range from the denial of your claim to criminal charges.

Understanding bankruptcy fraud

Bankruptcy fraud refers to any actions that the filer takes to gain an unfair advantage while declaring bankruptcy. While this type of fraud might take a variety of forms, the end game is always the same – avoiding transparency when dealing with the bankruptcy court and your creditors.

Here are some of the ways a filer can commit bankruptcy fraud:

  • Fraudulent disposal of property before and after filing bankruptcy
  • Knowingly making false entries or material omissions while submitting the claim
  • Destroying, concealing or mutilating important documents after declaring bankruptcy
  • Using fraudulent documents to obtain credit or something valuable

So how do you avoid bankruptcy fraud?

Avoiding bankruptcy fraud is as straightforward as committing to be honest from the onset, complying with Texas and federal bankruptcy laws and requirements and acknowledging that bankruptcy is meant to help you get a fresh start. You also need to understand to come to terms with the fact that you may have to give up certain valuable assets.

Additionally, it is also important that you are honest with your legal counsel even if this is going to put you in an embarrassing situation.

Declaring bankruptcy can be frightening for most people. Find out how you can avoid costly mistakes while filing for bankruptcy in Texas.