Bankruptcy fraud is hardly a new concept. As long as bankruptcy has existed, people have taken advantage of the program. Most people simply weren’t aware of it happening.
Many people first started thinking about bankruptcy fraud when Abby Lee Miller, the star of Dance Moms, was convicted of it and served time in federal prison. The case alerted people to several truths about bankruptcy, including how easily the system could be corrupted and that it was a crime that didn’t just result in a slap on the wrist.
While there are many negative connotations connected to bankruptcy, for many people it’s a last, desperate attempt to climb out of a horrible financial situation and rebuild their lives. In some situations, it’s a chance at redemption.
The way California’s bankruptcy system works is that complete honesty and transparency are required. When you file for bankruptcy, you’re required to report all of your assets, your earnings, and your debt load. The problem many people run into is that the temptation to hide things proves too strong. If the court finds out, trouble ensues.
Things you can’t do when you’re declaring bankruptcy includes:
✦ Failing to mention property you own
✦ Concealing/destroying/falsify information that relates to your financial state, debt load, earning, assets
✦ Failing to produce financial records
✦ Failing to disclose cash payments
✦ Making false statements
✦ Failing to update the courts about a sudden change in your financial situation
✦ Transferring/concealing property
In the past, many people likely committed bankruptcy fraud and got away with it. It was easy to hide a second source of income or assets. Thanks to computers and the tendency people have to share every little detail of their lives on social media sites, more people are getting caught.
In the case of Abby Lee Miller, a judge caught an episode of Dance Moms and realized a few things didn’t add up. This prompted her to start digging into Abby Lee’s case and ultimately revealed that Abby Lee was failing to report significant amounts of money.
Other people have been caught posting pictures and comments of them enjoying vacation properties in other countries that they neglected to reveal to the court. All it takes is one person notifying the court of these pictures and a bankruptcy fraud investigation starts.
The ins and outs of bankruptcy court are found in 18 U.S.C. § 152. This is a federal offense and a felony. A guilty conviction will impact you for the rest of your life. If you’re convicted, you could face a full five years in federal prison and be fined up to $250,000.
All things considered, if you must declare bankruptcy, it’s in your best interest to be completely honest. If you do find you’ve genuinely forgotten to report something or you experience an unexpected financial windfall, contact the court and provide an immediate update.