Times are tough. Small business owners find themselves taking on more and more debt in order to keep their companies afloat. Men and women who have built strong careers find themselves suddenly out of work due to corporate downsizing.
Getting loans and accumulating debt may seem to be a temporary solution until things turn around, but often, the “temporary” situation lasts longer than expected or is complicated by emergency debt for medical expenses, car repairs, home repairs, or other unexpected and necessary expenses. In these cases, the total debt becomes too much to pay, and an already shaky financial situation becomes overwhelming.
In these cases, federal law provides relief through bankruptcy. Bankruptcy, while not anyone’s first choice for handling financial problems, does provide a controlled way to resolve debt by liquidating assets to pay the debt or by reorganizing and restructuring the debt in a way that allows the debtor to repay over three to five years. Chapter 11 and Chapter 13 bankruptcies provide reorganization of debt. In general, Chapter 11 applies to businesses declaring bankruptcy, and Chapter 13 is for individuals.
A business may be restructured, and an individuals debts are reorganized in such a way that all or part of the debt is repaid within a specified frame of time. In a Chapter 7 bankruptcy, the debtor's assets are liquidated to pay the debt. There are certain assets which are generally exempt, but any assets that are not exempt may be sold to pay the debt.
Selling one's possessions can be extremely difficult, and because of this, the most common type of bankruptcy fraud occurs when a person conceals his or her assets. If the lender does not know about the assets, after all, he or she cannot take them away. Concealment of assets may occur through transfer of property or making false statements on bankruptcy forms. However, those attempting to salvage their assets by concealing them are only making matters worse for themselves.
Bankruptcy fraud is a federal crime that carries a maximum sentence of five years in prison. While concealment of assets is the most prevalent type of bankruptcy fraud, there are numerous other types of fraud and deception that are described as bankruptcy fraud under 18 U.S.C §152 and §157.
These include filing false or incomplete forms, making multiple filings in different states or with different information, bribing court-appointed trustees, and "petition mills" which prey on those facing eviction. Filing for bankruptcy can be a solution for those facing overwhelming debt; however, it is not an easy solution.
Hiring an attorney for your bankruptcy filing is a good way to make sure you avoid the errors that can leave you facing criminal charges. If you do find yourself accused of bankruptcy fraud, contact a white collar defense lawyer as soon as possible.