Debtors who withhold information on purpose when filing for bankruptcy are filing a fraudulent bankruptcy.
People often withhold information when they file for bankruptcy. It may be due to the fact they are not sure about what they need to include in their filing, or they are keeping the information to themselves on purpose. Withholding information constitutes a fraudulent bankruptcy under the rules of the Bankruptcy Act of 2005, which means it is considered to be a federal offense. Additionally, the statute of limitations for bankruptcy fraud cases depends on what kind of concealment was involved.
When a debtor files for bankruptcy, they are responsible to provide all relevant information about their financial status, assets and spending habits. This type of information is used by the court to figure out your eligibility for bankruptcy, and once this material is filed, you get an immediate stay to halt all collection activities.
The most common types of bankruptcy fraud attempted are trying to conceal property or income. The debtor does not include information that is required by omitting income sources and/or jobs and does not list property in the petition. Property could include vehicles, homes, or jewelry. Other types of fraud that debtors have been known to try are receiving property from someone who is planning to file for bankruptcy relief and then not mentioning it during their bankruptcy hearing.
Officially, the statute of limitation for a fraudulent bankruptcy is five years. In other words, it is the median, but it is best to keep in mind that it does not go into effect until the bankruptcy case is discharged or denied. An example of this would be an individual filing for Chapter 13, with a five-year plan to repay all or a portion of their debts. If the bankruptcy was fraudulent, the federal court then has five years after the discharge, the end of the payment plan, to begin prosecuting the debtor. Put another way, the federal government had a total of ten years to build a bankruptcy fraud case against the debtor.
You should also be aware that after a discharge is granted, the bankruptcy court can move to revoke it. They would do that based on the determination that the discharge was approved as the result of the debtor hiding pertinent financial information from the scrutiny of the court. The creditor’s lawyer has one year to petition the court to revoke the discharge before a separate statute of limitations kicks in. As you can see, this is a very complex process.
If the debtor is found guilty of bankruptcy fraud before the statute of limitations expires, this is a felony offense, with a fine of up to $250,000 and five years in jail. On top of this possible consequence, other creditors have the option to take legal action once they are made aware the bankruptcy discharge was revoked or the case denied.