Bankruptcy Fraud

Sure this sounds like a cliché, but Bankruptcy fraud hurts everyone, and here’s how.

Firstly, the government must track down and prosecute those who have committed bankruptcy fraud. Guess where the governments get money to do this? That’s right, taxes. And who pays taxes. Right again. You!

Secondly. America is built on a foundation of investment. If you want to start a business, your creditors trust that you will do your best to make their investments pay off, so everyone makes money.

If somebody ends up stiffing their investors they are betraying the whole system. That same investors (who unlike most is willing to give someone else cash) will not only have less money to invest in the future but he or she is going to be shy, or at least conservative when thinking about investing again.

The most common form of bankruptcy fraud is concealing assets. In fact this is the case in some 70 per cent of bankruptcy fraud cases. This can sometimes be an honest mistake, but often it is a direct attempt to not pay back investors.

Often is the concealment of assets is on purpose, it happens like this. The business owner decides that he or she will soon file for bankruptcy. They then transfer large amounts of their assets to friends and family who are not affiliated with the business.

However, this tactic rarely works because, obviously, that’s exactly what bankruptcy investigators are looking for. It is also a risky proposition. By doing this you are asking loved ones to commit fraud which could land them in jail, or damage their permanent record.

It is also a risky proposition for the business owner, seeing as that person could simply walk away with those assets and the debtor would have no recourse. Seriously, what are they going to do, go to the police?

Other common ways people try to defraud the bankruptcy system is by filing for bankruptcy in multiple states.

Some people also file for bankruptcy under a false name using a stolen identity or a false Social Security number.

CPAFinder