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Criminal Consequences of Committing Fraud During Bankruptcy

Whenever someone decides that it is best for them to file for bankruptcy, they must submit financial statements to the bankruptcy court. The purpose of these statements is to determine the assets and liabilities of the filer, in hopes of coming to an acceptable conclusion for all parties involved. When a person filing for bankruptcy decides to intentionally withhold assets, or over-report liabilities, a court may not only deny a debtor’s bankruptcy request but may also recommend that criminal charges be filed against the filer.

barbed-wire-960247_960_720Most often, criminal charges are brought because a filer is not aware of the strict reporting requirements in a bankruptcy proceeding. While not all of these charges are likely to result in a conviction for fraud, the trouble of dealing with the case alone is punishment enough. It is very important to consult with a dedicated bankruptcy attorney prior to filing for bankruptcy to ensure that you are in compliance with all laws and regulations.

Man Charged with Fraud after Hiding Rental Income from Bankruptcy Court

Earlier this month, one man was arrested and charged with tax fraud and bankruptcy fraud after the U.S. Department of Justice looked into his financials during the pendency of his bankruptcy proceeding. At the time of his bankruptcy, he had accrued over $300,000 in back taxes and over $1 million in other outstanding debt.

According to one news report covering the man’s case, he was recently sentenced to two years’ incarceration after pleading guilty to the offenses. In addition, the court ordered him to pay over $400,000 in restitution.

Evidently, the man was first charged with hiding rental income while going through a bankruptcy. This resulted in the bankruptcy court putting a levy on his bank account. However, about two years after his initial bankruptcy filing, the man then opened another business and another bank account so that he could get around the court’s levy. This was a direct violation of the bankruptcy court’s orders. The U.S. Department of Justice found out what the man was doing and charged him with the crimes in a federal court.

Are You Considering Filing for Bankruptcy?

The discussion above was not meant to scare you. However, it is an accurate account of what can happen if someone is attempting to “pull one over” on the IRS or the bankruptcy court. It is incredibly important that you comply with all federal regulations while going through the bankruptcy process. Even an innocent mistake can result in long delays and the potential that your bankruptcy will not go as smoothly as you’d hoped. Filing for bankruptcy can be a fresh start for many Americans, and if properly filed it can provide new opportunities to those who previously felt overburdened. Call 866-366-3328 to set up a free consultation with a dedicated attorney to discuss your situation and to see if filing for bankruptcy may be right for you.

More Blog Posts:

Inherited IRA Retirement Accounts Not Exempt from Chapter 7 Bankruptcy, Kentucky Bankruptcy Lawyers Blog, published February 16, 2016.

U.S. Bankruptcy Judge Makes a Million-Dollar Ruling, Finding the Electronic “Currency” Bitcoin is Actually Property and not Currency, Kentucky Bankruptcy Lawyers Blog, published March 9, 2016.

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