Although America rid itself of debtors’ prisons long ago, there are still stiff penalties for intentionally providing false or misleading financial information to the bankruptcy court. Debtors can be sentenced to up to 5 years in jail and fined up to $250,000 for providing false or misleading financial information to the bankruptcy court.
For example, if you file Chapter 13 bankruptcy and fail to disclose that you earn an additional $300 a month this would obviously cause your monthly repayment plan to be lower. But this “little white lie” could possibly send you to jail. Even if financial lies are “discovered” after your bankruptcy case has been discharged you could still face criminal prosecution for lying to the bankruptcy court. It is important that you disclose all financial information to your bankruptcy attorney, including cash income, property/asset transfers, real estate and other assets and income no matter how insignificant they may appear. If you are in the middle of a bankruptcy and “discover” that you have more assets, notify your bankruptcy attorney immediately. Saving a few dollars in bankruptcy is not worth spending 5 years in jail. Many debtors have already been successfully prosecuted for lying about their financial assets during bankruptcy, don’t become one of them.