Defending Against Bankruptcy Fraud

Protecting Yourself From Bankruptcy Fraud Charges

One of the scariest things that can happen to a debtor is to face charges of bankruptcy fraud.  Bankruptcy fraud is a serious offense and can carry a prison term of five years plus a hefty fine.  So how does a debtor protect himself/herself from charges of bankruptcy fraud?

Keep Records

Keep very good records of your income and expenses.  This is especially important for self-employed individuals who may receive cash payments.  Inconsistent financial records can send up a red flag during bankruptcy and may cause the bankruptcy trustee and/or creditors to believe that the debtor is hiding something.

Audit Your Expenditures

If you have “missing” money, that can’t be accounted for, you may want to dig through your records for evidence of how that money was spent.  Bankruptcy trustees want to know where your money went, especially if you have large sums missing and if that money can’t be accounted for you may be accused of bankruptcy fraud if the court suspects you illegally transferred the cash.  Debtors often spend large sums of cash if they are supporting a child who does not live with them or making alimony payments to a former spouse.  The wise move is to make those payments with some type of paper trail.  Use a check or money order when making child support or alimony payments.

Give References

Be prepared to offer reliable character references who can give an account of your financial issues.  When debtors are accused of bankruptcy fraud, it is because the court believes that the debtor is not really in need of bankruptcy and may simply be trying to avoid their debts. By providing witnesses who can testify on your behalf you will have a stronger defense against bankruptcy fraud charges.