Deciding to file bankruptcy for your business is never an easy decision. However, facing accusations of bankruptcy fraud compounds a difficult situation. It is crucial to understand the potential reason for the allegation against you.
If you omit any information about property or assets that you possess at the time of your bankruptcy filing, you may face charges of fraud. Submitting a false bankruptcy petition may have severe repercussions.
Why you need to report all assets
Accusations of hiding assets or property during a bankruptcy process are severe. During filing, you need to account for any property or assets that qualify for a bankruptcy discharge. Generally, the court liquidates these assets to pay for any outstanding debts.
What happens when you do not report all assets
Failure to disclose your assets may have much more severe consequences than just the court declining your bankruptcy discharge. You may face criminal charges that include up to five years in prison, three years of probation and a $250,000 fine.
What accusations you may face
There are several reasons why you may face accusations of hiding property. This may include not listing certain assets in your petition, listing lower values of assets or giving assets to someone else immediately before filing. For example, if you gave someone an expensive heirloom or transferred property, the prosecutor may allege that you did so to hide money from the court and creditors.
What your defense may be
The prosecutor needs to prove without reasonable doubt that you attempted to defraud the bank. However, if there is reason to believe that you were unaware of undisclosed assets or provided gifts without an intention to defraud, you may have a case for defense.
What you need to do to file safely
The most effective way to prevent facing bankruptcy fraud charges is to disclose all assets with complete transparency. You also need to ensure that you do not give any high-value gifts in the weeks preceding your bankruptcy filing.