Bankruptcy is a legal process that allows businesses and individuals to exude or discharge their debts. However, some people try to abuse the bankruptcy system by committing bankruptcy fraud. Bankruptcy fraud can have serious consequences, including criminal charges and significant financial penalties.
Bankruptcy fraud can take many forms, but it typically involves concealing assets or income in order to avoid paying creditors or qualifying for bankruptcy relief. Some common examples of bankruptcy fraud include:
Bankruptcy fraud is a federal crime and is punishable by both fines and imprisonment. The penalties for bankruptcy fraud can vary depending on the severity of the offence, but they can include the following:
Bankruptcy fraud can result in fines of up to $250,000 for individuals and up to $500,000 for corporations.
Bankruptcy fraud can result in imprisonment for up to five years for individuals and up to 20 years for corporations.
Bankruptcy fraud can result in the requirement to pay restitution to the victims of the fraud.
In addition to these legal penalties, bankruptcy fraud can also have long-lasting consequences for the individual or business involved. Bankruptcy fraud can damage a person’s credit score, making it difficult to acquire credit in the future. It can also make it difficult to obtain employment or professional licenses.
To avoid bankruptcy fraud, it is important to be honest and transparent throughout the bankruptcy process. This includes disclosing all assets and income in bankruptcy filings, working with a bankruptcy attorney to ensure all filings are accurate and complete, and avoiding any attempts to hide assets or income from creditors.
Working with an experienced bankruptcy attorney can help ensure that all filings are accurate and complete and can help individuals and businesses navigate the bankruptcy process in a way that is legal and ethical.
A trustee is a person appointed by the state to put forward a person’s estate in the case of bankruptcy. The bankruptcy trustee evaluates and gives suggestions regarding the important steps that need to be taken during the bankruptcy proceedings in court.
Despite the suggestions that are made keeping in mind various debtors’ demands, the bankruptcy judge makes the final decision regarding the estate.
The responsibilities of a bankruptcy trustee are different based on different types of bankruptcy. In the case of chapter 13 bankruptcy, the owner sells some of their assets to pay their debts and keep the rest for themselves. In chapter 13, bankruptcy, the debts are not discharged because the owner offers to provide a repayment plan. Individuals mostly file it with a regular income who can restructure their obligations and pay their debts over time.
Regular does not only mean wages earned through a job. It can also include self-employed individuals or unincorporated business owners. It is the trustee’s responsibility to come up with a restructuring plan to help the debtor repay their debts timely.
In the case of chapter 11 bankruptcy, the owner aims to re-emerge from bankruptcy and try to continue their operations. This type of bankruptcy is mostly filed by business owners who want to help their business function again. Chapter 11 bankruptcy is one of the most expensive ways to deal with bankruptcy.
Reorganising your business can cost you a lot. It is necessary to do thorough research and evaluation before making a plan to reorganise your business. A trustee helps you devise a plan according to your current financial standing and advices on selling the business if there is no chance of reorganising.
In the case of chapter 7 bankruptcy, a trustee liquidates the owner’s assets and repays the debts and creditors by formulating a bankruptcy plan. After paying all the essential debts, the court discharges the remaining debts if the funds gathered from liquidation are exhausted. The trustee sells all the assets and transfers them to a trust. He then pays all the valid claims accordingly.
Bankruptcy may seem like losing all your essential assets, but it is not the same as bankruptcy. Although bankruptcy significantly affects your retirement plans, it does not mean that you will lose everything you have saved for your retirement. A retirement account or retirement fund is very different from other savings or investment accounts and can be saved for your future personal needs.
There are many ways you can deal with your retirement accounts when it comes to bankruptcy. In most cases, you can keep the retirement account separate from the whole procedure. In other cases, your savings are invested in insurance or held in trust.
The government usually protect your retirement fund, but if you take money from a retirement fund and place them in a different account, the rules applied to them will change. The money that you withdraw from the retirement account will be treated as income for your debts. Hence, it is advised to refrain from withdrawing money from your retirement fund until after your bankruptcy.
You can also use bankruptcy exemptions to save some of your property, funds, household belongings, and some basic necessities to live after retirement.
Although the funds in your retirement account are exempt from creditors, the benefits paid as income are not discharged. Under chapter 7 bankruptcy, the court cannot take your retirement benefits and pensions and consider them as income. However, the court can take some amount from your retirement benefits for your own support and pay off some portion to your creditors.
Under chapter 13 bankruptcy, the court decides the amount of money to be paid to your creditors monthly on the basis of the total amount of retirement benefits or pensions you are receiving. This is done only for the debts that you must repay under your repayment plan.
Keep in mind that general saving accounts, stock option plans, and investment accounts are not the same as retirement accounts and are not protected from the court. Court has the authority to utilise your unprotected accounts to pay your creditors and essential debts under your repayment plans.
Medical bills are one of the leading causes of bankruptcy. Many people file for bankruptcy due to medical bills, even if they have health insurance. The cost of healthcare in the US is very high and often leads to bankruptcy for many people. Medical expenses are usually discharged when a person files for bankruptcy.
Medical debts can be discharged when you file for bankruptcy. But it is considered better to file for bankruptcy as a last resort. Filing for bankruptcy due to medical debt can be avoided through alternatives like suggesting and negotiating a payment plan with your healthcare provider.
This is done to avoid the claim going to collections where you do not have freedom over your funds. When you file for bankruptcy, the trustee ensures that all the creditors are repaid as soon as possible. Discharge of medical debt mostly depends on the amount of debt and the type of bankruptcy you filed for.
Medical bills are considered to be unsecured nonpriority debts in bankruptcy and can be discharged easily. In the case of chapter 7 bankruptcy, the trustee sells all your assets to repay creditors. At the end of that process, the medical bill is usually discharged even if you didn’t raise any funds to pay the healthcare provider.
However, there are downsides to filing Chapter 7 bankruptcy because the trustee has the authority to sell your property. Losing property can lead to losing your home or other land you may own. Hence chapter 7 bankruptcy is only for those who are critically low on funds.
In the case of chapter 13 bankruptcy, you may have to repay medical bills over the course of time from your income. This helps build a good relationship with your healthcare provider because you are at least repaying some of the medical bills.
If you are only facing medical debt, filing for bankruptcy is not the best option for you. Alternatives for avoiding bankruptcy filing include debt management plans, consolidating your debt, raising money, negotiating with the health provider, etc.
Non-dischargeable debts are those which are not ruled out when you file for bankruptcy proceedings. Often when a person files bankruptcy in court, many debts are discharged, and the person is no longer obligated to pay those debts. However, some debts need the creditor to challenge your discharge during bankruptcy to make it completely non-dischargeable.
The process usually includes the court making the decision after listening to both parties, i.e., the person filing for bankruptcy and the creditor. If the court disagrees with the creditor, your debt can be discharged.
There are many conditions under which your debts are non-dischargeable after filing for bankruptcy. This includes debts due to fraudulent acts, debts from marital settlement or divorce decrees, debts from embezzlement, a breach of fiduciary responsibility, larceny, or debts from willful or malicious acts to another person.
Most of the non-dischargeable debts arise from acts of fraud or unlawful practices. Other types of non-dischargeable debts include payment owed for personal injury to a person by the debtor.
Moreover, creditors have the right to object to the discharge of debts. If the court agrees with the creditor, the debts become non-dischargeable. These include purchases of luxury items made by the debtor that were acquired within 90 days of filing for bankruptcy. However, the debtor can discharge these debts by assuring the court that they will repay the creditor and that the purchases were not luxury items.
Other situations in which the debts become non-dischargeable are when the debtor does not have proof or record of their finances and property settlements to show to the creditor. The court declares the debts incurred from creditors non-dischargeable when you cannot account for your missing assets due to a lack of records.
Furthermore, debts can also become non-dischargeable if you file for bankruptcy too often. You cannot get discharges on debts if you file for bankruptcy within eight years after you filed your first bankruptcy case. Your previous bankruptcy filing can serve as grounds for your latest debts to be discharged or not. This depends on the type of bankruptcy and the settlements of your last bankruptcy.
