Consequences of Attempts to Defraud -

     There are several adverse consequences faced by a debtor attempting to commit fraud in connection with his bankruptcy case. 

Recovery of Assets by the Trustee

     If the debtor made a fraudulent transfer of an asset, and the trustee discovers it, the trustee can sue to set aside the transfer and recover it for the benefit of the bankruptcy estate, under Section 548 of the Bankruptcy Code. Thus, the trustee can get back the car, painting, watch, or coin collection from the friend or relative to whom it was fraudulently transferred, or its value in money. If the debtor omitted an asset from his schedules of assets, and the trustee finds out about it, the court can compel turnover of the asset to the trustee. The debtor can be further penalized by the Court disallowing any exemption in the asset which the debtor may otherwise have been entitled to, under Section 522 of the Bankruptcy Code.

Denial of Discharge Under Section 727

     If a debtor transferred the asset within one year prior to the bankruptcy filing, with the intent to hinder, delay and defraud his creditors, it is a ground for denial of his discharge under Section 727 of the Bankruptcy Code. If the debtor omits an asset or fails to report the pre-bankruptcy transfer of an asset, this can lead to denial of his discharge under Section 727 of the Bankruptcy Code for making a "false oath or account". This means that he will have filed his bankruptcy for naught. He will still be liable to his creditors, and will be out the money he paid for the bankruptcy court filing fee and attorney's fees.

Written by Henry Rendler