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Bankruptcy Fraud -
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Debt Relief Laws Our bankruptcy debt relief laws are designed to help the poor but honest debtor in his time of need, and to return him to a productive life free of unpayable debt. The laws, however, are not meant as a haven for unscrupulous "scofflaws" operating in bad faith to cheat their legitimate creditors. The law is meant to provide a "fresh start", not a "head start". Accurate
Reporting of All Assets
In the normal Chapter
7 case, the petition and supporting schedules and statements usually
are a minimum of 55 pages. Multiplied by 1.4 million, the number of
bankruptcy cases filed in a Compliance with Transfer Laws For the bankruptcy system to function fairly and equitably, a debtor must obey bankruptcy law, as well as the law of his home state, concerning the transfer of assets prior to the bankruptcy filing. These transfers can be either to creditors or to third parties. The laws of the 50 states all have some form of "Fraudulent Transfer" law. These laws prohibit transfers by insolvent debtors which are made with the intent to hinder, delay or defraud creditors ("hard" fraudulent transfers") or which are made for less than reasonably equivalent value ("soft" fraudulent transfers"). The federal bankruptcy law, Section 544, gives the bankruptcy trustee the right to enforce these state laws to recover assets which were improperly transferred. Principle of Equitable Distribution The bankruptcy laws operate under the principle of equitable distribution of available assets. This means that similarly-situated creditors are to be treated the same. The creditors are to be paid a pro rata share from the available asset pool. This includes payments from assets on hand in the bankruptcy case, and also those assets which are recovered from third parties under the trustee's "avoiding powers". It is not fair to pay one creditor in full, and not pay anything to another creditor. Hiding Assets and Fraudulent Transfers
It is not uncommon for a person contemplating
a bankruptcy filing to not like the idea of having his nonexempt assets
sold to pay creditors. He may dispute some of the bills he owes, or
believe that he is a victim and should not be "punished"
by loss
A debtor may have assets over and above the exempt amounts.
This asset may be a vintage 1950 Cadillac aging in the garage, a stamp,
baseball card or coin collection, an antique watch, a valuable Cezanne
Impressionist painting, or a diamond ring. The debtor may decide to
simply not list the asset, especially if he does not think that any
of his creditors know about it, and it has never been listed on a
financial statement. Or, he may have an asset that he transfers to
someone else, like a friend or relative, to "hold" for him,
until he is done with the bankruptcy case. The person receiving the
asset will often pay little or no money to the debtor. When the debtor
files his bankruptcy case, he omits the asset from his Schedule of
Assets, and also fails to list the transfer of the asset on the Statement
of Financial Affairs. His hope is that it will not be discovered by
the bankruptcy trustee. When the case is over, the friend or relative
will give the property back to the debtor. The debtor will have successfully
manipulated the system, kept all of his assets and paid none of his
bills.
Written by Henry Rendler | ![]() | ![]() ![]() ![]() ![]() ![]() ![]() ![]() ![]() ![]() ![]() ![]() ![]() ![]() ![]() ![]() - Consequences - Criminal Fraud - Prosecution - Reporting Fraud ![]() ![]() ![]() - Asset Liquidation - Chapter 7 Discharge - Non-dischargeable - Repayment of Debts ![]() - The Debtor - Filing Chapter 9 - Jurisdictional Issues ![]() - Debtor in Possession - The Examiner - Reorganization/Debtor - Chapter 11 Trustee - Creditors Committee - Finances - Filing Lawsuits - Creditors' Rights - Dismissal/Conversion - Selling of Assets - Reorganization Plan - Plan Procedures - Plan Provisions - Claims - Common Plans - Payment of Interest - Chapter 11 Attorney ![]() - Qualifications - The Discharge ![]() - Advantages - Filing Chapter 13 - Meeting of Creditors - Filing Chapter 13 Plan - Creditors' Claims - Plan Confirmation - Order Confirming Plan - Appealing OCP - Modifying Plan - Defaulting - Discharge ![]() ![]() ![]() ![]() ![]() ![]() ![]() ![]() ![]() ![]() ![]() ![]() ![]() |