Bankruptcy Fraud and What You Need to Know

Greeves & Roethler, PLC

In the news, today, there is an article about a widow trying to preserve her $6 million judgment against a financial adviser who filed for bankruptcy protection. There is a cautionary tale to be told regarding using this case as an example for both creditors and for debtors, alike.

Even without looking at the docket, I can safely assume that the widow is alleging that her financial adviser committed actual fraud against her. This is one of several types of fraud that can be pressed against you when filing for bankruptcy.

Arizona State Statutory Fraud

Fraud, as defined by Arizona laws, certainly qualifies for denial of your discharge. This is where an individual makes a knowingly false or ignorant statement where another individual relies on that statement to their detriment. There are other elements, but this is enough to qualify as fraud under the bankruptcy code.  This is the type of fraud proven in a civil court.

If you are a debtor, you cannot discharge this debt.  However, if you are a creditor, you have to assert your rights to prevent your debt from being discharged.  This means that you need to actively protect your judgment against the bankruptcy debtor.

Bankruptcy Fraud

Then there are fraud allegations that arise only in the course of filing a bankruptcy. The most common of these, and also the least worrisome, are instances where a person purchases something on credit and then files bankruptcy on the creditor within a certain amount of time determined by the type of debt borrowed.

I say these are the least worrisome because, usually, there is no intent to defraud the creditors in this situation.  Normally, the result of this type of fraud is repaying the amount of the purchases back to the creditor after the bankruptcy filing.

The other types of bankruptcy fraud are based on intent. These are very problematic and involve lying to the trustee regarding your assets and income. The statement “I forgot” may work. However, forgetting your boat parked in your garage is much different than forgetting some books that you have.  This type of fraud may result in you ending up in jail or facing substantial fines.

Debtors — Tell Your Attorneys Your Whole Situation

The best thing to do is to tell your attorney all of your financial situation.  It is easier for us to deal with the problems prior to filing bankruptcy.  This prevents the trustee from having to do anything on your case.  It also allows you to go into the bankruptcy process fully educated and without any large surprises.

If you’d like more information about the case I highlighted earlier in this post, please follow clink on here.  If you have any questions regarding your bankruptcy situation as either a creditor or a debtor please give us a call or click here.

This post was written by Tempe and Phoenix bankruptcy lawyer Glenn Roethler.

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