Bankruptcy fraud is a white collar crime that has a rather far reaching definition. It encompasses some acts that individuals may unknowingly engage in prior to or during the bankruptcy process. Further, a finding that you intended to defraud creditors can also lead to the court electing not to discharge a debt.
The potential stakes of a bankruptcy fraud case can be illustrated by the tale of a Wichita, Kansas car dealer. Nazer Ali Haider, who owned a used car dealership in Wichita, was convicted of the federal crime of bankruptcy fraud. Haider gave money to relatives before filing and lied on his bankruptcy paperwork. Evidence produced at trial showed Haider provided money to both his wife and brother, than stated in his Chapter 7 filings that he did not make any transfers. He also charged over $125,000 on credit cards within a year of filing for items such as jewelry, airline tickets, and other goods. Haider faced up to five years in prison and a fine of up to $250,000 on each count.
Haider’s actions are not necessarily ones that an average citizen would know could lead to charges of bankruptcy fraud. To avoid ever ending up in a situation like Haider, it is imperative that all potential Chapter 7 filers understand the actions that constitute bankruptcy fraud so that they steer well clear of them.
If you are considering filing for Chapter 7 bankruptcy, it is best to avoid:
- Making big purchases—the bankruptcy court will look suspiciously at large purchases made in the days, months, or even years before filing. As Haider’s case shows, any sizable luxury purposes can demonstrate intent to defraud. Further, purchases made prior to bankruptcy can be seized by the trustee and sold. In the high profile case of Joe and Teresa Guidice from the Real Housewives of New Jersey, the Chapter 7 trustee seized over $60,000 worth of personal goods purchased before filing. These items were auctioned off to satisfy creditors, and the Guidice’s face several charges of bankruptcy fraud for these and other actions. Consult with a bankruptcy attorney early on and seek his or her advice before making any large purchases prior to filing.
- Paying back family members or friends—repayment of loans to family and friends prior to declaring bankruptcy generally raises a red flag. The bankruptcy court will prioritize which creditors get paid first, and the court may feel other creditors were not treated fairly if you repay friends and family before their preferred creditors. The bankruptcy trustee can actually sue individuals who received money from you in the pre-bankruptcy period. Accordingly, it is best not to discharge old debts to friends and family before filing for Chapter 7 absent a thorough consultation with your knowledgeable bankruptcy attorney.
- Transferring or giving away assets—perhaps the number one type of bankruptcy fraud, the transfer or donation of your assets can cost you greatly. Whether it be money, artwork, or household goods, you could be criminally liable for willfully disposing of assets so as to avoid paying back creditors. Further, the court may not allow discharge of a particular debt if the creditor can show you disposed of assets with the intent to defraud. If you have valuable items you do not wish to lose, an experienced bankruptcy attorney can examine your situation and determine if perhaps an exemption exists that will allow you to maintain the item.
Our law firm has assisted hundreds of clients in obtaining relief under Chapter 7. New Jersey Bankruptcy Lawyer Andrew Carroll’s clients receive the individualized attention necessary to achieve the greatest results. For legal services with unmatched professionalism and zeal, call New Jersey Bankruptcy Lawyer Andrew Carroll at (609) 400-4690.
