Tag Archives: bankruptcy fraud

Top reasons for a Chapter 7 Bankruptcy dismissal

Recently on our bankruptcy forum a user asked, “I filed bankruptcy several months ago. I have heard horror stories about how some filers have their Chapter 7 bankruptcy cases dismissed. I am desperate and cannot have that happen. Can you tell me what I need to do to ensure that I do not face a Chapter 7 bankruptcy dismissal?”

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Preferential payments to creditors and Chapter 7 bankruptcy

Recently on our bankruptcy forum a user asked, “I am planning on filing Chapter 7 bankruptcy. I have recently come into a bit of money, and I would like to repay my father for a loan that he gave me. Is this allowed? What do I need to consider before I repay my dad? What are preferential payments?”

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Toni Braxton Rumors Fly on Possibly Facing Bankruptcy Fraud

Celebrity Toni Braxton is an American Rhythm and Blues singer, songwriter, record producer, actress, and philanthropist. She has won six Grammy Awards, seven American Music Awards, and five Billboard Music Awards in her career. Toni Braxton has sold over 60 million records worldwide, but despite her obvious financial success within various entertainment industries, she filed her second bankruptcy within four years on October 6, 2010, reporting over $50 million in debts. Now, she may be facing bankruptcy fraud. Continue reading

Can You Use Your Credit Card for Necessary Living Expenses Right Before You File Bankruptcy?

This personal bankruptcy question was posted on the internet in 2011 in a bankruptcy discussion: “Going to see an attorney on Monday. Meanwhile, there is not enough money to sustain everything and get into a rental home. Is it a bad thing to use the credit cards right now for gas, food, etc.? Would that be fraud since it’s so soon before filing?”

In 2005, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act. The idea was to help control perceived abuses like certain types of fraudulent acts made by filers.

Bankruptcy fraud is a crime. While difficult to generalize across legal entities, common criminal acts under bankruptcy laws typically involve concealment of assets, concealment or destruction of documents, conflicts of interest, fraudulent claims, false statements or declarations, and fee fixing. Falsifications on bankruptcy forms often constitute perjury.

Here are three important sections in the Bankruptcy Code dealing with fraud:

  • Section 547 basically states that a trustee can potentially confront any transfer of funds between a debtor and an insider, meaning a relative or close friend, if the transfer is related to a pre-existing debt and the payment occurred within twelve months of the bankruptcy filing. Preferential treatment, payments made within 90 days of the filing, might be confronted if perceived by the bankruptcy court to have been paid by the debtor to a creditor he or she favors.
  • Section 548 gives the trustee the power to confront any transfer of assets made in a fraudulent manner to anyone within the past 24 months before the bankruptcy filing. Here, intent comes into play in determining whether or not the act is fraudulent. Fraud is often hard to prove, but when there is proof, felony charges might be brought against the violator.
  • Section 727 of the Bankruptcy Code gives the Bankruptcy Court the legal authorization to deny a debtor a discharge in their bankruptcy case for certain fraudulent violations against creditors and the bankruptcy estate. To be denied the discharge, it must be proven the debtor transferred property within one year of the filing date with the intent of defrauding his or her creditors or the bankruptcy estate.

Can you use your credit card for necessary living expenses right before you file bankruptcy? Regardless of how honorable you might think your reason is for making such a transaction, if you think you are going to file bankruptcy while knowing the transaction may be discharged, the answer to the question is NO. The reason for this answer is because your intention is to use credit where you will be the beneficial recipient of the transaction knowing you will never legally have to pay the debt back.

The act of using your credit card in this manner can be viewed by the bankruptcy court as fraudulent. That is why many bankruptcy lawyers will advise you not to use your credit cards any once you decide to file.

If you live in or around the metropolitan area of Baton Rouge, Louisiana, contact us here today at www.bankruptcyhome.com . We will help you find a bankruptcy attorney in your area that will help you with any questions you may have on bankruptcy law.

 

What are Some Reasons a Creditor Might Object to a Bankruptcy Discharge?

At the close of a bankruptcy filing, all unsecured and non-exempt debts that were not satisfied by the bankruptcy process will be discharged. That means the debtor no longer has a legal obligation to pay the debts. The bankruptcy is over, finalized, and protection for the debtor is guaranteed by the terms of the bankruptcy discharge.

Creditors may, under some conditions, formally object to the possibility of a discharge of their debt. Most debtors filing for bankruptcy protection have very little assets or income. That is why they are bankrupt in the first place. Most Chapter 7 bankruptcy cases are “no-asset” cases, meaning the filer does not have any non-exempt property for the trustee to sell. So, why would a creditor object to a debt being discharged if the debtor has no assets and very little income?

There are a variety of reasons a creditor would object to discharge. Most of the time, an objection to discharge is usually related to the amount of money being discharged. Additionally, a creditor may object if they feel like you took advantage of your financial relationship. The more personal the relationship, it seems, the more chance a creditor might challenge the discharge.

If a creditor suspects you have run up a bill and filed bankruptcy to defraud them, they might be more likely to challenge a discharge. Congress passed the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act in response to those filers who appeared to be abusing the system. This allowed bankruptcy courts to look back over a time to see how filers had spent their money before they filed. A creditor suspecting they were taken advantage of by a filer who knew they were going to file bankruptcy before they ran up a credit bill can challenge a discharge based on this abuse.

Also, a creditor might challenge a discharge if they suspect fraud was committed to obtain the credit. Filing bankruptcy may allow an honest debtor to make a fresh start. The key word here is “honest.” Bankruptcy fraud, however, is a crime.

Because there are a variety of reasons a creditor might object to a discharge you may want to consult with a bankruptcy lawyer before you file for bankruptcy. He or she can help you understand how bankruptcy laws might apply in your particular situation.

 

Placing an Asset in a Revocable or Irrevocable Trust

Filing for bankruptcy is a legal proceeding designed to protect both creditor and debtor and to allow the honest person or business to work their way out of a bad financial situation, or in some cases, to completely start fresh. The key word here is “honest.” Bankruptcy fraud is a crime. While difficult to generalize across legal entities, common criminal acts under bankruptcy laws typically involve concealment of assets, concealment or destruction of documents, conflicts of interest, fraudulent claims, false statements or declarations, and fee fixing.

This personal bankruptcy question was posted on the internet in 2011 in a bankruptcy discussion: “If your home has no mortgage can you save it by placing it in a revocable or irrevocable trust prior to filing Chapter 7?”

Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 to deal with perceived abuse and fraud when filing for bankruptcy. The law included a minimum of a six month look back period for anyone filing a bankruptcy. That means a bankruptcy court has the right to look back during a certain time frame at how you spent money and moved assets prior to filing. On larger assets, like homes, the courts can go back even further in time if they expect fraudulent activity to deceive the court.

Placing an asset into a a revocable or an irrevocable trust to protect the asset from a bankruptcy might be a very poor idea. Doing so inside a few years before you file may certainly raise a red flag to the bankruptcy court. They may ask you to provide them with a reason why you acted in such a manner. At the very least, the action might be considered a bad-faith action on your part, and at the worse, it could be considered fraud.

A revocable or living trust is simply a type of trust that can be changed at any time. There is no advantage of placing an asset in one of these types of trust in order to protect the asset from creditors. The assets in such a trust are still considered your own personal assets for creditor and estate tax purposes. Creditors can still go after the assets in a living trust if you are sued.

An irrevocable trust creates a different problem. An irrevocable trust is a type of trust that, once signed, cannot be changed or once the trust maker dies, by design, cannot be changed. The greatest advantage of an irrevocable trust is that creditors cannot get to the assets because the trust maker, technically, no longer owns the property, the trust does.

Nevertheless, placing an asset in an irrevocable trust has a timely characteristic, from a bankruptcy court perspective. When and why you placed the asset into such protection may be of significance to a court that has the responsibility of protecting both the rights of the filer and the creditors.

Bankruptcy laws can be complicated, and common sense indicates you might need a bankruptcy lawyer in order to help you understand how these complex laws may apply in your particular situation.

If you live in or around the metropolitan area of Fresno, California, contact us here today at www.bankruptcyhome.com . We will help you find a bankruptcy attorney in your area that will help you with any questions you may have on bankruptcy law.

How Long do You Have to Wait Before Filing Bankruptcy Again?

These personal bankruptcy questions were posted on the internet in 2011 in a bankruptcy discussion: “I declared bankruptcy in 2004, how long do I have to wait to file another bankruptcy? Does it vary for Chapter 7 and Chapter 13?”

In 2005, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act to control the perceived abuses caused by serial bankruptcy filers. As part of those changes, an individual is limited by law on when they can file, but not on how many times they can file.

There are basically two types of bankruptcies most individuals can file: Chapter 7 or Chapter 13 Bankruptcy.

A debtor cannot obtain a discharge in a Chapter 7 Bankruptcy case if the debtor obtained a discharge in a Chapter 7 Bankruptcy case filed within the past 8 years, or a Chapter 13 Bankruptcy case filed within the past 6 years.

Chapter 13 Bankruptcy can be filed 4 years from a prior Chapter 7 Bankruptcy filing or 2 years from a prior Chapter 13 Bankruptcy filing. The time periods in either case are measured from the commencement dates of the respective cases. The dates of discharge have no bearing on the disqualification.

Congress has also recently made changes in the bankruptcy laws intended to reduce or eliminate the effect of the “bankruptcy stay” for serial filers.

The moment you file bankruptcy, a judge will order all collecting actions to cease through an automatic stay. The automatic stay, applicable to all types of bankruptcy filings, means that the mere request for bankruptcy protection automatically stops certain lawsuits, foreclosures, utility shut-offs, evictions, repossessions, garnishments, attachments, and debt collection harassment.

If you have had a bankruptcy dismissed in the previous year, the new changes in the laws now makes the automatic stay only good for 30 days, and the stay will not even come into existence if the filer has had two bankruptcies dismissed in the previous year.

Another change in the law includes being barred from filing a new case for 180 days when a case has been dismissed, if the dismissal is because you willfully failed to abide by an order of the court, to properly prosecute the case, or if it was at your request after a creditor requested relief from the automatic stay.

The laws also imply if you are found guilty of bankruptcy fraud, depending on the severity, you can be barred from filing bankruptcy for life.

If you need relief from the stress of debt and you live in or around the metropolitan area of Orlando, Florida, contact us at www.bankruptcyhome.com . We will help you find a bankruptcy attorney in your area who can answer your bankruptcy questions.

An Inheritance During a Bankruptcy

What happens when you receive an inheritance during the bankruptcy proceeding? The answer to the question depends on timing and the type of bankruptcy filed.

If you inherit within 180 days of when you file or within 180 days after you file, you must report the inheritance proceeds to the bankruptcy court trustee who is handling your case. It does not matter whether you will receive anything from the inheritance for months or even years, you must report the possibility to the trustee. The date of death may determine how the trustee will handle the proceeds.

In Chapter 7 Bankruptcy, the inheritance assets will got to the bankruptcy estate, and the bankruptcy court will decide how the assets are to be liquidated. After liquidation, the proceeds will be dispersed to you and your creditors according to the priority order established by bankruptcy law.

In Chapter 13 Bankruptcy, a monetary value will be placed on the inheritance to determine how much you will pay in your reorganization plan. In either case, the addition of the inheritance will be considered when evaluating possible payment to creditors.

If the inheritance is received after the 180 days from when you filed, depending on which type of bankruptcy you filed, the affect will be handled differently. If you have filed Chapter 7 Bankruptcy, once the 180 days is past, you can keep the full amount of the inheritance proceeds and not have to share them with your creditors. The trustee can have no claim to it.

If you have filed Chapter 13 Bankruptcy, the inheritance assets might still be considered property of the bankruptcy estate and change the amount you have to pay to the reorganization plan. The trustee might contend that good faith requires devoting any excess assets obtained to the plan. Depending on which plan is chosen by the court, a three year or five year plan, you will have to report the inheritance until the bankruptcy plan has been discharged.

Why were bankruptcy laws written to include the 180 day provision for the handling of inheritances? To discourage those who anticipate an inheritance from filing bankruptcy when they think death is imminent. Death is not easily predicted outside of six months.

There are suggested solutions for the problem of an inheritance happening during a bankruptcy. Some accountants and lawyers suggest using a “spendthrift” trust to protect heirlooms and the family’s wealth from creditors. Before attempting to protect family wealth, make sure you fully understand the consequences of such actions. If you create a “self-settled trust,” a type of spendthrift trust that allows you to be beneficiary as well as creator, this might be viewed as trying to defraud the creditors. Bankruptcy fraud is a serious crime. State laws also influence which trust you can use to protect your inheritance after filing bankruptcy. One poplular spendthrift trust is the Domestic Asset Protection Trust (DAPT).

The 2005 changes to the Bankruptcy Code created a 10-year limitation period for transfers to self-settled trusts which are meant to hinder, delay or defraud creditors. This means that transfers to DAPTs will be suspect for the 10 years prior to the date that a bankruptcy petition is filed.

Inheritance and bankruptcy laws are complicated. Contact a bankruptcy lawyer if you have received an inheritance and you are considering filing for bankruptcy protection. If you need relief from the stress of debt and you live in or around the metropolitan areas of Albuquerque or Santa Fe, New Mexico, contact us at www.BankruptcyHome.com . We will help you find a bankruptcy attorney in your area who will answer your bankruptcy questions.

Debtors Can be Defrauded Too

Bankruptcy fraud is a crime and can include concealment of assets, concealment or destruction of documents, conflicts of interest, fraudulent claims, false statements or declarations, and fee fixing. Falsification on bankruptcy forms often constitutes perjury.

The new bankruptcy laws, which are more generous to honest debtors, were never intended to allow criminals to defraud the bankruptcy system, but they also were not created to allow the creditor to defraud the debtor.

This news story was published on the First Coast News website on May 30, 2011. The article was written by Ken Amaro, First Coast News administrative staff.

“Pamela Lewis, from Jacksonville, Florida, after searching Craigslist, found a two-story house near Morse Avenue on the west side to rent. Her nightmare began last August when she rented the house, which was not actually authorized by the owner to be rented.

After making contact with the person she thought was the property owner, Lewis said a week later she signed a lease with James Loen to rent the property for $950 a month. She said Loen told her he was the landlord.

In September 2010, Lewis moved onto the property. But in May, eight months later, a man showed up at her front door, told her he was the owner, he didn’t know who she was, and she needed to move out.

“He gave me a 24-hour notice, stuck it on my door. The cops saw the notice and said it was illegal. He can’t do this; he typed it up and signed it,” said Lewis. Records at the property appraiser’s office identified the owner as Damien Compo.

“That’s who he said he was and he wants me out,” she said. Lewis said since this ordeal began the breakers from her A/C units are missing and there is damage to the window screen. After hiring a local attorney, Lewis found out the house was in foreclosure, but this month the foreclosure lawsuit was “dismissed without prejudice for failure to prosecute.”

Lewis said now that she knows she was scammed, she’s in the process of finding a new home, but said she can’t move as quickly as the property owner wants her to move.
“We are both victims,” said Lewis. Property owner Damien Compo said he was overseas and just returned to find someone in his home. “There was a property manager, but I lost touch. I will go to court; I want to do it the right way.”

Due to the increase in foreclosures, there has been an increase in similar scams. With increased financial pressures, unscrupulous people find more creative ways to take advantage of other people.

How do you keep this from happening to you? Check the property appraiser’s website to make sure you know who really owns the property. You can also search the clerk of courts website to see if the property is in foreclosure.

If you are the victim of a scam and you are facing a financial hardship, have you considered bankruptcy protection? Bankruptcy can stop a home foreclosure, bank account levies, wage garnishments and property repossessions.

If you need from the stress of debt and you live in or around the metropolitan area of Las Vegas, Nevada, contact us at www.BankruptcyHome.com . We will help you find a bankruptcy attorney in your area who will answer your bankruptcy questions.

One for the Books

I love to watch the World’s Dumbest Criminal videos where criminals are caught doing stupid things. I loved the one where the armed robber went to a convenience store and filled out an application for employment. When he was done, he pulled his weapon out and robbed the store. He hurriedly rushed out of the establishment, leaving his application with the management.

Yes, he had put all of his personal information on his application, and the police picked him. Not only did they have his name, they had his face on video.

Bankruptcy fraud stories amuse me too.

On May 24, 2011, the Chicago Tribune website reported:

Oak Park police have arrested a man who allegedly used fake bankruptcy documents to get out of $3,500 in parking tickets.

Late last year, according to the police, a vehicle was booted due to an excessive number of parking tickets. Between November and March, the owner of the vehicle submitted various bankruptcy documents in an effort to have the boot removed and to avoid paying the tickets.

In March, village employees began researching the documents and found there was no matching case number in the courts. Police then took over the investigation and found the bankruptcy documents to be fraudulent.

[The man], 42, of the 1000 block of North Taylor Street, Oak Park, was arrested Monday and is being charged with felony forgery. His vehicle has since been towed.”

I don’t know whether they have him on video, but trying to scam the city is foolish.

The key word here is “honest.” Bankruptcy fraud is a crime. Concealment of assets, concealment or destruction of documents, conflicts of interest, fraudulent claims, false statements or declarations, and fee fixing are all illegal. Falsifications on bankruptcy forms often constitute perjury.

New bankruptcy laws, which are more generous for debtors, were never intended to allow deadbeats and criminals to manipulate the system and “beat” their debts, or in this case, to help debtors avoid paying parking tickets.

Filing for bankruptcy protection is a serious financial decision. Bankruptcy laws have been designed to help honest debtors get back on their feet and help them be productive citizens.

If you are facing a financial crisis and need help, contact a bankruptcy lawyer. If you need relief from the stress of debt and you live in or around the metropolitan areas of Austin or San Marcos, Texas, contact us at www.BankruptcyHome.com . We will help you find a bankruptcy attorney in your area that will answer your bankruptcy questions.