Bankruptcy can provide a fresh start for people struggling with debt, but it’s also a fertile ground for fraud and scams. Here is how bankruptcy fraud works and the tricks scammers use in Michigan.
What is bankruptcy fraud?
Bankruptcy fraud is among the leading white collar crimes in Michigan that involves filing false or misleading information with the bankruptcy court. People who commit bankruptcy fraud do so in an attempt to discharge their debts and get out of paying what they owe. Others may try to use the bankruptcy process to defraud creditors or hide assets from the court or as a way to avoid criminal charges for crimes such as embezzlement or tax evasion.
How bankruptcy fraud works
Hiding assets – This can be done in many ways, but the goal is always the same: to keep certain assets out of the reach of creditors. For example, someone might transfer ownership of a valuable piece of property to a relative before filing for bankruptcy. Or, they might open up a new bank account and funnel money into it before declaring bankruptcy.
Making false statements – Some people commit fraud by making false statements on their bankruptcy petition or other documents. For example, they can lie about their income, assets, or debts. Others can also mistake misrepresenting the nature of their debts, such as claiming that a debt is business-related when it is actually personal.
Filing multiple times – Serial filing occurs when someone files for bankruptcy numerous times to discharge their debts. In Michigan, you are only allowed to file for bankruptcy once every eight years. Serial filing is a serious offense because it abuses the bankruptcy system and prevents honest people from getting the relief they need.
Bankruptcy fraud is a serious offense in Michigan that can carry heavy penalties. If convicted, you could be fined up to $250,000 and sentenced to five years in prison. The best way to avoid these penalties is to make sure that you are honest and upfront with the bankruptcy court from the very beginning.