Bankruptcy fraud is a serious offense that can lead to harsh consequences. In Michigan, as in other states, the line between honest mistakes and fraudulent actions can be thin. Understanding the pitfalls can help you avoid unintentional fraud and protect your financial future. Let’s explore some of the frequent missteps that might land you in hot water with bankruptcy courts and how to avoid them.
What are the most common bankruptcy fraud mistakes?
Bankruptcy fraud in Michigan often stems from errors or omissions that seem minor but carry serious repercussions. Awareness of these pitfalls can help you stay on the right side of the law.
- Failing to disclose all assets, which is perhaps the most frequent error: You must list all your property, including your bank accounts, vehicles, real estate and valuable collectibles.
- Transferring property before filing: Creditors may see that you are attempting to hide your assets if you give them away or sell them at less than fair market value.
- Lying on bankruptcy forms: Providing false information or omitting details on official documents directly violates bankruptcy laws.
- Using up your credit card before filing: The court will consider it fraud if you make large purchases or cash advances when you know you will file for bankruptcy soon.
Remember, under Michigan law, knowingly making false statements about bankruptcy proceedings is a felony punishable by up to 10 years in prison.
How can you avoid unintentional bankruptcy fraud?
You should not hide property from creditors. If you do this, you can be charged and sentenced to 2 years in prison. You can avoid this by:
- Keep detailed financial records: Track all your income, expenses, and assets accurately.
- Be transparent: Share everything, even if it might not matter. It’s better to share too much than too little.
- Avoid big financial moves before filing: Don’t make unusual transactions in the months before bankruptcy.
- Update your attorney: Tell your lawyer immediately if your financial situation changes during bankruptcy.
Bankruptcy law is hard to understand without guidance. It’s easy to misinterpret legal terms or miss essential details without experience in this complex area. An attorney can explain these matters, helping you avoid costly mistakes during this stressful time.