Bankruptcy Fraud Prevention

Everyone has heard the old saying "An ounce of prevention is worth a pound of cure." Old sayings apply to some situations and not to others but this saying certainly applies to bankruptcy and to bankruptcy fraud. Nobody sets out making decisions with the intent of filing for bankruptcy and nobody who files for bankruptcy wants to end up being accused or prosecuted for bankruptcy fraud. Once the decision has been made to file for bankruptcy, there are some things you can do to help your bankruptcy go as smoothly as possible and to lesson the chance of any activities having the appearance of bankruptcy fraud. 1. Save and organize all paperwork. One file for every financial aspect of your finances with everything in the file in chronological order with the most recent on top. For files with specific documents that you think you may need to access, you can place #'s on all of the documents and list a table of contents on the inside of the folder. 2. Be able to justify any and all credit and purchases. After you have made the decision to file for bankruptcy, you should stop using your credit cards. If an emergency situation arises where you have to use a credit card, make sure you have some sort of "extra" justification for the purchase. An example would be tires for your car. If your tires are bald and you have to pay for a set of tires on your credit card, keep all of your paperwork and ask the tire technician to write on your paperwork the tred left on your tires. Keep this paperwork in your folder for this credit card. With this information available you would never be suspected of bankruptcy fraud. Worst case, this debt (not the entire balance on the card) would not be discharchable in your bankruptcy and you would have to pay this debt, post bankruptcy. 3. This is probably stating the obvious but don't do anything during your bankruptcy process that can even remotely be looked at as bankruptcy fraud. A normal chapter 7 bankruptcy is going to relieve the petitioner of tens of (if not hundreds) thousands of dollars in debt. Why risk having your bankruptcy case thrown out over trying to squeeze out every last dollar with fraudulent activity? Being debt free with a fresh start will be a life changing event. Don't mess it up by taking a chance committing fraud. There is nothing like going into your 341 meeting having all of your paperwork neat and organized and being able to answer any question and be able to justify any purchase. This along with not engaging in any activity that can be viewed as bankruptcy fraud will make your bankruptcy go as smooth as possible.

Bankruptcy Fraud Penalties

You may be concerned that you have committed bankruptcy fraud by omitting something or making an error on your bankruptcy paperwork. The main thing to realize when thinking about bankruptcy fraud is the word "intent". There is no need to worry about innocent bankruptcy form errors when filling out your paperwork. To be punishable as bankruptcy fraud, there is going to need to be the intent to defraud.

The penalties for committing bankruptcy fraud can be severe. For starters, your bankruptcy case is likely to be thrown out and you will continue to be liable for your debts. This alone, can be a huge penalty for a bankruptcy petitioner that could amount to tens of, if not hundreds, of thousands of dollars now not being allowed to be discharged. A potntial, huge, life changing mistake.

Bigger and clearly obvious cases of fraud are likely to be prosecuted further. Fines can range from small amounts all the way up to $250,000 and a sentance of up to 5 years in jail can be handed down. Jail sentances and fines are rare in the normal, run of the mill, consumer bankruptcy case.

So don't worry excessively about making an innocent mistake with your bankruptcy forms but worry enough to where you put adequate thought and care into filling them out and listing everything. Although you won't have your case thrown out for innocent mistakes you may have to redo large portions of youre paperwork, causing time delays in your case. This can also be costly when lawyers are involved.

So it is important to keep everything in perspective. Your bankruptcy is going to releive a huge, life changing amount of debt for you. Take it seriously and take your time to fill out the paperwork thoroughly and completely. Do it right the first time so you can relax later.

Credit Card Usage Before Bankruptcy

If you are considering bankruptcy and have used credit cards recently, you may be worried about being accused of fraud by a credit card company.

For starters let's look at what the Bankruptcy Code states:

[11 USC §523(a)(2)(C)(i)(I),

(I) consumer debts owed to one creditor and totalling more than $500 for luxury goods or services incurred by an individual debtor on or within 90 days before the order for relief under this title are presumed to be nondischargeable.
(II) cash advances totalling more than $750 that are extensions of consumer credit under an open end credit plan obtained by an individual debtor on or within 70 days before the order for relief under this title, are presumed to be nondischargeable.

The majority of us do not wake up one morning and decide "Oh I think I'll file bankruptcy today". The decison for most is made after a long drawn out process that usually takes place over many weeks, months and sometimes years. During this time frame credit cards are often used to bridge the monthly budget gap and moving money around from credit card to credit card by convenience checks and balance transfers(convenience checks as well as balance transfers are conisered cash advances).

Charges of fraud as it relates to purchases and cash advances by credit card companies are rare unless they are obviously fraudulent or unless they are for an amount that makes it worthwhile for the credit card company to initiate and carry through with a lawsuit.

If you have made some large purchases, transfers or advances recently and have now decided to file for bankruptcy, you may want to play it safe and:

1.Pay at least pay 2-3 minimum monthly payments. This will show to some degree that you intended to pay your bills when you made the purchase, transfer or advance.
2.If you have transferred a balance or used a convenience check to transfer a balance of more than $7,000 you probably will want to make at least 6 minumum payments and wait a year before you file.
It most likely is going to take something around the $7,000 range or more for it to be worthit for a credit card company to dispute a transaction(s) and claim bankruptcy fraud. Keep in mind, the credit card company can only dispute the portion of the total balance which it believes is fraudulent. If the judge rules in their favor only that transaction(s) will not be able to be discharged through bankruptcy.

If the credit card company decides to file a lawsuit it is called an Adversary proceeding. A judge hears the case and makes a ruling.

Keep in mind, you will be under oath at your 341 meeting and even if none of your creditors show up at the meeting, you still could be asked specific questions about specific credit card transactions by the Trustee. It is best to stop using credit cards immediately after you have made the decision to file for bankruptcy. This will alllow you to be 100% honest at your 341 meeting and avoid having your case delayed or thrown out due to bankruptcy fraud. Using credit cards with no intention of paying them off is by definition, fraud. It is best to look at the "total picture" of your bankruptcy and the fresh, debt free start it will provide. You have other things to focus on such as saving up to purchase a house or perhaps you'll need to rent after bankruptcy. So the advice here is to play it safe with your credit card usage. You will prevent a lot of stress during your bankruptcy and make it more likely your bankruptcy will be fully discharged on time without problems.

Debt Consolidation

There is no doubt that if you are carrying a burdensome amount of credit card debt you have heard about or perhaps even looked at debt consolidation.

In as few words as possible. Don't do it!

There are better ways to get out of debt without bringing a third party into the equation. What a debt consolidation company is going to do is this. They are going to negotiate settlements with all of your credit card companies and pay off the balances. Then you are going to make one payment to the debt consolidation company to pay them back for the amount they paid for you. Sounds good on the surface but on top of that, you are going to pay the debt consolidation company their fee for their service plus the interest rate they choose to charge you.

The bottom line is this. Everything that the debt consolidation does for you, you can do yourself and save yourself A TON of money.

Credit card companies are not going to settle an account for less than owed unless the creditor is behind on payments. Hence, your credit has taken a major hit already and there is nothing the debt consolidation company can do about this. After missing several payments, the credit card company is going to be just as willing to settle your account with you as they would with a debt consolidation company. Maybe even more so with you.

For the purpose of this article we are assuming that you are already behind on payments. Make a contact list of all of your creditors and start the process of making phone calls. Get your call routed to the appropriate department and start talking! You will be surprised at how willing the credit card companies are going to be to work with you. If you are able to negoiate a settlement for an overdue account, remember these 2 things.
1. Get everything in writing before you send any money and make sure the words "Settlement in Full" is in writing on the document.
2. Never give electronic access to any accounts. Make any and all settlement payments with cashier checks and keep copies of EVERYTHING in a safe place. You may need it at some point.

Obtaining settlements from credit card companies can be tedious, frustrating and time consuming. This is why many people opt for a debt consolidation company. Look at it this way. If it takes you 100 hours of work and you save $5,000, you have in a sense, just made $50 an hour for your part time work. Well worth it for most of us. So before debt consolidation and/or bankruptcy, look into settling your accounts on your own, you can always opt for the latter choices down the road if you think you must.

Bankruptcy Exemptions

It is important to know the Bankruptcy Exemptions for your particular state. Click on your state below to see what you are going to be able to keep and will have to give up in your bankruptcy.

by: Create a Clickable Map

Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware Florida Georgia

Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland

Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey

New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina

South Dakota Tennessee Texas Utah Vermont Virginia West Virginia Wisconsin Wyoming Washington

Bankruptcy Stress --- And De-Stress

Nothing like a good ole' fashioned personal bankruptcy to hike one's stress level about 20 notches. Bankruptcy has got to be on the short list of most unpleasant things to go through in life. Right up there with a root canal, public speaking and lunch with your mother in law. This site deals mostly with bankruptcy fraud, but bankruptcy fraud nonwithstanding, there are still plenty of other things about a bankruptcy to stress out about other than fraud. Here are a few, with some counter reasons not to stress out about them.

1. Bankruptcy is a public record - Sure bankruptcy is a public record and theoritcally, anyone can find out if you have filed for bankruptcy. You can monitor your bankruptcy on the Federal Government "Pacer" website. You can also look up others who have filed or gone through bankruptcy. This is the most likely place someone would look at to see that you filed bankruptcy. The silver lining here is that if someone is searching for you on this site, there is 99% chance that they are on the site because they are going through bankruptcy too.
2. The dreaded 341 meeting. There is another post on this website about the 341 meeting but build up to this event is very much overblown by bankruptcy petitioners. Unless you are hiding something and commiting some sort of bankruptcy fruad, this meeting is a mere formality. Your portion of the meeting will last about 5 minutes and you will be out the door with your clock ticking toward discharge.
3. Bankruptcy Fraud - Look at the overall big picture when going through bankruptcy. Don't risk any sort of credit card fraud or bankruptcy fraud. List everything and be open and up front about what you have and what you have done. it is much less stressful when you are confident you have played by the rules during your bankruptcy.
4. Out of debt - You are going to be debt free. If you are like most, you have struggled and struggled financially for a long period of time and agonized with the prospect of going through bankruptcy. De-stress yourself by thinking about your new debt free life you are going to be starting out.
5. Living situation - Maybe you included your house when you filed and you are going to have to rent after bankruptcy. Don't worry. At this point in time, most people who rent have some sort of ding in their credit. You will be able to accentuate the positive and stress your zero debt credit report as a plus in your ability to make a rent payment.
6. Be organized - Being completely organized with your bankruptcy schedule and paperwork will help reduce stress immensely. Keep a bankruptcy to do list and calendar. Keep all of your paperwork organized.

The process of bankruptcy can be long and arduous. Help yourself through it by doing these things and any others which may help in your particular situation.

Celebrity Bankruptcy Filings

Not necessarily any bankruptcy fraud involved, but here is a partial list of famous people who have filed for bankruptcy.

Toni Braxton,singer
Sonja Morgan (JP Morgan lineage)
Eva Longoria, actress
Lenny Dykstra, baseball player (charged with bankruptcy fraud)
Donald Trump, financier
Michael Jackson, singer
Wolfgang Amadeus Mozart, composer
Elton John, singer/composer
Kim Bassinger, actress
Mike Tyson, boxer
Mark Twain, humorist
Burt Reynolds, actor
Thomas Jefferson, patriot and president
Gary Coleman, child actor
MC Hammer, rap singer
Willie Nelson, country singer
Lorraine Bracco, “The Soprano’s” actress
Charles Goodyear, inventor of vulcanized rubber
PT Barnum, circus promoter
L. Frank Baum, author of “The Wonderful Wizard of Oz”
Mathew Brady, Civil War photographer
Oscar Wilde, playwright
Jerry Lee Lewis, rock singer
Rembrandt, painter
Henry Heinz, ketchup magnate
Milton Hershey, chocolate magnate
Henry Ford, auto magnate
Johnny Unitas, football player
Wayne Newton, entertainer
Mickey Rooney, actor
Debbie Reynolds, actress
John Connally, former Texas governor
Walt Disney, creator of Mickey Mouse
Mick Fleetwood, rock singer
Merle Haggard, country singer
Ulysses S. Grant, president and Civil War general
Dorothy Hamill, figure skater
Larry King, talk show host
Bowie Kuhn, former baseball commissioner
Stan Lee, comic book creator of “Spider Man”