Although it may seem like a straightforward difference, there are some circumstances in which a person may not be sure whether or not they are necessarily violating bankruptcy fraud laws. Specifically, this has become something of an issue with the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act, as this addition to the bankruptcy code has made intentionally filed bankruptcies significantly more difficult to achieve. However, there are a few definitive differences between what is known as strategic bankruptcy and what is fraudulent bankruptcy.
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Most simply, bankruptcy fraud can be defined if there are untruthful representations of a person's financial situation. Bankruptcy requires a debtor to allow the court to analyze their assets and debts by giving the court accurate numbers. If a debtor lies about the amount of property they own or even how much debt they are currently in, the court may pursue fraud charges. This includes modifying numbers to pass the means test for Chapter 7.
Bankruptcy may also become fraudulent if a person offers the court destroyed or compromised documents. There are several parts to a bankruptcy proceeding, each largely dependent upon proper record-keeping on the debtor's behalf. Intentionally destroying these documents outside of a natural disaster is considered fraud.
Fraud charges may be pressed against a debtor if that individual has lied to the court during the bankruptcy proceedings. A debtor may lie through forms and paperwork or may perjure themselves by lying while in a court proceeding.
There may be a difference between what some people call strategic bankruptcy and then what is widely considered bankruptcy fraud. To learn more about these differences, a bankruptcy attorney may be able to assist in differentiating what the court will pursue as fraudulent activity and what will be permitted.
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