Definition - What does Bankruptcy Fraud mean?
Bankruptcy fraud occurs when a person filing for bankruptcy fraudulently conceals assets or inflates their liabilities during bankruptcy proceedings. There are many types of bankruptcy fraud, but common to all these variants involves a fraudulent attempt on the part of the person filing for bankruptcy to present a financial picture that is not correct. In order to establish fraud in a bankruptcy court, it must be shown that the person intentionally presented inaccurate facts and knew full well that they were false at the time they were stated.
Justipedia explains Bankruptcy Fraud
The most popular type of bankruptcy fraud involves the concealment of assets in order to keep them from the liquidation process. Another fraudulent action in bankruptcy involves filing bankruptcy in multiple states in order to repeatedly receive allowances for personal withholdings in each case.
Bankruptcy fraud is a felony. It carries a hefty penalty of up to five years in jail and a fine of up to $250,000. The main purpose of trying to conceal assets by way of bankruptcy fraud is to abuse a Chapter 7 bankruptcy where all debts are forgiven.