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Taking Advantage: Bankruptcy Fraud

Bankruptcy is a welcome but serious tool for consumers and businesses in need of structured debt-relief. When debt-relief tools such as consolidation or debt settlement are not enough to address debt or improve pay-down ability, filing Chapter 7 or Chapter 13 bankruptcy can be good options.

Relief from debt through bankruptcy is based on identification of all debt — and all assets — during the bankruptcy process. When statements regarding a bankruptcy are not truthful, consequences can result. The Federal Bureau of Investigation (FBI) reports common types of bankruptcy fraud include:

  • False statements or false bankruptcy documentation
  • Tax fraud
  • Use of false or multiple identities
  • Asset concealment

Bankruptcy fraud also takes the form of bustouts, debt undertaken by an individual or business with no intention to repay creditors. Different forms of bustouts include:

  • Credit card bustouts: Many debtors have credit card debt, but some maximize credit card debt purposefully. Assuming different or stolen identities, debtors file for bankruptcy several times under different names, concealing monies obtained through their fraudulent activities.
  • Retail bustout: Doing business for a short period of time, a merchant receives money from sales without paying rent or paying for merchandise sold. Creditor collection efforts are halted by the automatic stay during a liquidation bankruptcy. The intent of the fraud is the same as a credit card bustout — receiving money and services then turning to bankruptcy to discharge obligation to repay.

Bankruptcy fraud means higher credit costs for everyone. If you suspect fraud, report it. If you need experienced bankruptcy advice, contact us.

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