It cannot be denied that there are a lot of negative financial consequences of filing for bankruptcy. The bankruptcy will be on your record for many years, you may not be able to get loans or other credit during that time, and it may even mean that you cannot do any large financial trading for a while. But a bankruptcy will still mean that your debts will be paid for you. This simple fact has led many people to finding ways at committing bankruptcy fraud. This increase in fraud has led to an increase in security and suspicion by government officials. Hopefully this government crackdown will lead to more people being able to be helped and more fraudsters being turned away.
There are several ways that bankruptcy fraud can be committed and some of them are very difficult to detect. One of the most common methods of fraud is when someone files for bankruptcy without really needing to file. This means that they have to hide most of their assets by either simply not disclosing them to the court or giving them away to others for the duration of the bankruptcy filing. Through these methods the property they do disclose is sold and used to pay their debts, then they collect the rest of their property and have the added benefit of not being in debt anymore. If someone hides enough assets even though they will have credit trouble because of the bankruptcy, they will still get by with the assets they managed to hide until the mark on their credit disappears. While this is not the only method that fraudsters use to commit fraud through bankruptcy but it is probably the easiest and most commonly used.
The biggest problem with bankruptcy fraud is that it ends up hurting people who legitimately have no other option than to file for bankruptcy. Those using the bankruptcy system fraudulently means using resources and tying up the court system instead of the people that really need that time. This hurts the entire process and isn’t fair to those who need the bankruptcy or to the creditors who only going to get part of the money they are owed. The rampant cases of fraud also cause the court system to look at everyone with more suspicion, which can only add to the embarrassment associated with a legitimate bankruptcy filing. With any luck the recent government crackdown on bankruptcy fraud will ensure that those who are caught will be punished and make the fraud not as easy to get away with.