Hate to be the Grinch, but

Posted by Kevin on December 14, 2010 under Bankruptcy Blog | Be the First to Comment

Sometimes, I get prospective clients who meet with me to discuss a bankruptcy filing.  During the course of our conversation, they mention a debt to a friend  or a property outside the United States that they do not want to list.  Unless I can convince them not to do this, those “prospective clients” never become clients.

I point out that the Bankruptcy Code is set up to give honest creditors a fresh start.  Focus on “honest”.  That means that you honestly disclose all your assets and liabilities, and all your income and expenses.  The debtor actually signs a declaration under the penalty of perjury that the information contained in the Petition is true and complete.

Usually this Civics class approach (do they call it “Civics” anymore?) works and the client flies right.  But some still push.  Well, if being a good citizen is not enough for you, think of the consequences.  You can go to jail.

Every year at the New Jersey Bankruptcy Bench (Judges) Bar (Lawyers) Conference, the United States Trustee reviews the previous year.  Invariably, the trustee will point out the people that he or she put in jail the past year for bankruptcy fraud.

So what happens is that if you get caught in a lie.  The best that can happen is that your discharge is denied.  Then you spent a few thousand dollars for nothing.  However, the trustee may refer the matter to the Justice Department.  Then, you get to deal with FBI agents and investigators from the US Attorneys Office.  You get to borrow a large sum of money from family members to pay a criminal attorney (or get a public defender).    Then it gets worse.

And the consequences?  How about this.  A woman in Vermont filed a Chapter 13 in November, 2007.  She failed to disclose that she owned an interest in a $150,000 house and a bank account.  She was sentenced to 3 months in prison and 3 months house arrest.  A Georgia man was sentenced to 16 years and 2 months  in prison.  He was involved in multiple frauds involving mortgages, and filed bankruptcies using false names and stolen Social Security cards.

If you are contemplating bankruptcy, you are in enough trouble.  Don’t compound it by doing something stupid.