The bankruptcy system is designed so that creditors receive an equal opportunity to receive a portion of the debtor's assets. However, there are some debtors who find a way to exploit the system to use it in a manner that it was not intended, which is considered a form of fraud. One of the most common forms of fraud is when you try to hide your assets and doing so can have a negative impact on your bankruptcy case and can lead to a criminal prosecution.
If there is evidence that you were trying to hide your assets, the trustee may choose to file a lawsuit known as an advisory proceeding. Your discharge could be revoked entirely. Also, if the property is discovered, the property can be recovered even if it is in the possession of someone else.
Sometimes, the asset is being depleted rapidly and an advisory proceeding is not rapid enough. For example, you may have hidden money that you are rapidly trying to spend. The courts can choose to file a temporary injunction that can halt the transfer of the assets. The trustee will simply need to demonstrate evidence that the asset is being depleted before the temporary injunction can be granted. If you have not filed for bankruptcy yet, you will need to wait at least two years before you file for bankruptcy to avoid being accused of bankruptcy fraud. You can sell your asset with the intention of using the profit to pay off creditors. However, if you sell the asset for less than what it is worth, this can also be considered fraud. It is best to leave your trustee responsible for selling your assets to pay off creditors.
Proving That You Accidentally Hid An Asset
If you have concealed assets, the next step for investigators is to determine if you knowingly concealed assets. For example, you might have failed to report assets that you simply forgot about. The most common assets to forget are those that you have not yet received. For instance, you might have lottery winnings that you have not yet received a payment for because the state paying for the earnings is insolvent. Also, if you co-own property and the property is in the possession of the other owner, you may forget that you also owned the property. If you can demonstrate that you did not knowingly conceal your assets, with the help of a bankruptcy attorney like Collins Toner & Rusen, you may be able to avoid prosecution.