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The Importance of Being Truthful When Filing Bankruptcy

Cumming Georgia Bankruptcy Attorneys - Importance of Being Truthful

When you file for a Chapter 7 or Chapter 13 bankruptcy, you must submit a two-page bankruptcy petition and several other bankruptcy forms and schedules in which you list all of your property, debts, income, expenses and financial transactions. You will also include the names of all creditors. It is essential that you provide such information honestly and truthfully. While it may be tempting to lower your income, or hide your property from creditors or the bankruptcy trustee, doing so will only lead to dismissal of your bankruptcy case or denial of your bankruptcy discharge, and you may even be subject to criminal penalties. Below describes in detail why it is important to complete your bankruptcy forms and disclose required information truthfully and accurately.

Dismissal of Your Cumming Georgia Bankruptcy Case

The court can dismiss your Chapter 7 case or convert your case to Chapter 13 with your consent. To qualify for Chapter 7 bankruptcy, your income (average income for the six month period prior to filing bankruptcy) must be lower than the state’s median, or your disposable income (your income minus national and local living expenses) must be low enough to pass the “Means Test.” If you have enough income or assets to make some repayments, you are not eligible to file for bankruptcy under Chapter 7. Where the court finds that the debtor can afford to repay its debts, it will not move forward the debtor’s Chapter 7 case and will either dismiss the case or give the debtor an option to convert to Chapter 13. So whether you deliberately or inadvertently failed to provide complete and accurate information, it is likely that you face one of the two scenarios: dismissal (under which you may either have to file for another bankruptcy or lose your chance to discharge your debts) and conversion to Chapter 13 (under which you will be legally obligated to repay the debts). It is therefore not worth important that you complete the bankruptcy petition and forms with accurate and truthful information.

You Can Be Barred From Filing Bankruptcy

Your bankruptcy case can be dismissed with prejudice and you will be barred from filing another bankruptcy or be prohibited from discharging any of the debts existed when you first filed for bankruptcy.  If your bankruptcy is dismissed by the court for procedural reasons such as failing to file the correct forms, to abide by deadlines, or to attend mandatory hearings, the dismissal will generally be “without prejudice.” It means that your case is dismissed without affecting your future rights to file bankruptcy. You will be able to immediately file another bankruptcy and discharge the same debts included in the first bankruptcy filing. However, if you commit bankruptcy fraud, your case may be dismissed “with prejudice.” You are committing bankruptcy fraud if you fail to disclose all of your assets and income, conceal a property transfer that occurred before filing your bankruptcy, create a false document, or destroy or withhold documents. A dismissal with prejudice can lead to either barring you from filing another bankruptcy for a certain period of time, 11 U.S.C. 109(g), or forever prohibiting you from discharging any debts that could have been discharged in the dismissed bankruptcy. Depending on how serious your misconduct was, the judge can preclude you from filing another bankruptcy for 180 days or more.

The Court Can Undo Previous Transfers of Assets

The bankruptcy trustee of the case can avoid certain transfers and distribute the money or property among the creditors. The bankruptcy trustee can avoid any fraudulent transfers made by the debtor within one year prior to the date of bankruptcy filing (Avoidance Powers) 11 U.S.C. § 548. A transfer made with “the actual intent to hinder, delay or defraud” is a fraudulent transfer. Signs of fraud (also referred to as “Badges of Fraud”) include: becoming insolvent because of the transfer; lack or inadequacy of consideration; general chronology of events (whether the transfer was made while the suit is pending); retention of possession by the debtor although the title transferred to another; or transfer to family member or related business entity. If a transfer is deemed fraudulent, the trustee may recover the property and make it part of the bankruptcy estate. Thus, it may be pointless for you to hide your property by conveying it to one of your family members because the bankruptcy trustee has the power to revoke that transfer.

Your Bankruptcy Discharge Can Be Revoked

The court can deny your Chapter 7 discharge or revoke the discharge even after entering discharge upon request of the creditor, bankruptcy trustee, or the United States Trustee. In Chapter 7 cases, the debtor does not have an absolute right to a discharge. An objection to the discharge may be filed by a creditor, the bankruptcy trustee, or the US Trustee. 11 U.S.C. § 727(c)(1). The court may deny a Chapter 7 discharge for the reasons including: transfer or concealment of property with intent to hinder, delay, or defraud creditors; destruction or concealment of books or records; failure to provide requested tax documents; perjury and other fraudulent acts; failure to account for the loss of assets. 11 U.S.C. § 727(a).

The court can also revoke a discharge under certain circumstances. A creditor, bankruptcy trustee, or US Trustee may request that the court revoke the discharge in a Chapter 7 case where the discharge was obtained through fraudulent acts, or the debtor acquired property but failed to report acquiring the property or to deliver the property to the trustee. 11 U.S.C. § 727(d). The request to revoke the discharge must be filed within one year after such discharge was granted. Also in a Chapter 13 case, if the debtor obtained confirmation of a repayment plan or the discharge through fraud, the court can revoke the order of confirmation or discharge.

You Can Be Charged With a Felony

Although relatively rare, you can be charged with perjury (felony under federal law) and be subject to fines and prison terms up to five years. All of the bankruptcy documents must be signed under “penalty of perjury.” By signing under penalty of perjury, you swear under oath that the information contained in the document is true and accurate. You are committing perjury in bankruptcy cases if you failed to list all your property, income, expenses, and creditors and knew that at the time of signing. Also, if you lie or omitted information in a meeting of creditors (i.e., the 341 hearing), you will likely be subject to criminal penalties for perjury because you are under oath during the meeting. If you are convicted of committing perjury in connection with your bankruptcy case, you can go to federal prison for up to five years for each count (11 U.S.C. § 152) and be fined up to $250,000 (11 U.S.C. § 3571). In addition, if your perjury caused harm to another, you can be ordered to pay restitution.

One of the main reasons for filing bankruptcy is to get rid of your unpaid debts. You may be inclined to lower your income or hide your assets believing that doing so will increase your chance of removing all of the debts or at least decrease the burden from the debts. However, it is not only pointless to do so but also highly risky because you may end up blowing your chance of discharging your debts and even face criminal charges subject to fines or imprisonment.

Use an Experienced Bankruptcy Attorney.

Using an experienced bankruptcy attorney can help you avoid many of the problem discussed above. Many otherwise honest people may succumb to a temptation to omit or otherwise misrepresent information on their bankruptcy petition due to fear they may lose assets or their case will not be discharged. In addition, many other people will not include required disclosures and information just because they do not fully understand the significance of the questions asked on the bankruptcy petition. However, an experienced bankruptcy attorney can help most people avoid bad consequence and avoid these mistakes from the very beginning when utilized by a person fling bankruptcy. An experienced bankruptcy attorney will ask the right questions and guide you in filling out the forms, helping you and advising you so you can avoid many of the mistakes and consequences discussed above.

If you are facing a personal or business bankruptcy in the Cumming Georgia or surrounding area, call us at 770-609-1247 to discuss your case with one of our experienced bankruptcy attorneys.  Contact information for consultations. >>

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