When your finances are ill, bankruptcy is powerful medicine. The federal bankruptcy law discharges many debts and can give you time to pay others. In most cases a bankruptcy debtor will not lose any property; in other cases a debtor may choose to “walk away” from a house or car debt and not owe anything.
Bankruptcy reorganizes both personal and business obligations and provides a fresh financial start. However, there is one situation when a person should avoid bankruptcy:
When you cannot be a completely honest debtor.
The bankruptcy process relies on the full and honest cooperation from the debtor. More than that, the law requires honesty. Dishonesty during bankruptcy is a federal crime punishable by a fine, or by up to five years in prison, or both.
Section 152 of Title 18 includes nine paragraphs which identify the following activities as criminal:
• the concealment of property belonging to the estate of a debtor;
• the making of false oaths or accounts in relation to any bankruptcy case;
• the making of a false declaration, certificate, verification or statement under penalty of perjury in relation to a bankruptcy case;
• the making of false claims against the estate of a debtor;
• the fraudulent receipt of property from a debtor;
• bribery and extortion in connection with a bankruptcy case;
• transfer or concealment of property in contemplation of a bankruptcy case;
• the concealment or destruction of documents relating to the property or affairs of a debtor; or
• the withholding of documents from the administrators of a bankruptcy case.
Each paragraph in section 152 constitutes a separate criminal act, the violation of which may be indicted and proved separately. All crimes listed in Section 152 require that the act be done “knowingly” and “fraudulently.” Consequently, an inadvertent error is not a crime. “Knowingly” means that the act was voluntary and intentional. The government does not have to show that the defendant knew that he or she was breaking the law. The term “fraudulently” means that the act was done with the intent to deceive, which may be proven by circumstantial evidence.
If you cannot or will not be completely honest during your bankruptcy, you should avoid filing. Dishonesty during bankruptcy will only make matters worse including denial or discharge and criminal charges.