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Bankruptcy Fraud Does Not Pay

When necessary, filing for personal bankruptcy is an excellent way of getting a “fresh start” by discharging debts while keeping exempt assets.  The laws give Massachusetts residents ample exemptions, including the Massachusetts Homestead Exemption, while allowing folks to discharge most consumer debts and old taxes.

However, when you file a Chapter 7 Bankruptcy Petition and Schedules, you must be absolutely and totally honest in every detail you provide to the Bankruptcy Court.   In addition, when you have a Trustee Hearing, you must testify honestly and clarify any misunderstanding or item left out of your Petition and Schedules.

Bankruptcy False Statements Results in Criminal Conviction

In a recent Wisconsin case, Paul R. Graves pleaded guilty to making false statements in his Bankruptcy Petition and Schedules under oath in his May 12, 2010 Bankruptcy filing.  Mr. Graves, who owned a hardware store with his wife in Mauston, Wisconsin, owed more than $500,000 to creditors for the business.

Unfortunately, Mr. Graves undertook fraudulent bankruptcy planning.  He claimed to have disclaimed $800,000 in inherited assets; however, in reality his disclaimer was false.  In fact:  he owned a 25% interest in an island in Canada; his interest in a cabin on that island which his family had used since 1995; his wife’s life estate in a home in Jackson County, Wisconsin; his wife’s ownership interest in $200,000 in various bank accounts; his life estate interest in a home in Middleton, Wisconsin, which he claimed to have disclaimed in an inheritance, but had not; and, his ownership in a Mercedes ML350 SUV.

While neglecting to mention your old stamp collection with nominal value may be considered excusable neglect, neglecting the aforementioned assets, and in fact testifying under oath that those assets did not exist, is clearly a criminal matter.

Bankruptcy Planning

The irony of Mr. Graves’ criminal matter is that with proper bankruptcy planning, he may have still been able to save some assets and file bankruptcy to discharge his consumer and business debts.  It’s hard to be a back-seat bankruptcy planner, but assets in his wife’s name, that were not owned by him, may have been legitimate.  Denouncing an inheritance is valid; but it has to be a legitimate disclaimer.

Bankruptcy planning in Massachusetts can involve putting assets into your home and filing a proper Homestead Exemption.  Further, selling assets and putting cash into retirement accounts is another example of bankruptcy planning.  Again, it’s not clear what, if any, planning Mr. Graves undertook, but it’s clear that he committed fraud.

Hire An Experienced Massachusetts Bankruptcy Lawyer

First, don’t believe that researching on the internet will answer all of your questions.  If you have a complicated case, or are in need of bankruptcy planning, you should retain an experienced lawyer.  It could save you money.  It could keep you from a criminal prosecution.

Second, be sure that your bankruptcy petition and all schedules are absolutely 100% accurate and correct.  Even if you have a lawyer prepare the documents, it is you, the debtor, that is signing and that will have to testify, under oath, that the information on the documents is correct.  Check and double check.  If done correctly, your case should be approved with minimal questioning by the United States Trustee.

Attorney Neil Burns has been representing Chapter 7 debtors in bankruptcy for 30 years. Call him at 617-227-7423 for a free consultation today.

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