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Bankruptcy May Be Your Option

Alleged false statements in Chapter 7 petition result in charges

During the process of initiating a petition for bankruptcy under Chapter 7 of the U.S. Bankruptcy Code, the debtor is required to file with the petition certain financial information, including a listing of expenses and income, and existing creditors and debts.

The bankruptcy trustee and the bankruptcy court need this information to properly assess questions, such as, whether the debtor qualifies for Chapter 7 or must file under a different chapter, as well as for an accurate accounting of the debts and creditors subject to possible discharge.

Because of the importance that the debtor’s financial information be accurate, and to discourage attempts to misuse the federal bankruptcy laws through fraudulent bankruptcy petitions, the debtor is required to submit his or her information under oath.

The recent indictment of an Oklahoma man for making false declarations in connection with apparently related indictments for wire fraud provide a reminder to anyone contemplating a business or personal bankruptcy of the need to be truthful when filing the required documentation.

The man had allegedly sold an oil rig to a company in another state, but the indictment claims that he never provided the rig, nor refunded the money that the customer paid. He is also accused of using the customer’s payment for his own personal use.

The false declaration charges stem from allegations that the accused had made false declarations when he petitioned for a Chapter 7 bankruptcy. He has been indicted for making two such false declarations under penalty of perjury; each count is a felony punishable by up to five years in prison and a fine of up to $250,000.

Going through a Chapter 7 bankruptcy has the salutary effect of allowing a debtor to get a fresh financial start when debts become impossible to manage. But the bankruptcy process is designed to create a fair result for all involved. Creditors may stand to lose money when the bankruptcy court discharges what they are owed, especially when those debts are discharged due to the debtor’s misconduct.

Accordingly, it is essential that the debtor provide accurate and truthful information to the bankruptcy court. As the case above indicates, the willful failure to provide such accurate information, if proven in a court of law, can carry significant criminal penalties.

Source: The Hennessey Clipper, “Matthews in indicted for wire fraud,” Sept. 10, 2014

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