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It's illegal to be dishonest during bankruptcy

You know that you're not supposed to be dishonest when declaring bankruptcy, but it's tempting. You don't want to lose certain assets. Wouldn't it be easy not to report that you own them in the first place?

What you should know is that you're not just breaking the rules by willfully concealing assets. You're breaking the law. Never do this under any circumstances.

For example, in 2017, the Internal Revenue Service (IRS) discovered that a man and his wife had committed bankruptcy fraud in 2013. They had used Chapter 7 bankruptcy, which means that assets were liquidated to pay off some of the debt. As part of the process, they needed to tell the IRS about all of the assets that they controlled, but they neglected to do so. Some of the assets that were left out were huge: Real estate, boats and a vehicle.

They had been involved in other things, including personal injury fraud and tax evasion, so the sentence was not entirely based on the bankruptcy fraud, but it's worth noting that the man wound up with four years in jail. After he gets out, he'll have to be supervised for three more years.

Again, there were multiple crimes there, so don't assume all fraud cases carry that type of sentence. However, make sure that you do understand the seriousness of following the proper procedures and being honest when declaring bankruptcy. Lying to the court isn't just bending the rules a little bit; it's illegal. Be sure you know what steps to take and how to provide all of the right information about your assets.

Source: IRS, "Examples of Bankruptcy Fraud Investigations - Fiscal Year 2017," accessed July 05, 2017

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