Bankruptcy Fraud

Basically the bankruptcy system has been designed for providing fresh start to the individual and business which are overwhelmed by the debts and are unable to make the creditors stay away from them. See (link to Chapter 7) and (link to chapter 13) which are two of the most commonly used bankruptcy petitions used.

• Once a person has filed bankruptcy he/she gets a pause for creditors running madly behind the debtors for payments. Though the individual gets time to reorganize himself, some people use bankruptcy in the wrong way to double there profits even though they can make up the payments, resulting into a bankruptcy fraud.
• Also intentional filing of bankruptcy with the aim of retention of ones assets can be categorized the same.
• A person filing a bankruptcy is supposed to make full disclosure of his property, income, and all forms of money transactions in order to sort out the way to pay back the creditors.
• Some people do some false documentation which is also a case of bankruptcy fraud.
• Some cases reveal that a person leaves town after bankruptcy has been filed and leaving all the creditors gasping for the perpetrator.

• Bustouts: In this case a company sets itself by buying merchandise from the creditors and sale the goods at lower cost and does not pay the suppliers.
• Bleedouts: Bleedouts are more or less similar to bustouts, whereas in this an insider from the company is responsible for exhaustion of the assets over a period of time.
• Ponzi schemes: Such schemes involves of making a pyramid of investors promising them high interests on a small investment. However as the pyramid grows it becomes unstable and the rest of the people remain unpaid even for what they invested.
• Rent/Equity Skimming: A perpetrator takes over some property and collects whatever are the proceedings without paying the mortgage. Later filing a bankruptcy for a stay on the foreclosure of his scheme.
• Bankruptcy Fraud by The Debtor: This fraud is the most common one. Used intentionally to transfer the assets from creditors and getting discharged from the debts.
• Collusive Involuntary Bankruptcy: This kind of fraud is done with the creditors and debtors in parallel. Generally used by the people responsible for the bleedouts and bustouts. In this type creditors file an involuntary case against the debtor.
• Straw buyer/Fictitious Bidder: A debtor sell his assets to the buyer approved by the court who resale's the assets at the same value to third party
• Serial Filers: Here the debtor files a number of cases to get a stay on foreclosure and a break from eviction. This includes the filer using different names and social security numbers.

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