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Bankruptcy Abuse and Fraud Information
(In 2005), the United States Congress enacted and President
George W. Bush signed into law legislation that vastly changes the laws of
bankruptcy as they pertain to individuals. This law, The Bankruptcy Abuse
Prevention & Consumer Protection Act of 2005, will go into effect on October
17, 2005 and drastically change the historical American version of bankruptcy in
that creditors will be treated much more favorably than debtors. Some of the
more significant (and controversial) changes include:
* Making it more difficult for individuals to receive a Chapter 7 discharge. A
means test is to be imposed on would-be filers, one that is linked to whether
the debtor's earnings in the six-month period prior to filing were above or
below the median income for the debtor's state of residence.
* Making Chapter 13 far less attractive by, amongst other things, eliminating
its "super discharge," eliminating the ability of debtors to "cram down"
non-residential secured property (i.e., to disallow them from paying off the
real value of the secured property as secured while treating the excess value as
unsecured, by disallowing the reduction of interest charged on the debt to
reasonable values), by removing the credit for payments on retained secured
property from the calculation of disposable income, and by requiring that
debtors undergo counselling in order to file under Chapter 13.
* Requiring that debtor counsel conducts an investigation of their clients'
filings and be personally liable for them, a duty apparently unprecedented under
U.S. law. A similar requirement will likely force debtors desiring to reaffirm
to attend a court hearing and prove to the court that they can meet obligations
they wish to reaffirm (because few debtor's attorneys will wish to certify their
belief of their client's prospective ability to pay on a reaffirmed debt). Those
who cannot thus prove will be compelled to surrender the property.
* Limiting the homestead protection to $125,000 in equity and establishing a 40
month residency period before such protections are recognized in Bankruptcy.
The legislation, sponsored (introduced) by the chairman of the Finance
Committee, Republican Senator Chuck Grassley of Iowa, was supported by President
George W. Bush and opposed by many Democrats and the Green Party. Although the
original legislation was introduced during the Clinton Administration, and had
more bi-partisan Congressional support at the time, the president vetoed it
nonetheless. The bill languished for years due to disagreements in Congress as
to the level of the means test, and whether anti-abortion groups could use
bankruptcy to discharge fines levied against them by courts for actions that
resulted in property damage or injury such as bombing abortion clinics.
Bankruptcy Fraud
Bankruptcy fraud is the a business crime of filing for bankruptcy with criminal
intent, that is with the intention of evading payment for goods even though the
buyer has funds that could be used to pay for them, or accepting payment for
goods or services but not supplying them. Common types of bankruptcy fraud
include petition mills, false oath, concealment of assets, and fraudulent
conveyance. Multiple filings are not per se fraudulent; as with all things in
the law, it depends on the circumstances. Bankruptcy fraud should be
distinguished from strategic bankruptcy, which is not a criminal act (but may
prejudice a judge against the filer if there is evidence that bankruptcy is
being used strategically). In the United States, bankruptcy fraud is a federal
crime. Its provisions are found at Title 18 of the United States Code. It is
prosecuted by the United States Attorney, typically after a reference from the
United States Trustee, the Interim Trustee, or a bankruptcy judge. Bankruptcy
fraud can also sometimes lead to criminal prosecution in state courts, under the
charge of theft of the goods or services obtained by the debtor for which
payment, in whole or in part, was evaded by the fraudulent bankruptcy filing.
For more free legal information on Bankruptcy Laws, please use the
links below:
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