There are two types of Bankruptcy Fraud that can arise in either a Chapter 7 or Chapter 13 bankruptcy.  The first type of bankruptcy fraud is when charges are made on an account within 60-90 days of filing in a Chapter 7.  If a person charges over $1000 dollars within 90 days of filing, the court presumes  fraud because the Debtor incurred the debt just before filing a Chapter 7.  This presumption of fraud includes charging $750 within 90 days for luxury items or $500 for cash advances made within 60 days. 

The bankruptcy fraud penalty for making a debt so close to filing is that you may have to repay the amount charged.  Since a Chapter 13 pays back the debt anyway this may not be a penalty in a Chapter 13.  If you make such a charge in a Chapter 7 case you may wish to wait until this period passes so that the court does not automatically presume the debt was incurred by fraud.  However, the court also uses 12 other factors to determine fraud.

The second type of Chapter 7 or 13 bankruptcy fraud involves any transfer for less than fair market value for items valued at over $600 dollars.  These fraud "preferential transfers" include repossessions, garnishments and foreclosures, as well as, a gift from the debtor to friend or family members.  Whenever a garnishment, foreclosure or repossession happens it is a transfer of an asset without the creditor giving anything of value. 

It is important to disclose any asset transfer to the bankruptcy court and your attorney.  If you tell your bankruptcy attorney about any asset transfer he will be able to plan your bankruptcy so that you can recover and keep property.  Some persons may be tempted to hide assets or transfer them to family members.  However, the bankruptcy court can reach back up to one year to undo fraud transfers to family members and others if you were not paid full value for what the debtor gave away.   Hiding assets is a federal crime.

The Louisville Kentucky Bankruptcy Manual fully discusses bankruptcy fraud in Ky.   Download your free copy or view the PowerPoint presentations.

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