Chapter 7 Fraud

[cz3ch]

I've posted a few questions here so far, thanks for the responses. I had a question regarding fraud. My attorney was discussing the status of my case and if I opted for dismissal (this is stressing me out) that if the Trustee finds assets or suspects fraud I wouldn't get a dismissal. For one I'm staying in my case and pursuing it but as soon as I heard that word "fraud" it freaked me out.

I've been open and honest on all of my documentation and have disclosed all of my assets, income, and expenses correctly. My question is what construes fraud and how is it handled?

Being involved in a BK case is stressful enough without hearing the word, "fraud" thrown in to drive up the anxiety levels.

Can anyone help shed some light on fraud and how it works in the BK world?

Thanks in advance!

[daveinIL]

Fraud implies (and requires) knowingly and deceptively misstating your financial situation. If you have been honest and complete then you have nothing to worry about. If you genuinely did not report an account, or have miscalculated a number somewhere then you simply need to file an amendment to your paperwork.

Only you know if you have been honest (so far), and from the sounds of things, you are aware of the consequences.

[justbroke]

Additionally, fraud is refer to the U.S. Attorney's office for prosecution in the U.S. District Court. Fraud is serious and you would know if you committed fraud or not.

[malf1204]

I think we need a few more details. Why is your attorney suggesting fraud?

[justbroke]

I think that the "fraud" question is standard when a person seeks to have a Chapter 7 case "voluntarily" dismissed. The reason being that a Trustee can keep a Chapter 7 case open regardless and liquidate the estate, unless it makes no sense to do so. If there is fraud, it is usually due to hidden assets and the Trustee would want to administer the estate anyhow and not let the debtor "get away" with dismissing when they have been caught.

To summarize, any voluntary request to dismiss a Chapter 7 will generally be met with questions of "hidden" or late discovered assets or outright fraud. To me, they are mostly in the same category. Many people who want to dismiss their Chapter 7 do so because they discover that the asset they attempted to transfer (to a relative, friend or other) is a so-called "fraudulent" transfer and that the creditors would be better served to have the case liquidate the assets.

Unfortunately many people realize, too late, that a Chapter 7 isn't something that you could voluntarily stop such as you can in a Chapter 13. It requires the Trustee to examine the case and to determine what the real underlying reason is for the request to dismiss voluntarily.

The real question is... why are you wanting to voluntarily dismiss? Is it because you think your money in the bank won't be covered by an exemption, so you want to dismiss? This would be a real why a Trustee would NOT go along with dismissal and petition the court to allow the Trustee to liquidate the estate.

I'm not trying to frighten you, but your case "is what it is" upon filing. There are "technical" ways out from a Chapter 7 -- by letting it get dismissed for other reasons, but that's something you and your attorney would look at.

[cz3ch]

I think the fear of filing bankruptcy got the better of me which made me want to pull out. Plus upon looking at the numbers my lawyer submitted as expenses, while they were averages she bloated on a few numbers. She is going to make the corrections but it changes my means test and puts me in Chapter 13 now. I'm glad I caught that before the case went to hearing.

She's filing a motion tomorrow to convert it to 13 and explain that my expenses have changed since filing.

I just want to do the right thing. And any number that is not correct I want to correct to avoid it looking fraudulent. She's confident that making these changes and converting to a 13 won't be a problem. But in the back of my mind I'm freaking out that I'm going to jail for an expense being off by $50.00 or so.

I know in my heart what I'm reporting to be true and honest and have documentation to support it, I guess that's all I can ask for. The rest I have to put in the hands of my lawyer and trust that she does the right thing by me.

[Pjmax]

I know exactly how you feel. I have had one of the easiest, sure-thing C7s (looking for lot of wooden things to knock on), and I was so paranoid about wanting everything as accurate as possible. It sounds like you've done all you can to report everything to the best of your ability. Now the trick is to just . . . breathe, and take one day at a time.

[justbroke]

I would not worry about a slightly "bloated" expense. The type of fraud they are looking for is actual fraud such as hiding assets or not claiming income. It is actually your attorney's job to make sure the numbers are comfortable for you and that you have some wiggle room and the ability to actually build a "small" savings while in a Chapter 13. It is the Chapter 13 Standing Trustee's job to argue about your numbers and try to make your attorney adjust them downwards. It's just the nature of the process.

If you voluntarily convert to Chapter 13 because of your expense number, then that is normal. No need to panic.

[cz3ch]

I would not worry about a slightly "bloated" expense. The type of fraud they are looking for is actual fraud such as hiding assets or not claiming income. It is actually your attorney's job to make sure the numbers are comfortable for you and that you have some wiggle room and the ability to actually build a "small" savings while in a Chapter 13. It is the Chapter 13 Standing Trustee's job to argue about your numbers and try to make your attorney adjust them downwards. It's just the nature of the process.

If you voluntarily convert to Chapter 13 because of your expense number, then that is normal. No need to panic.

Ok, that helps to bring my anxiety down some. I didn't know the attorney's actions were typical. I wanted to be as accurate as possible. And in removing her "wiggle room" it put me into Chapter 13 which I am voluntarily converting to.

What makes me worried is I signed the documents that say under "penalty of perjury". Changing my expense numbers and resubmitting my case to me (note, I'm paranoid a bit) like perjury. I guess in my mind I just think that they saw the original numbers and now new numbers are being submitted, they may think it's fraud. Yes, that's how my mind works. Probably because this is my first dealing with anything legal in nature.

As far as my income and assets all of that is precise to the dollar. I guess I should be more concerned with that then with having to change my numbers, right?

[justbroke]

Yes, you are supposed to look at the petition and numbers before you sign and have it submitted. Usually you would ask your attorney why they made your food bill $700/month rather than the $500 you normally spend. They'll say that it's the allowance per the USTA guidelines and that they maxed it out. It would be the Trustee who then may question the number.

If you tightened your belt already to the point of starvation and you wanted to use the starvation number, that's not what the schedule should show. It should show your reasonable "looking forward" costs/expenses, with an emphasis on the "looking forward" part. A Chapter 13 should not be punitive. It's actually in the Chapter 13 Standing Trustee's best interest -- read "commission"/earnings -- to make sure you stay in plan and survive!

[cz3ch]

Yes, you are supposed to look at the petition and numbers before you sign and have it submitted. Usually you would ask your attorney why they made your food bill $700/month rather than the $500 you normally spend. They'll say that it's the allowance per the USTA guidelines and that they maxed it out. It would be the Trustee who then may question the number.

If you tightened your belt already to the point of starvation and you wanted to use the starvation number, that's not what the schedule should show. It should show your reasonable "looking forward" costs/expenses, with an emphasis on the "looking forward" part. A Chapter 13 should not be punitive. It's actually in the Chapter 13 Standing Trustee's best interest -- read "commission"/earnings -- to make sure you stay in plan and survive!

That's makes a lot of sense. Thanks for explaining. I guess my question is do I have anything to worry about now that my attorney is resubmitting my expenses and converting to a chapter 13?

I'm just paranoid about being in legal trouble for my expenses being bloated the first time around and now her having to resubmit.

She said she has contacted the trustee and let him know I'm converting to a chapter 13 due to a change in finances.

[justbroke]

Converting to a Chapter 13 when the expenses are "tight" (borderline) is entirely normal. Hopefully, your attorney comes out with a budget that not only works, but insures that you don't starve and that you can build a "small" savings for emergencies.

[cz3ch]

I was combing over my expenses and my bank statements and it appears we missed a $500.00 check that was made out to me as well. Can that be included in the amendment? Everything else income wise and asset wise is accounted for but I just found this. Now I'm worried.

[justbroke]

You will need to address that check with your attorney. Was it earned income or some gift? Again, just speak with your attorney... especially if it was a one-time event.

[cz3ch]

You will need to address that check with your attorney. Was it earned income or some gift? Again, just speak with your attorney... especially if it was a one-time event.

It was a one-time payment for a product I provided. I sent her all the information, however after all the questions I've had lately I'm pretty sure she is sick of hearing from me.