Future Income and Bankruptcy FraudPosted on August 11th, 2012 Guest Poster No comments
What is Bankruptcy Fraud?
Bankruptcy fraud occurs any time someone lies or misstates income, assets or liabilities when filing for bankruptcy. Committing bankruptcy fraud can result in the bankruptcy case being tossed out of court and your creditors coming back with a vengeance for their money. Mistakes on bankruptcy filings can result in allegations of bankruptcy fraud. Efforts to shield assets by transferring them to heirs before filing for medical bankruptcy or sell items at a loss to relatives to pay off personal loans may trigger allegations of bankruptcy fraud. Always consult with a legal professional when you begin to see bankruptcy as your only option. Giving away property to mollify relatives or sell items below market value to raise cash to make this month's debt payment could endanger your bankruptcy case later on.
What Is Future Income?
Future income is the money you will receive or earn in the future. This money can come from a salary, sales commissions, the sale of property, inheritances, insurance payouts, royalties and any number of sources.
When Is Future Income Related to Bankruptcy Fraud?
Failing to report future income is a form of bankruptcy fraud. You are not always aware of future income. If you have been trying to sell a book manuscript for years and then hit it big a year after your bankruptcy, no fraud has occurred. If you were in negotiations to sell the rights and didn't tell your creditors this during the bankruptcy proceedings, you have committed bankruptcy fraud. If you quit your job to lower your income in order to qualify for bankruptcy or spite creditors (or an ex-spouse), you are open to charges of bankruptcy fraud if you pick up a good paying job after the bankruptcy is discharged. Failing to report deferred compensation to a bankruptcy court is bankruptcy fraud. Not reporting lump sum payments at retirement like unused vacation time and sick time is also bankruptcy fraud.
Your retirement accounts are generally protected from liquidation during bankruptcy. So are public employee pension plans, Social Security payments and disability benefits. However, failure to report these plans and any income you receive from them is bankruptcy fraud. If you can make payments to creditors but do not do so, they can request that the bankruptcy case be thrown out. While your pension payments may not be garnished, you have a legal and moral obligation to pay your creditors if you can. Failing to report pension income or future retirement plan benefits during bankruptcy is fraud.
Another form of bankruptcy fraud is selling rights for less than they are worth or transferring rights to someone else. If you sell an oil and gas lease for pennies on the dollar to a family member, future income from that lease could have been used to pay creditors. Transferring royalties for a book or patent to an ex-spouse to prevent increased demands for child support or alimony could be construed as bankruptcy fraud. Signing a quit-claim deed on a rental property to a family member or former spouse can also be mistaken for bankruptcy fraud. Always consult with a legal professional before giving up sources of future income.
--About the Author
Michael Bolinske is a Minnesota Chapter 7 bankruptcy lawyer helping people file bankruptcy the right way.