The Risks of Bankruptcy Fraud Explained
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Bankruptcy Fraud: The Importance of Disclosing All Your Assets

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) created a lot of hurdles for honest debtors, but the news is even worse for debtors who think they can put one over on their creditors-and the bankruptcy courts.

Across the country, bankruptcy fraud prosecutions are in the news every week. Some stories are regular people who "forgot" about an inheritance when they filed, while others are more newsworthy, like the recent bankruptcy petitioner who had transferred many of his company's assets to a former Playboy model before filing for bankruptcy protection.


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On this page, you'll find a variety of information about bankruptcy fraud: stories of people who got caught and the prices they paid, news about which states and localities are cracking down on bankruptcy fraud, and court rulings.

U.S. Supreme Court Rules Petitioner Who Defrauded Court Lost His Right to Convert from Chapter 7 to Chapter 13 Bankruptcy

The United States Supreme Court recently ruled on a case where an individual was attempting to convert his bankruptcy from a Chapter 7 bankruptcy to a Chapter 13 bankruptcy. Marrama v. Citizens Bank of Massachusetts, et al. The Court denied Marrama's motion to convert because they found that he had intentionally concealed information regarding a property that he previously owned and had recently transferred into a trust in an apparent attempt to conceal the property from his creditors and the bankruptcy court.

This case highlights the importance of fully disclosing all of your assets in your bankruptcy schedules. If Marrama had disclosed the transfer and his true interest in the property, he could have converted to a Chapter 13 bankruptcy where he would be able to keep the property, regardless of its value. The Court found that Marrama had acted in "bad-faith" by fraudulently concealing information regarding the transfer of the property and its value, and therefore was no longer eligible to file a Chapter 13 bankruptcy. It is likely that the Chapter 7 trustee will now liquidate the property and use the proceeds to repay Marrama's creditors.

The Court noted that the Marrama was not a "honest but unfortunate debtor[s]" that the bankruptcy laws were enacted to protect. The bankruptcy laws are designed to protect honest individuals in financial distress, but this ruling shows how little tolerance the Court has for individuals acting in bad-faith.

If you are considering filing bankruptcy, it's important to have a good understanding of the law so you can stay on its good side.

A local bankruptcy attorney can help explain the law, local exemptions, and how they may affect your case. You can connect with a local lawyer today by calling 877-349-1309.


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