California Bankruptcy Fraud and its Implications

Asset Disclosure Issues in California Bankruptcy

Bankruptcy fraud, though not as common as could be suspected, is an issue that has been around from as long as we have had the bankruptcy system in place. Bankruptcy cases in practice involve trustees appointed by the court to oversee the decisions agreed upon the execution of the arrangement. The trustees are the individuals tasked with managing the documentation of the debtor’s affairs.

The trustees in the California bankruptcy agreement are tasked with the sale of non-exempt property to repay the creditors in the case. In this aspect, they have to remain vigilant to detect fraudulent activity by the debtor including the failure to disclose necessary information that would affect the execution of the bankruptcy suit.

California bankruptcy laws recognize bankruptcy fraud as being actions involving false oaths, a failure to disclose assets or debs among others correctly. These violations of the bankruptcy code are deemed to fall under the federal domain.

Anyone within the California jurisdiction however, is allowed to report bankruptcy fraud to the relevant authorities when there is sufficient reason to doubt the assets declared by the debtor.

A debtor that fails to disclose their assets correctly to the trustees in a bankruptcy case is deemed to have engaged in fraudulent activity under bankruptcy.  As such, the debtor would not be legally eligible to enjoy the protection offered under bankruptcy since bankruptcy is a powerful remedy given to honest debtors willing to disclose their assets and debts fully.

Under the Chapter 7 California bankruptcy laws, the debtor’s non-exempt property would be sold, and the proceeds distributed to the creditors if the individual has no regular income that they would otherwise use in debt reorganization to repay the creditors’ debts. However, when this is not an option, the Chapter 13 bankruptcy would come in handy for an individual with a regular income to repay their creditor debts under California law.

Complex institutional structures would, however, use the Chapter 11 bankruptcy clause under the California Bankruptcy laws as a way to reorganize their structures to the point of compensating the creditor of their debts.

Whichever way it is taken, bankruptcy fraud would serve to deny the debtor of the right to bankruptcy protection if they are discovered at any stage during the proceedings. It is thus advisable to be forthcoming with information regarding your debts during a bankruptcy proceeding at all times.