Bankruptcy Abuse - What Constitutes Abuse?

Having a lot of unsecured debt might be one of the reasons that a debtor chooses to file for chapter 7 bankruptcy. The debtor can get discharged from all of his unsecured debts by filing for chapter 7 bankruptcy. Debt from credit cards, hospital bills, lawsuits, and other debt are terminated, leaving the debtor with a fresh start. However, this option is mostly available to those that don't have a lot of assets that can be distributed to the creditors.

If the debtor has more than 15,000 of equity in his house, or 30,000 of equity in case of a married couple, then the house can be sold and the equity that exceeds the exempt amount, 15,000 or 30,000, gets distributed among creditors. However, if a debtor realizes that he has a lot of assets that will be taken by the creditors he may choose to file for chapter 13 bankruptcy, which would enable him to keep most of his assets and pay out a percentage of his debt over three to five years.

Although, some debtors try to avoid filing for chapter 13 bankruptcy, since it does require a repayment of part of the loan over three to five years, only after which the debtor gets the discharge. These debtors try to use different forms of asset protection funds, attempt to transfer assets to different persons, move assets to different states that have larger exemptions and sometimes they attempt to conceal their assets.

However, upon attempting such practices, debtors should keep in mind that the bankruptcy judge can punish such acts by not giving a discharge in bankruptcy or by even using the criminal code to punish such debtors. Code 18 USC sections 151-155 provides different punishments for concealments of assets, false oaths, false claims, fee fixing and other criminal conducts.

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