What Happens to Debt Resulting from Fraud in Bankruptcy?

Most of the people who end up with debt assume that filing for bankruptcy is the only solution available for them to consider. You need to keep in mind that filing for bankruptcy would not make your debt go away. That’s because debt is divided into several categories. Out of these, the non-dischargeable debts will not go away, even if you file for bankruptcy. The debts that accumulate from fraud activities fall into this category. Hence, you are encouraged to pay special attention towards this fact and make sure that you make an informed decision when overcoming such debt.

If the debt needs to be declared under non-dischargeable debt, it should fall under a specific criteria. In fact, a creditor needs to go to the court and ask for the determination of fraud. If the creditor fails to do it, the debt will be wiped off. You should also keep this fact in mind when you are dealing with non-dischargeable debt.

What exactly is fraud?

Before we deep dive and understand more information on this topic, it is important for you to have a basic understanding about the topic of fraud. Fraud will take place when someone manipulates or lies. During the bankruptcy cases, the fraud activities usually take place as an expense of the creditor.

For example, most of the people are not honest about their true income, when they go ahead and apply to obtain a credit card. On the other hand, some people tend to hide their money from business partners when they work on joint business ventures. When your restaurant business goes down, you go ahead and sell all the items that you had in it, including the ovens and tables. After you do that, you will need to fairly divide the amount in between all shareholders. But if you decide to pocket all the money, you will end up with committing fraud. Therefore, you will need to take appropriate measures to overcome such situations and make sure that you don’t become a person who commits fraud. Otherwise, you will have to face a lot of issues when you file for bankruptcy.

Presumptive abuse of credit cards can be considered as one of the most common types of fraud. In here, you will be using your credit card to make payments and purchase a variety of luxury items, including jewelry, purses and to enjoy movies. You do this within the 90 day period, before you file for bankruptcy. Then you will be committing a fraud. But still, you can use your credit card to get all the basic necessities of your life, such as food and home rent covered. But if you use that money to purchase fancy stuff, which you really don’t need, you will be committing fraud. You never want that to happen.

These are just few examples of fraud and there are many more. Embezzlement, larceny and fiduciary fraud are to name a few.

A creditor is in need of a judgement

As mentioned earlier, the creditor needs to take the case to the courts and prove that you have committed a fraud. Otherwise, you will not have to face any negative consequences associated with it. To do that, the creditor will need to file a lawsuit and get the fraud judgement to work against you. The creditors do it in several ways.

In most of the instances, the creditors file complaints alleging the fraud, even before you go ahead and file for bankruptcy. By doing that, it is possible for them to end up with two different judgements. Those 2 judgements include:

  • Default judgement

In here, the court will grant the judgement by default. To make sure that it doesn’t happen, you will need to provide a response within the given time period. If you fail to do it, you will be labeled as the committer of a fraud.

  • Trial judgement

If you respond within the given time period, the trial will begin. The creditor will need to go through the trial period and prove that you have done the fraud. If you are proven guilty, the creditor will receive trial judgement.

When the creditor files a fraud judgement against you, all the debt that you own related to fraud would become non-dischargeable. This is the reason why it is important to get the assistance of an attorney, especially when you get a lawsuit. When you take quick action, you will be able to take appropriate steps to overcome the negative complications that are linked with the judgement.

There is a time period, which the creditor should adhere to, when filing a lawsuit against you for fraud. In fact, the creditor will need to do it within a period of 6 0days. If the creditor fails to do it, your debt will remain dischargeable, even if they are linked with fraud. This type of debt would eventually go away along with time.

Proving the fraud activity at the trial is not an easy thing to do. That’s because it is important to pay attention towards few important factors and prove them. The creditor will need to prove that you committed the fraud activity by having a good understanding about it. In other words, the creditor should prove that you purposely mislead something. On the other hand, the creditor should prove that they believed the misrepresentation that you did. As a result of all these activities, the creditor should prove that he lost his money at the end of the day.

All the matters that are associated with fraud are taken seriously. Therefore, it is important for you to get the assistance of a bankruptcy lawyer and how you can get assistance to overcome the pain and frustration associated with these situations. In case of you have credit or debt issues visit www.gtacredit.com or call 416 650 1100

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