Abby Lee Miller of the famous reality television show “Dance Moms” recently plead guilty to bankruptcy fraud and was sentenced to 1 year and 1 month in a federal prison to be followed by supervised release for another 2 years. Fraud is not something taken lightly by the federal court system and can have devastating and life changing consequences.
Fraud in bankruptcy can take a couple of different forms.
- When a debtor, the person who is filing for bankruptcy, tries to hide their assets in order to prevent losing them. When filing bankruptcy, you are provided certain exemptions that allow you to protect a portion of your assets. Any asset that is not protected by one of these exemptions can be taken from you by the trustee and then distributed to your creditors.
- When a debtor tries to bribe the bankruptcy trustee.
- When a debtor deliberately files falsified or incomplete bankruptcy forms in order to protect their assets from being seized by the trustee.
- When a debtor files for bankruptcy multiple times this can be viewed as an abuse of the right to file bankruptcy and enjoyment of the protections that bankruptcy affords. As soon as someone files for bankruptcy, an automatic stay is put into place that prevents any of their creditors from continuing to collect the debt that is owed to them. This is often seen when someone is facing foreclosure. The debtor files for bankruptcy on the eve of a foreclosure sale date with no intention of completing the bankruptcy. The intentions are to have more time in the home. The bankruptcy is later dismissed by the court because the forms are incomplete or because the debtor does not comply with the bankruptcy court, or the debtor dismisses the case themselves. Once the bankruptcy case has been dismissed and a foreclosure sale date has been reset, the debtor again files bankruptcy on the eve of the sale date with the same intentions as the prior bankruptcy. Some debtors do this over and over again, and this is an abuse of the bankruptcy system.
It is important to note that while bankruptcy fraud not only involves one of the above-mentioned forms, but it is usually coupled with some criminal activity such as money laundering, mortgage fraud, or corruption.
The overwhelmingly most common type of bankruptcy fraud committed is when debtors try to hide some of their assets from the bankruptcy court. And this is exactly what Abby Lee Miller has pleaded guilty of doing. Apparently, she tried to hide $775,000 of the income she received from her multiple Lifetime series by holding the money in various secret bank accounts. In addition to hiding almost $800,000, she was also accused of smuggling another $120,000 of Australian currency into the country.
Bankruptcy fraud can not only be committed intentionally; it can be committed on complete accident as well. Take for example the instance in which you give an older vehicle to your child so that they can get to and from college. A couple of years later, you fall on hard times and are forced to file bankruptcy. The vehicle you gave to your child a couple of years ago does not even cross your mind. You were financially sound at the time and wanted to help your child. There were no alternative motives involved, but you still unknowingly could be committing bankruptcy fraud by failing to list the vehicle in your petition. This is because giving away an asset such as a vehicle within 5 years of filing bankruptcy can be seen as trying to hide it so that it is not lost when bankruptcy is filed. This is why it is so important to seek the advice of an experienced bankruptcy attorney when facing bankruptcy. Hopefully, errors such as these will be caught before filing bankruptcy. But at the very least, when the error is found after bankruptcy has been filed, your attorney will be able to work with you and your trustee to reach a resolution.
For a free initial bankruptcy consultation, call the Law Office of David M. Goldman, PLLC at (904) 685-1200.