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Bankruptcy fraud explained

If you are considering bankruptcy, you must be honest and transparent when completing your application. The information you provide needs to be in full, and you’ll need to cooperate with the Official Receiver. 

There can be serious consequences if you are dishonest or don’t comply with the terms of your bankruptcy.

What is bankruptcy fraud?

Bankruptcy fraud occurs when people:

  • Knowingly lie or fail to mention information about their finances on their application or while their bankruptcy is being processed.
  • Hide assets, such as foreign properties or vehicles.

The Official Receiver will carefully review previous financial behaviour and bankruptcy applications.

Bankruptcy fraud is taken very seriously and can result in extended initial restriction periods, fines, prosecution, and even custodial sentences. 

What offences should you be aware of?

Various activities are considered bankruptcy offences or fraudulent, including:

  • Knowingly providing the wrong contact details – such as your address.
  • Lying or not including key information about your finances when completing your bankruptcy application or refusing to discuss your bankruptcy with the Official Receiver at any point.
  • Leaving the country (England or Wales) with possessions worth £500 or more that should be given to the Official Receiver to use as part of your bankruptcy.
  • Giving away or selling property for less than its value five years before you applied for bankruptcy.
  • Attempting to benefit someone, such as a creditor, by putting them in a better position than they would have been in the bankruptcy. This is known as a preference and can be overturned if it occurs at any time up to two years before bankruptcy.
  • Applying for credit of £500 or more without notifying the lender that you are currently bankrupt.
  • Hiding details of any property you own or are involved with from the Official Receiver.

When you sign the declaration on your bankruptcy form, you confirm that everything you have included is correct. If it is later discovered that false information was provided, you will be investigated and at risk of an extension to the initial restriction period, fines, prosecution, and even custodial sentences. 

What will happen if you are found guilty of bankruptcy fraud?

Bankruptcy fraud is a criminal offence; you could be fined or imprisoned. You’ll also have a Bankruptcy Restrictions Order placed upon you, which means your bankruptcy restrictions will continue for up to 15 years.

What are bankruptcy restrictions?

Bankruptcy restrictions mean you have to follow specific rules when it comes to your everyday finances and work life:

  • You can’t act as an insolvency practitioner or work in certain financial sectors.
  • You will need permission from the court to set up a new company or act as a director.
  • You can’t set up a business under a different name than the one you were made bankrupt with without telling people that you have been made bankrupt.

What to do if you think you have committed bankruptcy fraud

You will need to speak to a legal advisor if you believe you have committed one of the offences above. You may be able to defend your actions if you can prove that you didn’t intend to defraud or mislead the Official Receiver or creditors.

You can ask someone aware of your financial situation or a debt advisor to review your application before you submit it to reduce the risk of any mistakes. 

If you have any questions about bankruptcy or bankruptcy fraud, our expert team are on hand to answer them. Get in touch via phone or live chat today.

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