Most people who file for bankruptcy are honest individuals who have fallen upon hard times through divorce, unemployment, health problems or other stressful life events.
However, there are times when people abuse the system and commit what’s known as bankruptcy fraud. This is a serious offence and comes with many negative consequences ranging from fines to imprisonment. Here’s what you need to know.
WHAT IS BANKRUPTCY FRAUD?
When someone files for bankruptcy, they can commit fraud by:
Disposing of property before or after filing for bankruptcy
Using false representations to obtain credit or property
Concealing claims or debts
Refusing to fully and truthfully answer questions posed during an examination
You can read sections 198 to 201 of the Bankruptcy and Insolvency Act or consult the Criminal Code of Canada for a complete list of offences.
HOW CAN YOU AVOID BANKRUPTCY FRAUD?
If you’re planning on filing for bankruptcy, the best way to avoid committing fraud is to be completely transparent with your licensed insolvency trustee (LIT). Make sure you provide them with as many details as possible about your financial situation, debts and assets. Remember that your LIT will only know what you tell them. Therefore, you must provide them with a complete picture of your situation so they can properly support you. You must divulge any critical information before filing for bankruptcy. Otherwise, it could be uncovered somewhere down the line to very unpleasant results.
HOW TO SPOT BANKRUPTCY FRAUD
The entire process of filing for bankruptcy is designed to spot fraudulent activity. In fact, licensed insolvency trustees are trained to notice suspicious behaviour and are required to ask for sworn statements about your financial affairs. Furthermore, creditors, banks and casinos can make reports to the Office of the Superintendent of Bankruptcy (OSB), which are then investigated by the Royal Canadian Mounted Police. If you’re truthful with your LIT, you won’t have any problems.
FILING FOR PERSONAL BANKRUPTCY IN OTTAWA
If you’ve fallen upon hard times, the team at D. & A. MacLeod Company Ltd. is here to support you and help you find the best path forward. We’ll help you establish whether filing for bankruptcy is the right choice for you and guide you every step of the way. To learn more about the options available to you, give us a call to book a free consultation.