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Bankruptcy fraud has legal consequences

Bankruptcy is an effective legal option for individuals who are struggling with debt, which allows them to discharge or restructure their debts in a more manageable way. For those who are truly suffering from crushing debt, bankruptcy is a wonderful alternative to living your life in fear of creditor harassment, but it is important to remember that bankruptcy is not to be abused for those seeking financial advantages. There are consequences to trying to abuse the system.

Back in 2012, a man claimed that he could not pay his bills on a $5,000 a month income, and filed for Chapter 7 bankruptcy. Despite this, he managed to put $25,000 down on a house with a $1.5 million price tag. It was later discovered that the man was managing a synthetic marijuana manufacturing company, which contributed to a secret account in which he was hiding more than $1 million.

Of course, filing for bankruptcy is a very serious legal procedure that is treated as such, and it is illegal to lie about income or hide assets during bankruptcy in any state, including Texas. The man was charged with bankruptcy fraud, concealing assets, and making false declarations, which could have gotten him five years in prison. Instead, he pleaded guilty to bankruptcy fraud, and he was recently ordered to pay more than $300,000 to his defrauded creditors, as well as sentenced to a year in prison with three years of probation time.

It can be tempting to file bankruptcy to avoid paying off debts that you simply don't want to pay off, but the consequences far outweigh the benefits. Bankruptcy exists to help those who genuinely need relief from debts that they can pay off, not so that wealthy individuals can amass even greater wealth by simply not paying what they owe.

Source: AZCentral.com, "Marijuana manager hid $1 million then filed bankruptcy," Robert Anglen, Dec. 22, 2014

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