Questions about fraud

[applecake]

I'm wondering a few things....

1. We took out two loans in August. We had no intention whatsoever of filing BK when we took them out. We made the payments for two months, tried to deal with them, tried to work with a credit counseling agcy, and then decided to file ch 7 (we will file in Jan/Feb). When we decided to file, we stopped paying on these loans. They were NOT for luxury items; they were basically loans we had to take to pay some people who were about to sue us as a result of the business closing. But will this look like fraud??? I'm worried, because even though we absolutely didn't do this on purpose, it may look like we did, just because of how soon after we took the loans out, we stopped paying on them. We do have records of where the money went; will this "save" us?

2. Has anyone here been wrongfully accused of fraud, and it messed up your BK? Maybe I'm just worrying too much, but I don't want to get into deeper doo-doo than we already are. I just want to make sure that when it's time to file, we will have as few surprises as possible.

apple

[magyar123]

Maybe not fraud - but August was only three months ago. Waiit with your filing until about March or April, and try to make the loan payments in the meantime.

[ansky0007]

I'm wondering a few things....

1. We took out two loans in August. We had no intention whatsoever of filing BK when we took them out. We made the payments for two months, tried to deal with them, tried to work with a credit counseling agcy, and then decided to file ch 7 (we will file in Jan/Feb). When we decided to file, we stopped paying on these loans. They were NOT for luxury items; they were basically loans we had to take to pay some people who were about to sue us as a result of the business closing. But will this look like fraud??? I'm worried, because even though we absolutely didn't do this on purpose, it may look like we did, just because of how soon after we took the loans out, we stopped paying on them. We do have records of where the money went; will this "save" us?

2. Has anyone here been wrongfully accused of fraud, and it messed up your BK? Maybe I'm just worrying too much, but I don't want to get into deeper doo-doo than we already are. I just want to make sure that when it's time to file, we will have as few surprises as possible.

apple

Also, If what you are saying is true and you can show where all the funds went I would not worry about it. I made a $25k balance transfer in August and we made one payment on the card since the transfer. Lawyer told us not to worry because worse comes to worse the bank will go after the other bank to get their money back. We have no assets so they can not come after us for it.

[kornellred]

Fraud must be proven in a court of law. When it comes to unsecured credit, the bank gives you money based upon your trustworthiness. The debtor promises to pay the money back with interest. The risk for the bank is that it is not a crime to break a promise. You are not a criminal if you do not pay the money back. It does not matter why you are not paying the money back. There is no way for a lender to determine that you had no intention of paying them back when they gave you the money, unless your actions belie your avowed intentions.

If you file for bankruptcy virtually on the heels of accepting money from a bank - what choice have they but to assume that you had no intention of paying them back? Most of us in bankruptcy are fairly intelligent people - we knew what we were doing when we got into debt.

I am assuming that it is the US Trustee who presses fraud charges against debtors who have filed for bankruptcy. It is very difficult to transfer or hide assets without leaving a paper trail somewhere. Such actions are clearly fraudulent, because in bankruptcy you are required to surrender all assets except for defined exemptions.

The customary waiting periods and spending restrictions prescribed by good bankruptcy attorneys are specifically for the purpose of eliminating a debtor's motives, rationale and reasoning as factors in the filing process. Fraudulent intent - even if it was there - can never be proven if the debtor is completely honest about their financial situation at the time of filing.

[Flamingo]

Fraud must be proven in a court of law. When it comes to unsecured credit, the bank gives you money based upon your trustworthiness. The debtor promises to pay the money back with interest. The risk for the bank is that it is not a crime to break a promise. You are not a criminal if you do not pay the money back. It does not matter why you are not paying the money back. There is no way for a lender to determine that you had no intention of paying them back when they gave you the money, unless your actions belie your avowed intentions.

If you file for bankruptcy virtually on the heels of accepting money from a bank - what choice have they but to assume that you had no intention of paying them back? Most of us in bankruptcy are fairly intelligent people - we knew what we were doing when we got into debt.

I am assuming that it is the US Trustee who presses fraud charges against debtors who have filed for bankruptcy. It is very difficult to transfer or hide assets without leaving a paper trail somewhere. Such actions are clearly fraudulent, because in bankruptcy you are required to surrender all assets except for defined exemptions.

The customary waiting periods and spending restrictions prescribed by good bankruptcy attorneys are specifically for the purpose of eliminating a debtor's motives, rationale and reasoning as factors in the filing process. Fraudulent intent - even if it was there - can never be proven if the debtor is completely honest about their financial situation at the time of filing.

_______________________________________

While I agree with most of your posting, in your first paragraph a lender lends money based on the recipient's creditworthiness which is based on their credit record and any past credit/loans with the lender on which to base their decision. If the risk to them is high that the recipient will not pay the money back or default, they will not lend the money. They base that on the recipient's credit track record. I wouldn't state it was based on "trust" unless one wants to tie that in with being creditworthy as they see fit. A contract is signed between both agreeing parties which is legally binding and if the debtor fails to comply with the terms of the contract as to repayment and stops paying the agreed upon payments, the debtor is in breach of contract as soon as the first payment is missed. If you do not make any further payments they will sue you for the balance owed plus any interest and late charges accruing after the first missed payment and wreck your credit due to your contract breach. Lenders are aware of all the tricks of folks planning to file BK so an eye is kept on certain periods of time prior to filing as to what the debtors did as to payments, charges, cash advances, etc. If they, or a trustee, sense there could be fraud as to those transactions due to the timing, certain things occurring, etc., they will investigate and pursue if needed.