The Details Concerning Filing a Fraudulent Bankruptcy in Canada
There are numerous reasons a consumer ends up in bankruptcy. Despite this, the results remain the same for everyone that files. Once the requirements for the process have been completed successfully, any unsecured debts are eliminated and the individual is assured a clean financial future.
There are some debts that will remain despite a successful filing. This includes any secured debts such as a car loan or a mortgage. There may additionally be a variety of judgements and legal fines. Certain assets are relinquished for a personal filing to enable some debts to be eliminated. This means the individual will not have to pay their unsecured debts.
In certain instances, secured debts do not have to be repaid because the asset securing the debt has been reclaimed by the lending institution. A good example is if the bank has repossessed the individual’s car, they will not be required to pay the car loan.
It is important to understand what happens to the debt prior to deciding to file. This enables the individual to understand the cost for Canadian residents while making an informed decision regarding their finances. Once the process is completely understood, many individuals choose to continue to provide debt relief.
Although some people choose a debt consolidation loan, a debt settlement program, or consumer credit counseling, these options are not generally anywhere near as effective. The majority of unsecured debts are forgiven despite the period of time required for the debts to be discharged.
This process can take anywhere from nine months to a little over three years once the filing has been completed. If the individual does not possess any real assets, the creditors will most likely walk away. If there are any assets, the creditors will want at least a portion of what is owed. They will not receive the full amount of the loan.
Once the filing has been discharged, the individual will not owe anything on certain debts. This includes personal loans, credit cards, specific lines of credit, and unsecured loans such as payday loans, past due insurance premiums, and medical bills. Certain past due utility bills are also included such as gas, water, electricity, and telephone services.
If a minimum of seven years has passed since the individual was a student, their student loans will be forgiven. There are some fines and debts that will not be forgiven. These debts are categorized in two major ways. These are legal judgements and fines and secured debts.
The legal system and the government will not forgive debts even if the individual has filed for relief. Certain judgements are still applicable including child support payments, alimony, payments due to a fraud conviction, fines for restitution and government overpayments from income tax. These charges must be paid.
The difference between a consumer proposal and a bankruptcy is when the conditions pertaining to the consumer proposal have been fulfilled, the creditors are unable to come after the assets of the individual. Other than specific exemptions, the individual will have to let go of their secured assets for their secured debts to be released.
A good example is a consumer with a mortgage line of credit against their home. The banks will not forgive this type of debt and enable the individual to keep their home. The home will be repossessed by the bank. It is also important to note if a student loan is less than seven years old, it must still be paid.
The majority of Canadians who file are honest and simply experiencing severe financial difficulties. Some of the most common reasons for filing include unemployment, divorce, and health issues. Unfortunately, there are certain individuals who purchase expensive items they know they are unable to afford or obtain credit they have no intention of repaying. This is a crime.
Fraud in Bankruptcy
There are several different types of fraud but they all involve the same premise. The consumer is purchasing either services or items with no intention of paying for them. This includes living an extravagant lifestyle or a lifestyle the individual is unable to afford, severely mismanaging their finances, trading or borrowing while aware there is no way to repay the debts, telling a lie to obtain something valuable, creating or using fraudulent documents to receive something of value or a loan, obtaining unaffordable loans while showing preference to a specific creditor, and writing bad checks to juggle payments.
There are specific checks built into the filing process to prevent fraud. Sworn statements must be provided to licensed insolvency trustees regarding the expenses, income, and windfalls such as receiving cash for a gift or winning the lottery. Previous spending and the current financial status will additionally be discussed.
A good example is an individual that purchases several thousand dollars worth of items shortly before filing. In this case, the trustee will suspect fraudulent activity. A red flag will be raised if the home is sold right before or after filing. Fraudulent behaviour can also be reported by family and neighbours when observed.
Regular reports are made regarding this type of activity to the authorities by casinos, banks, and creditors. The OSB maintains a website where suspected fraudulent activities can be reported. The Royal Canadian Mounted Police will investigate all reports. If evidence is recovered, the result is usually an arrest.
Committing fraudulent activities is a serious crime and there are a variety of penalties involved. Recent purchases are generally not included when the individual files. The individual must pay for any profits resulting from fraudulent activities. In the event of a conviction, the filing will be reviewed and the individual will be denied an automatic discharge.
A consumer proposal or another filing may be impossible or difficult to obtain in the future. The penalty involves several different fines and the individual can be sent to jail. A lot of individuals believe they can get away with fraudulent activities but the licensed insolvency trustees and the OSB perform their jobs extremely well.