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Can going shopping before filing for bankruptcy be fraud?

On Behalf of | Aug 2, 2023 | Bankruptcy

If you are in financial straits, filing for bankruptcy may be a logical solution. The decision can provide the necessary relief from debt and can provide a fresh start. But what about the spending habits leading up to that moment? If you indulged in a shopping spree shortly before filing for bankruptcy, you may wonder if you unintentionally committed fraud.

Bankruptcy courts examine transactions made before filing for bankruptcy closely, as they aim to ensure fairness for all parties involved. Spending lavishly or recklessly right before filing for bankruptcy may raise eyebrows, potentially leading to accusations of fraud.

Understanding bankruptcy fraud

Bankruptcy fraud is a serious offense. It occurs when a person intentionally tries to evade their financial responsibilities by hiding assets, falsifying forms or intentionally racking up debt with no intention to pay. If you knowingly make large purchases on credit before filing for bankruptcy, the court could interpret this as fraud.

Shopping and bankruptcy

Going shopping before filing for bankruptcy is not necessarily fraudulent. However, the courts could scrutinize excessive or luxury purchases. Courts typically look at the nature of the purchases, their frequency and the debtor’s intent.

The role of intent

If you made purchases on credit before filing for bankruptcy but intended to pay them off, this is usually not considered fraud. However, if you made these purchases knowing you were going to file for bankruptcy and had no intention to pay, this could be fraudulent activity.

Filing for bankruptcy is a significant decision with far-reaching implications. You need to go through the process honestly and transparently to avoid any complications or accusations of fraud. The best way to avoid accidental fraud is to act responsibly with your finances. If you are considering bankruptcy, limiting your spending to necessary expenses can help you get through bankruptcy without unintended legal issues.