Ordinarily I write these bankruptcy blogs from the perspective of a bankruptcy attorney helping clients understand and file Chapter 7 or Chapter 13 bankruptcy. Today, however, I would like to discuss a particular element for creditors. Often, people will speak derogatorily about bankruptcy saying that it allows people to wrack up debt and then walk away scot-free. As a Boise Bankruptcy Attorney, I do not hold that perspective. I believe that bankruptcy is a valuable tool aimed at helping people get back on their feet and giving them a second chance. There is one situation, however, that I find unacceptable for an individual filing bankruptcy and that is FRAUD.
Fraud
What is fraud? Fraud is the intentional deception of another to make financial gain. If a debtor files bankruptcy and is trying to get out of paying debt justly owed to a creditor and the debtor has committed fraud, can anything be done?
Absolutely! First, let's look at a situation where this might occur. Say you are remodeling your home. You hire a contractor who hires subcontractors to work on your house. If the contractor knowingly submits bills for subcontractor work that has not been done, with the intent to get paid and to use those funds for their own benefit, that contractor has committed fraud. Say that you discover his fraudulent activity and you file suit against him and win a judgment against him. Say then, you try to execute on your judgment only to find out that he has filed for bankruptcy.
Ordinarily, a Chapter 7 Bankruptcy will discharge a debtors debt. But what if fraud is involved? Is the creditor barred from collecting on his judgment and is the debtor freed of the debt? No. But that is not automatic. You must file an objection on the basis of fraud. The bankruptcy court will look at your judgment and your claim of fraud and make a determination as to whether or not the judgment will be barred by bankruptcy or not discharged because of the fraud.
Collections
After the bankruptcy court determines that there was fraud and that your judgment won't be discharged, you can collect on the outstanding judgment. You would proceed with collection efforts as if the bankruptcy were not there. This might include having the sheriff attach property or by doing a garnishment against the debtor's wages.
If you are seeking a bankruptcy or are the victim of fraud and you need your judgment protected from discharge, please give us a call and see what we can do for you, 208-472-2383. You will be glad you did.
