Fraudulent bankruptcy – What it is, definition and concept

Fraudulent bankruptcy is a form of crime in which people or companies falsely declare that they are insolvent or bankrupt, in order to avoid making payments to those who are committed to paying.

This is how people or companies that falsify their financial situation do so to avoid facing their commitments.

Implications of fraudulent bankruptcy

The main victims of a fraudulent bankruptcy are the creditors. These creditors are usually, for example, suppliers, employees, shareholders or the State for the payment of taxes.

Depending on the country where the fraudulent bankruptcy was committed, a sentence must be served, which can be deprivation of liberty or jail. Although it is true, that everything will depend on the dimensions of that fraudulent bankruptcy.

Circumstances in which a fraudulent bankruptcy occurs

The situations in which this type of crime is carried out are:

  • When the existence of assets in inventory, money, bank accounts, personal or real property is hidden. Which can be transformed into money that could be used to pay creditors.
  • Failure to keep a record of operations in the right place and time, causing harm to a third person, company or Government.
  • Delete, falsify, alter in any way the financial records, to the detriment of a third party.
  • Hide property or rights information.
  • Have consumed own funds or outsiders, that were directed to the payment of commitments established in previous contracts.
  • Simulate purchases to justify false money outflows.
  • Simulate debts.
  • Buying property in the name of another person or company hurting creditors.
  • Anticipate payments so that at the time of paying the creditors it can be justified that there are insufficient funds to pay them.
  • Carrying out purchases after you have declared bankruptcy.
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