North Carolina Man Jailed for Bankruptcy Fraud – Why You Should Always Tell the Truth in Chapter 7 and 13 Petitions

Burlington man faces jail time over bankruptcy fraud

Image Source: Flickr User teofilo

Many people don’t think twice about a small lie on a loan application or to a friend about their finances but fibbing on a North Carolina bankruptcy petition is in a whole different league of lies. Bankruptcy laws are federal statutes and must always be taken seriously. If you’re dishonest in Chapter 7 or Chapter 13 petition, you can land time in jail like Burlington resident Faiger Blackwell.

Jail sentence handed down in March

Faiger Blackwell was slapped with a two-year prison term for bankruptcy and tax fraud owing to misleading the bankruptcy court. Blackwell was accused of hiding rental income during a bankruptcy case he filed to cope with more than $300k in back taxes plus $1 million in commercial debt he had accumulated for himself and a funeral home business.

The secret rental income was what landed Blackwell in trouble with the bankruptcy court. The tax fraud accusations were tied to a second bank account he opened up in another company name to try and circumvent an IRS levy on his income due to the back taxes. Now he’ll serve two years in jail (perhaps less) plus three years supervised release and must repay more than $400k in restitution.

How to avoid trouble from the bankruptcy court

In a word, transparency is the approach to take when it comes to bankruptcy. Most people have some aspects of their finances – whether it’s debt, income, or spending habits – that they keep secret. Some consumers hide credit card or tax debts from their partners. Still others spend secretly and hide the proof of their excesses. Very few people are completely honest about their finances across the board.

But in bankruptcy court and in bankruptcy petitions, you must come 100% clean about your income, assets and debt. That’s the only way to avoid fraud accusations, possible jail time, and repayment of any benefit you received to which you were not entitled. Your bankruptcy attorney is there to advise and protect you, but they cannot do so if you are not honest with them.

Prepare for total honesty with your attorney and Trustee

When you come in for an initial North Carolina bankruptcy consultation, be sure to bring the following documents with you:

• Most recent paystubs. If your pay varies, bring in several so your average income can be calculated.
• If your income has changed recently because you just got a job or were just terminated, bring info related to that too.
• Most recent bank statements for any and ALL bank accounts including checking, savings, etc.
• Bring in your most recent tax returns – preferably two years’ worth.
• Bring in a copy of your credit report pulled recently.
• Bring in copies of all of your living expenses such as mortgage statement, car loan agreement, utilities, insurance statements for health home, auto, etc.
• Be sure to bring copies of expenses related to your kids including child care, school tuition, orthodontics, etc.
• Calculate estimates of other living expenses such as clothing costs, medical expenses, fuel costs, groceries, etc.
• Bring in copies of your credit card bills and other debt statements including past-due medical bills, etc.
• Bring in copies of any debt collection notices, foreclosure or repossession threats, etc.
• Bring in copies of creditor lawsuits, liens, and other legal notices.

Documentation is just part of the story

When talking to your bankruptcy attorney, be completely honest when you assess your financial conditions. There is no reason to be overly optimistic about your financial prospects. If you’re hoping for a significant raise but have no clue about the amount, don’t puff up based on your hopes.

Stick to the facts so your attorney can work with the reality of your current financial situation when they prepare your petition. The path to the best results in your bankruptcy filing is giving your attorney all the information they need to fight for the best outcome for you.

To find out more about North Carolina bankruptcy, contact the Law Offices of John T. Orcutt for a free bankruptcy consultation at one our convenient locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro or Wilmington. Call +1-833-627-0115 now to get the financial peace of mind you deserve.