What is bankruptcy fraud?

WHAT IS BANKRUPTCY FRAUD?

Before we go further on bankruptcy fraud definition, lets have a look at this video so we can get a brief idea on what is bankruptcy fraud. 

A bankruptcy fraud scheme is encountered when there is an individual or a company make a false statement or misrepresentation of assets in a proceeding of bankruptcy (Grath, 2009). They abuse the bankruptcy process for the purpose of obtaining a protection from settlement of their financial obligations. In Malaysia, the bankruptcy proceedings are regulated under the Bankruptcy Act 1967 and administered by the Malaysian Department of Insolvency (MDI). MDI has divided the case of bankruptcy into two primary categories mainly (1) Personal Bankruptcy (2) Corporate Insolvency.

Personal bankruptcy involves a process where a person is declared with a bankruptcy status upon a Receiving Order by the High Court in pursuant to the definition under Section 3(3) of the act. A person is a debtor who is unable to settle his debts of at least RM30,000. The debtor can be made bankrupt after a bankruptcy petition presented either by a creditor’ petition or by the debtor’s petition itself. The creditor’s petition may be presented upon the fulfilment of an act under Section 3(1) of the Bankruptcy Act 1967 and the amount of debt owed by the debtor is more than RM30,000. Whereas, the debtor’s petition is presented to safeguard himself from creditors’ claim.

Corporate Insolvency encounters when a company is positioned into liquidation. The administration of liquidation process is in charged by the Liquidation Division of MDI. The division must ensure the liquidation process is performed appropriately and all approved liquidator must comply the provisions of the Bankruptcy Act 1967.

Bankruptcy fraud is a serious problem and should be regard as a higher level of culpability because of its deception in the bankruptcy judicial course. Therefore, this cases must be treated severely with a greater punishment to the offender such as imprisonment or fine or both upon conviction.

References

Chang & Diamond, APC (2014). Bankruptcy Fraud [Online] Available at https://www.youtube.com/watch?v=8uDEtxPSLOg

Grath, T. M. (2009). A Fraud Is a Fraud , but Bankruptcy Fraud Is Inherently Bad : Enhanced Sentencing. American Bankruptcy Institute Journal, 4(May), 56–59.

http://www.insolvensi.gov.my/ms/