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Lying in a credit application. Consequences.
Anonymous3 views5 answers
What happens to debtors who lied about their income when applying for a credit card? How do trustees find out what information you entered in the application? If possible, give examples of cases you know of.
I agree with the other responses above. In the bankruptcy context, the issue is dischargeability of the debt, which is usually only an issue when large charges are made on the card within the 90 days prior to filing. If that is not the case, the likelihood of the falsehood becoming an issue in a chapter 7 case is very small. Also, I think it is a safe bet that a fair percentage of credit card applications contain inaccurate income and/or employment information. However, if we are discussing a larger issue, such as identity fraud, criminal prosecution is a possibility. You should notify your bankruptcy attorney of this possibility so that, should the card issuer send a representative to your creditor's meeting (which almost never happens normally) you may want to be careful what questions you answer, and it may be easier to try and settle monetarily with a stipulation of non-dischargeability rather than open up a can of worms a criminal prosecution could bring. Make your attorney aware of this so that they are not blindsided and can get you through this.
I agree with my colleagues and also want to point out that each creditor acts differently. The creditor is who you have to worry about and not really the trustee. The company will send a representative to the 341 if they are interested in pursuing an adversarial procedure against you ( a case brought to make the debt nondischargeable). Companies generally care about what you charged and when. If you charged heavily shortly before filing, this can be an issue for you.
The most likely outcome is that this will not be an issue unless there are bad timing or credit usage facts. If the debtor has had the card for awhile and usage of the card is fairly normal then I would not expect the credit card company to challenge the discharge of the debt. The answer might be different if debtor has significant income and the balance is large.
The Trustee is concerned about finding assets that you cannot exempt, so he can liquidate them and distribute funds to the creditors. He cares less about your debts than he does about your assets. On the other hand, if a specific creditor can show that you lied, and that as a result of that lie, it granted you credit, then it could bring an action to have its debt deemed not discharged - meaning it survives the bankruptcy. At the meeting of creditors, you are under oath and will have to tell the truth about your circumstances at the time of applying for credit - if it differs with what you put on the application, the creditor has evidence to support the fraud claim.
If you lied on a loan application, a creditor could (1) file to oppose a discharge based on fraud and/or (2) seek to throw you in jail.
The size and timing of the fraud would dictate the likelihood, and you need to discuss this with your lawyer.
