Is Selling a Secured Asset Before Bankruptcy Fraud?

Recent Question and Answer

Question: I have had 2 loans out for about 2 years now, one secured one unsecured. I have been paying them throughout the 2 years on time but have recently had my hours cut from full time to part time. I am unable to afford to pay the loans and am even living out of my car. I am not worried about the unsecured loan but on the secured loan, I lost all the personal property I put up when I was kicked out of my previous address. The loan workers come into my work and threaten me that I stole from them and I committed fraud. I told them I am trying to come up with the money to pay them but the keep pushing me on telling me that I am committing fraud if I don’t pay them soon. I am a man with a short temper and that made me just think about saying screw it and take the hit on my credit. Would this be a bad thing for me? My credit isn’t the best so I’m not to worried about that, just the Theft Fraud issue?

Answer: Fraud is an issue. You must have the intent to defraud them when you sold the items. Also, your knowledge that you should not have sold the items and sold them anyway also shows intent. However, the company would have to take you to Court and prove that you defrauded them and they must get judgment in court to garnish or force any collections. Otherwise, they can just threaten. In general, fraud can make a debt undischargeable in bankruptcy, but that also requires the creditor to sue in bankruptcy court and prove that there was fraud. In many instances this is not economical for the creditor.