Embezzlement refers to liability occurring from criminal, fraud, litigation and other malpractice. The jury or court usually orders an individual to pay fines or compensation or penalty based on the crime or law/code violation. This kind of debt is referred to as embezzlement debt. The common doubt or question people have is; Will the embezzlement debt be discharged during bankruptcy? It is important to learn that the type of debts held by the person filing bankruptcy is usually arranged on the basis of priority to determine the discharge or release ability. In the array or order, the embezzlement dues fall under the most prioritized debt since it is usually an order of jury which cannot be compromised. However, the type of embezzlement and the course adopted by the lender may still determine the release of embezzlement debts.
Criminal fines and civil body orders
Any type of debt arising from criminal activities like fraud, or any other such malpractice is regarded as ‘non-releasable debt’. This kind of debt cannot be released and should be paid off as first priority above secured and unsecured loans. There is practically 1% chance of getting criminal fines released by the bankruptcy law code. Learn more about such facts and bankruptcy on Recovery Law Group.
In case of civil body orders or judgments, the lender or the person who is expecting compensation from the bankruptcy filer has to proactively present a case for non-release of his/her debts. The lender has to request the court to categorize his/her debt as non-releasable debt by presenting facts and evidence confirming the same. If the lender fails to do so or does not approach the bankruptcy court proactively, the bankruptcy court might release such a debt prioritizing other debts. Civil debt is referred to as an act of fraud or misrepresentation in the capacity of fiduciary. Unlike civil dues, criminal fines need not be proven as non-releasable debts in the court and the lender need not make proactive attempts to confirm the same.
What the lender will do?
In order to retrieve the civil dues, the lender usually files a lawsuit which is referred to as ‘adversary proceedings’. This has to be filed in the span of 60 days from the first date of lenders meeting in the bankruptcy case. The meeting of lenders during the bankruptcy case in the court is a mandatory meeting, which usually happens in the first or second hearing. This meeting usually happens in about 30 days after the bankruptcy filing. This means a lender would have about 3 months or 90 days to file for an ‘adversary proceeding’ once the debtor has filed for bankruptcy. It is important to note that if the lender does not file within this period, the right of lender is void and it is up to the discretion of the bankruptcy court to release or not release the civil fines/compensations.
Points to be noted
Three important points to be proved by the lender in order to categorize a debt as fraud or from embezzlement can be listed as follows-
• The bankruptcy filer or debtor held the property for another property
• The property was used for unauthorized purposes
• The circumstances, evidence, and facts suggest an act of fraud
Once these three points are proved by the lender, the debt cannot be released under the bankruptcy norms. Also, once the debt has been declared as non-releasable by the bankruptcy court, it remains so for any future bankruptcy filings also. This means such debt could never be released no matter what. Every situation of bankruptcy is different. Personalized and professional services desired can be availed by dialing +1 888-297-6203. Dial now for interpreting your situation better!