Fictitious bankruptcy can be easily recognized by its signs.
Signs of fictitious bankruptcy include:
- falsification or destruction of accounting and other documentation indicating the financial condition of the debtor;
- concealment, destruction or depreciation of property that could be used to pay off debts;
- concluding imaginary or unprofitable transactions with counterparties or dummies aimed at reducing the assets or increasing the liabilities of the debtor;
- creating obstacles to the work of the arbitration court, arbitration manager, creditors or other persons participating in the bankruptcy procedure.
Not everyone can avoid the specified punishment for fictitious bankruptcy, since there are mechanisms aimed at identifying signs of such illegal actions:
- analysis of financial statements and accounting documentation of the debtor
- conducting an audit and examination of the debtor’s activities and property
- study of transactions and agreements concluded by the debtor with third parties
- checking the validity of documents confirming the debts and obligations of the debtor
- assessment of the market value of property and rights of claim of the debtor
- use of information systems and databases containing information about debtors and creditors
In my practice, I do not recommend that people use the bankruptcy procedure, since this entails certain negative consequences for individuals:
- Introduction of restrictions on: management of legal entities, holding managerial positions in financial organizations, repeated bankruptcy within 5 years.
- Entering information about bankruptcy into the Unified State Register of Information on the Activity of Legal Entities, Individual Entrepreneurs and Peasant (Farm) Farms and in the Credit History Bureau for 10 years.
- The need to warn the lender about the fact of bankruptcy when applying for a new loan or loan within 5 years.
- The possibility of appealing bankruptcy by creditors if signs of fictitiousness or premeditation of bankruptcy are revealed.
Is a person ready to take such a step? It depends on his will, intentions and goals that he has defined for himself.
In most cases, if you want to resolve the situation with debt collection and carry out the procedure correctly, you can avoid bankruptcy and get rid of debt obligations, preserving your reputation and your capabilities.