Debt Restructuring Fraud

AAA

DEFINITION of 'Debt Restructuring Fraud'

An illegal technique where an individual or corporation hides or transfers assets before filing for bankruptcy. Debt restructuring allows the fraudster to reduce or even erase the debts and then reclaim the assets. Debt restructuring fraud is a clear abuse of the intent behind bankruptcy laws.

INVESTOPEDIA EXPLAINS 'Debt Restructuring Fraud'

The guiding principle of bankruptcy is that the creditors and debtors can find a compromise that favors neither party, but satisfies both. By knowingly concealing or misstating assets, the debtor is abusing the process to escape financial liabilities while holding onto the wealth that those liabilities - and thus the creditors - helped create.

RELATED TERMS
  1. Cramdown

    A bankruptcy concept that is often employed to obtain a Chapter ...
  2. Chapter 11

    Named after the U.S. bankruptcy code 11, Chapter 11 is a form ...
  3. Secured Debt

    Debt backed or secured by collateral to reduce the risk associated ...
  4. Default Risk

    The event in which companies or individuals will be unable to ...
  5. Bankruptcy

    A legal proceeding involving a person or business that is unable ...
  6. Accelerated Resolution Program ...

    A program designed to reduce the time and cost of resolving failed ...
RELATED FAQS
  1. What are some high-profile examples of wash trading schemes?

    In 2012, the Royal Bank of Canada (RBC) was accused of a complex wash trading scheme to profit from a Canadian tax provision, ... Read Full Answer >>
  2. How should a whistleblower report unlawful or unethical behavior?

    Whistleblowing takes many forms. A whistleblower could expose government corruption, expose unethical business behavior or ... Read Full Answer >>
  3. How do insurance companies use a whistleblower?

    Fraudulent claims are among the most prevalent and serious business risks that insurance companies face. Many consumers have ... Read Full Answer >>
  4. What are examples of inherent risk?

    Inherent risk is the risk imposed by complex transactions that require significant estimation in assessing the impact on ... Read Full Answer >>
  5. What is the difference between a possessory and a non-possessory lien?

  6. Why is more interest paid over the life of a loan when it is capitalized?

    More interest is paid over the life of a loan when that interest is capitalized because the capitalized interest is added ... Read Full Answer >>
Related Articles
  1. Insurance

    Declaring Bankruptcy Is No Easy Out

    Going bankrupt can help pull you out of debt, but it's rarely the best option.
  2. Insurance

    Life After Bankruptcy

    Find out what you have to look forward to after filing for Chapter 7 or 13.
  3. Retirement

    What You Need To Know About Bankruptcy

    Don't choose this last-resort option until you learn how it will affect your future.
  4. Options & Futures

    Changing The Face Of Bankruptcy

    A 2005 law attempts to unmask fraudulent debtors and still save those who are struggling. Will it affect you?
  5. Options & Futures

    Uncovering A Career In Forensic Accounting

    Does a job as a financial sleuth sound interesting to you? Dig in to learn more.
  6. Economics

    Oil Companies Near Bankruptcy

    With the resumed uncertainty in Europe surrounding Greece and the sudden bear market gripping China, the price of oil has once again slid under $50. While low oil prices may be welcomed by drivers ...
  7. Economics

    What Does Going Concern Mean?

    Going concern is a concept used in business and accounting to describe the fiscal health of a company.
  8. Economics

    Why U.S. Consumers Aren’t Spending

    Despite continued improvement in the labor market and lower gasoline prices, consumers' activity remains soft: retail sales growth is close to its lowest.
  9. Fundamental Analysis

    Companies That Went Bankrupt From Innovation Lag

    Companies that don't keep up with market-changing innovations run the risk of going bankrupt. We look at some examples.
  10. Fundamental Analysis

    What Does Consolidation Mean?

    The term consolidation has multiple meanings depending on its context.

You May Also Like

Hot Definitions
  1. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  2. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  3. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  4. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
  5. Grandfathered Activities

    Nonbank activities, some of which would normally not be permissible for bank holding companies and foreign banks in the United ...
  6. Touchline

    The highest price that a buyer of a particular security is willing to pay and the lowest price at which a seller is willing ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!