It must be stated before starting that proving fraud in a court of law is a difficult proposition (notwithstanding the obvious) because the court must enter the heart and mind of the accused and determine what intent they held at the time of the act. That said, let's define fraud:
FRAUD:
The intentional misrepresentation of a material fact, relied upon by another to their detriment.
In other words, a lie that causes someone else to suffer damages (in the legal sense—money loss)
The lie must be intentional (as opposed to accidental lies?), must be about a fact (no opinions), and that fact must be a major part of the transaction, not something of minor consequence.
You might then be scratching your head and wondering: "how could a creditor come after me for fraud in a bankruptcy court when I have done none of the above?"
Simple and then again not so easy.
1) Oftentimes, factual truth is dictated by the interpretations of its perceiver. Meaning: what one person sees, may not be the same thing another person sees. What ever happened to objective truths?
2) Because no two stories are ever identical, creditors sometimes cling to their most desperate argument in an attempt to salvage any last ounce of legal might.
3) Because a creditor cannot proceed in contract versus a debtor in bankruptcy, the creditor is left with few legal claims (see 11 U.S.C. 523 for a complete list)
4) A basic, albeit risky, ideology in the practice of law is to throw a dart at the board and hope it sticks.
5) So, some risk-taking creditors (or those with "slam-dunk" cases) will throw their fraud dart and hope the fact-finder rules in their favor. In a bankruptcy court, the finder of facts is a federal judge and not a jury.
6) The creditor may state (if their pleadings are well-drafted) that the debtor committed fraud by intentionally misrepresenting the following material fact and that such misrepresentation caused legal/equitable damages. (They had better have some facts to support this)
You might still be scratching your head: "how does this pertain to me?"
Three common ways in the realm of credit cards and cash advances:
1) Sometimes applicants fib when stating their income on a credit card application. This can be argued as a material misrepresentation that was relied upon by a creditor (new rules are making this more difficult to get away with).
2) Incurring debt on the eve of a bankruptcy, or to be more exact: 90 days prior to the filing of a bankruptcy (for credit card charges, with an exception of $550 for necessaries) and 70 days prior to filing for cash advances. The misrepresentation that is presumed: a debtor did not have the intention of paying back the debt and thus should not have incurred it in the first place.
3) Incurring suspicious debts (think luxuries and big-ticket items) and not making any good-faith payments on said debts.
Keep in mind that a court works with both law and facts. The facts determine whether a creditor may wish to pursue you in a bankruptcy court, and most often they do not (unless the act was truly "fraudulent" or there is that appearance of fraud)
So, as long as you find yourself in that common category (where the vast majority of all debtors find themselves) you will be just fine. If paying past debts becomes difficult to unbearable and there was always the intention to pay until it became challenging or impossible (remember the heart-and-mind test), with the proper guidance you can avoid any allegations of ill-behavior and file a clean bankruptcy, leading, in turn, to instant relief.
