What Is the Standard of Proof in Bankruptcy Law?
Given the amount of documentation you'll be asked to send to a bankruptcy court when you petition for relief, you might wonder what the standard of proof is for everything you're going to present. Here is the answer a bankruptcy lawyer might provide.
Petitions and Perjury
It's worth noting that a bankruptcy petition is signed under penalty of perjury. This means that when you attest to the contents of the filing, you do so to the best of your knowledge at the time.
Also, the court will appoint a trustee. This individual is usually either a bankruptcy attorney or an account, and they have the right to place you under oath and ask questions about your circumstances and finances.
Creditors also have the right to hear the testimony of the debtors. This happens after the court has ordered a meeting of the creditors.
Questioning Evidence
Presuming the petitioner is not engaged in willful fraud, questions about evidence in bankruptcy court are subject to the civil standard of evidence. This standard is stated as "the preponderance of the evidence," and it's often called the 51-Percent Standard. What that means is when there's a question about the evidence, you only have to prove that your explanation about its validity is the correct one.
Suppose there were doubts about the accuracy of the figures from your savings account. Generally, the court will ask you to just make a good-faith effort to double-check or update the information. If necessary, the court could ask the bank to supply the required numbers. The trustee then determines the account's value based on the preponderance of the evidence.
Fraud, Avoidance, and Deceit
There is an unfortunate unresolved issue in the bankruptcy system pertaining to the standard of evidence when accusations of willful deceit emerge. Such concerns appear usually when someone transfers assets to another party before they file a petition. This is considered an attempt to deny creditors the chance to recover value from the sale of the assets.
Some courts continue to apply the civil standard of evidence, but others apply the higher "clear and convincing evidence" standard from criminal courts. The appellate courts have yet to have definitively resolved this issue.
Muddying the waters more is that intent to defraud can be presumed in some bankruptcy proceedings. Specifically, many Ponzi schemes and similar business models are presumed fraudulent.
The best solution, however, is to avoid asset transfers prior to filing. Likewise, your bankruptcy lawyer will accurately record and present all of your assets in the petition.
To learn more or build your bankruptcy case, contact a bankruptcy attorney.