1

What happens if you borrow 100-500k in Australia, pay it to a friend and then declare bankruptcy shortly after? Would your friend need to pay back the bank? Would this be fraud?

What would happen if 1,000 people did this and paid the same person?

Edit:

Not sure why everyone is getting angry about the question. I was just curious and researching about loopholes in systems. I don't plan to do such a thing

  • 14
    Obviously that would be fraud. – quid Aug 21 '17 at 17:22
  • 11
    Because you are literally asking a question about how to commit a fraud . – JoeTaxpayer Aug 21 '17 at 17:37
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    Not really, I already know how it works. I'm just asking if it is fraud. – mateos Aug 21 '17 at 17:44
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    Borrowing money from anyone for any reason, with the intent of not repaying it is always fraud, by definition. – TTT Aug 21 '17 at 20:55
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    "What would happen if 1,000 people did this and paid the same person?" - 1001 people would risk going to jail. – Joe Strazzere Dec 6 '17 at 20:47
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This is fraud and could lead to jail time.

The vast majority of people cannot obtain such loans without collateral and one would have to have a healthy income and good credit to obtain that kind of loan to purchase something secured by a valuable asset, such as a home.

Has this been done before? Yes, despite it being the US, you may find this article interesting.

Hopefully, you see how the intent of this hypothetical situation is stealing.

14

This is called a fraudulent conveyance because its purpose is to prevent a creditor from getting repaid. It is subject to claw back under US law, which is a fancy way of saying that your friend will have to pay the bank back. Most jurisdictions have similar laws.

It is probably a crime as well, but that varies by jurisdiction.

2

Following up on the @DavidSchwartz answer... mens rea.

https://www.law.cornell.edu/wex/mens_rea

Mens Rea refers to criminal intent. The literal translation from Latin is "guilty mind." ... A mens rea​ refers to the state of mind statutorily required in order to convict a particular defendant of a particular crime. ... Establishing the mens rea of an offender is usually necessary to prove guilt in a criminal trial. The prosecution typically must prove beyond reasonable doubt that the defendant committed the offense with a culpable state of mind. Justice Holmes famously illustrated the concept of intent when he said “even a dog knows the difference between being stumbled over and being kicked.”

You The borrower knows full well that what he's doing is fraud.

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This sounds like a crazy idea, but in reality people don't make the wisest decisions when considering bankruptcy in Australia. My suggestion would be to get some advice from an insolvency specialist.

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