bust-out scheme

fraud

Written by

The Information Architects of Encyclopaedia Britannica

Last updated

July 21, 2026

Quick Summary

A "bust-out scheme" is a type of bankruptcy fraud where an individual applies for as much credit as possible, accumulates debt, and then files for bankruptcy with no intention of repaying the creditors. This often involves purchasing luxury items that may be difficult for creditors to reclaim during bankruptcy proceedings. Historically, such actions were viewed as careless, but they are now classified as criminal bankruptcy fraud. In the United States, approximately 10 percent of bankruptcy filings involve fraudulent claims, with bust-out schemes being one of the commonly encountered methods.1

Summary created from Britannica articles using AI. AI can make mistakes, so verify using Britannica articles.

2 Britannica Sources

Ask Britannica AI about this topic

Britannica doesn't have a full article on this topic, so we've curated a list of our relevant coverage.

bankruptcy fraud
Bust-out schemes
Bust-out schemes have long been a problem but have only recently been classified by many scholars as bankruptcy fraud. Historically, individuals who engaged in this type of activity were labeled as careless but not criminal; today, the same cannot be said. When an…
Read More
Bust-out schemes have long been a problem but have only recently been classified by many scholars as bankruptcy fraud. Historically, individuals who engaged in this type of activity were labeled as careless but not criminal; today, the same cannot be said. When an…
Read More