Karl Mathers set up a new company and obtained loans to buy inventory with the intention of filing for bankruptcy after 2 years and selling the inventory later to a close friend at deep discounts.This type of bankruptcy fraud is known as:

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This situation is commonly referred to as a "bust-out" scheme, where a business owner obtains credit or loans with no intention of paying them back and plans to sell off assets at a discounted rate before declaring bankruptcy. This is a form of bankruptcy fraud.

Karl Mathers Set Up a New Company and Obtained Loans