What is Bankruptcy Fraud?

The crime of bankruptcy fraud covers many different types of activities, but these generally fall into two broad categories: • Hiding, non-disclosure, or removal of assets during the bankruptcy process in a knowing and fraudulent manner • Use of bankruptcy to avoid litigation or get out of contracts in a knowing and fraudulent manner Prosecutors may file bankruptcy fraud charges for actions taken in contemplation of filing for bankruptcy (using a look-back period) as well as for actions taken during the bankruptcy process. The "knowing and fraudulent" clause is critical. The government must demonstrate intent to defraud. This can be difficult in some cases — thus providing knowledgeable lawyers with the means for a successful defense of the charges.

In the United States, bankruptcy fraud is a federal crime. Bankruptcy is a legal process which allows a business or individual to be discharged of all their debts due to an inability to pay. There are multiple types of bankruptcy, but all have the same definition of what types of actions constitute bankruptcy fraud. There are three methods of committing bankruptcy fraud: concealment of assets, multiple filings and petition mills. The number of bankruptcy fraud cases rises in proportion to the number of bankruptcy filings each year. Bankruptcy fraud convictions can result in a fine up to $250,000 US Dollars (USD) and/or up to five years in prison. Concealment of assets is the most common type of bankruptcy fraud. This type of fraud occurs when the debtor hides his assets during the declaration phase of the bankruptcy process, in an attempt to keep them from being liquidated. Debtors may fail to include them on the list of assets, transfer ownership to family or friends and move assets ...  more

Bankruptcy fraud is a business crime of filing for bankruptcy with criminal intent, that is with the intention of evading payment for goods even though the buyer has funds that could be used to pay for them, or accepting payment for goods or services but not supplying them. Common types of bankruptcy fraud include petition mills, false oath, concealment of assets, and fraudulent conveyance. Multiple filings are not per se fraudulent; as with all things in the law, it depends on the circumstances. Bankruptcy fraud should be distinguished from strategic bankruptcy, which is not a criminal act (but may prejudice a judge against the filer if there is evidence that bankruptcy is being used strategically).

As America navigates its way through the economic crisis, many families will feel as if filing bankruptcy is their best option at a new beginning. The bankruptcy laws provide individuals the ability to reorganize, or purge their debt. Part of the process requires those who seek bankruptcy protection to file a legal form detailing all assets and liabilities. Those who fail to disclose all assets and liabilities on the bankruptcy forms subject themselves to criminal charges of bankruptcy fraud. During the more than 21 years that I've served in federal prison, I've met several individuals who were convicted of bankruptcy fraud. They were well-educated individuals who did not consider themselves criminal. Arthur, for example, was a corporate lawyer who should have understood the consequences of providing misleading information on an official government document. He did not. As a consequence of his prevarication, a grand jury charged Arthur with bankruptcy fraud. In Arthur's case, the ...

People declare bankruptcy when it becomes impossible to pay back creditors. Usually it is done as a last resort when the amount of debt one incurs is far greater than the amount of their income. It is a means of declaring that you do not have the money to settle any outstanding debts, and wiping those debts out. Scammers take advantage of this system by purposely running up large debts that they have no intention of attempting to pay back. There are several common types of bankruptcy fraud criminals utilize: Concealing assets When a person files for bankruptcy, the personal belongings that they still owe money on and can not pay for will be repossessed. Scammers will purchase items and attempt to conceal when declaring bankruptcy. They may claim the items were given as gifts, or sold at a garage sale in an attempt to raise money. Once the bankruptcy case is over, the criminals keep their ill gotten goods or sell them for profit. Improper forms Some scammers will give false ...  more