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Matthew A. Radefeld and Daniel A. Juengel

Everything you need to know about bankruptcy fraud

On Behalf of | Sep 1, 2022 | Federal Crimes, White Collar Crimes |

Bankruptcy fraud occurs when an individual doesn’t represent accurate information when filing for bankruptcy. It can also happen when someone files for bankruptcy to deceive creditors. According to Bankruptcy Code, 18 U.S.C, if the U.S Department of Justice finds you guilty of bankruptcy fraud, you could face $250,000 in fines and up to five years in federal prison.

The U.S Attorney’s Office investigates bankruptcy fraud cases which involves reviewing financial crimes which could have been committed by the alleged. Any dishonesty act after being found guilty of bankruptcy fraud could further lead to perjury charges. Below are some of the most common bankruptcy fraud schemes in the U.S.

Concealment of assets

This occurs when debtors hide their assets to avoid losing them to creditors. When filing for bankruptcy, the court requires a debtor to indicate all assets. Creditors can then claim a share of earnings after a bankruptcy trustee sells the assets.

Typically, debtors conceal their assets either by transferring or gifting a large amount of property to a close loved one with good credit or by hiding cash assets in an overseas account. Therefore, when filing for bankruptcy, it is essential to disclose to your trustee any significant financial dealing or transfer of property you have made recently.

Multiple filings

This occurs when someone intentionally files for bankruptcy in more than one jurisdiction. The individual may file the claims using their actual personal details or false details. Similarly to concealment of assets, the debtors may fail to indicate all their assets when filing for the claims in different states.

Hiding the actual value of a property

A debtor may list a property but fail to indicate its real value. When overseeing the debtor’s bankruptcy estate, a trustee usually has the property valued. Through this, it can be known if the debtor lied about the property’s value.

Sometimes, a person may not know the property’s real value and make a wrong estimation or an honest mistake. However, this could lead to a criminal investigation as it can be challenging to prove it was an honest mistake. Therefore, debtors need to have a professional assessment of their property before listing it as any mistake could be considered as hiding of assets.

Making mistakes on bankruptcy forms

Mistakes on bankruptcy forms, whether honest or intentionally, can have serious consequences. It is easy to make an error in the bankruptcy paperwork, but this could lead to a review of your claims. A bankruptcy trustee and the court usually take any wrong information or misinterpretation as fraud, so it is vital to seek professional legal help when filing bankruptcy forms.