Individuals and businesses will file for bankruptcy when they have more debts than they can realistically manage. After an individual or a legal entity files for bankruptcy, they can no longer be harassed by creditors and creditors can no longer threaten them with a lawsuit. Instead, creditors must go to the bankruptcy court where the bankruptcy petition was filed. There, the judge will determine how much debt should be repaid based on the amount of property the individual filing for bankruptcy owns. The idea of bankruptcy is allowing an individual or a business to start fresh without having crushing debts.
According to the law, anyone who files for bankruptcy while at the same time concealing their assets or making false statements about their assets while they are under the penalty of perjury, destroys financial records that are pertinent to the case being considered, takes a bribe, or files false claims has committed bankruptcy fraud. This is a serious federal crime.
In some instances, bankruptcy fraud is also seen as a civil crime. The difference between the two is that a federal charge of bankruptcy fraud requires individuals to knowingly act in a fraudulent manner. A civil charge of bankruptcy fraud usually stems from a mistake in paperwork and is not the result of deception or cheating.
The primary form of bankruptcy fraud stems from individuals attempting to hide or conceal assets that they have. They intentionally attempt to block the bankruptcy court from finding out what they own. When an individual or business files for bankruptcy, the bankruptcy court is going to do an inventory of all of their property, come up with a combined value, and create what is known as a bankruptcy estate. This is then used to determine how much a person filing for bankruptcy can pay their creditors or how a payment plan should be restructured. Some individuals will deceitfully attempt to hide property from the court, hoping to minimize the amount they have to pay back to creditors. This is a federal crime and can result in jail sentences. Anyone who is being accused of concealing assets must speak to our criminal defense attorneys immediately.
Bribery happens between the individual filing for bankruptcy and the creditor. Some try to bribe creditors in an attempt to convince them not to file a claim. They will offer the creditor a cash payment if the creditor in turn does not file a claim.
It is impossible to accidentally commit bankruptcy fraud. For example, if an individual had an expensive piece of art that was left to them by a long-lost uncle and the individual never had possession of the art, so they forgot to include it in the information presented to the bankruptcy court, this is not fraud. This is forgetfulness. Criminal fraud involves a conscious attempt to deceive the court.
Bankruptcy fraud is a broad category and includes many different activities that are done with the purpose of taking advantage of the bankruptcy process. These actions would include intentionally destroying important documents, lying to the court, filing for bankruptcy in multiple states at the same time, starting a business with the hopes of getting credit and then filing for bankruptcy to avoid paying back the credit. Anyone who is charged with bankruptcy fraud must talk to a criminal defense attorney.
The penalties for bankruptcy fraud are severe. Civil penalties include forfeiture of discharge rights. It can also include loss of exemptions.
Prison: Criminal penalties include prison time of up to 5 years for every act of bankruptcy fraud committed.
Probation: Probation is a possibility in bankruptcy fraud cases and can last from between 3 to 5 years. In extreme circumstances, longer sentences may be possible. Probation will require interaction with the probation officer and avoiding committing more crimes.
Fines: The fines for bankruptcy are very steep. The court has the option to impose fines of up to $250,000 for every act of fraud committed. These fines can be imposed in addition to prison time and other penalties.
Talk to an Attorney
Bankruptcy fraud is a very serious crime. There are civil and criminal punishments that come into play. If you are being charged with bankruptcy fraud, you must speak to an attorney immediately. Even if you are already working with a bankruptcy lawyer, you need to speak to a criminal defense attorney. The majority of bankruptcy lawyers do not know how to handle the criminal justice process. Only a lawyer who works with the criminal justice system can provide you the protection from criminal prosecution you need.