bankruptcy fraud (2024)

FAQs

What is an example of bankruptcy fraud? ›

concealing a property transfer that occurred before the bankruptcy (for example, failing to disclose gifting a car to a friend) providing a false document to the bankruptcy court or trustee. destroying or withholding documents.

Proof of fraud requires a showing that the defendant knowingly and fraudulently misrepresented a material fact. Bankruptcy fraud carries a sentence of up to five years in prison, or a fine of up to $250,000, or both. Even just intending to commit bankruptcy fraud may be punishable.

The federal crime of bankruptcy fraud, as codified by Title 18 of the United States Code, Section 157, criminalizes the making of false statements or representations with the intent to commit fraud in the bankruptcy process.

One of the most famous incidents of bankruptcy fraud in the United States involved the activities of Robert Brennan. Brennan was suspected of numerous financial crimes but was eventually convicted of bankruptcy fraud.

But sometimes omissions are deliberate. Bankruptcy trustees will look for red flags that may indicate dishonesty about assets and income. Some of these are hidden assets, non-exempt property that's categorized as exempt, and missing pieces in a person's financial history.

Bankruptcy fraud is taken very seriously and can result in extended initial restriction periods, fines, prosecution, and even custodial sentences.

Uncovering fraud, a trustee generally refers the information to an appropriate U.S. Attorney and the FBI for investigation. Working closely with the U.S. Attorney's Office, FBI agents generally conduct interviews and review financial documents filed in connection with the bankruptcy petition.

Buckley, the United States Supreme Court ruled that the bankruptcy process cannot be used to discharge debts incurred through fraud, even when the debtor was not the individual that defrauded creditors.

According to the U.S. bankruptcy code, there is no specific minimum dollar amount of debt owed that would make them eligible for filing bankruptcy. This means that no matter how much you owe, you can file for Chapter 7 bankruptcy. A key determinant is the size of your income.

Fraudulent Spending Before Bankruptcy

That means credit card purchases totaling $600 or more within 90 days of the bankruptcy filing will be presumed to be fraudulent, under federal bankruptcy laws. In addition, a cash advance of more than $875 within 70 days of the bankruptcy filing will also be presumed fraudulent.

Do federal courts hear bankruptcy cases? ›

More specifically, federal courts hear criminal, civil, and bankruptcy cases.

Filing for bankruptcy is never an ideal situation. However, it's one of the main options to explore if you fall victim to an online romance scam and end in financial distress. The bankruptcy attorneys at the law offices of Warren & Migliaccio can help you file for bankruptcy, saving you from further distress.

The Federal Bureau of Investigation (FBI) estimates that 10 percent of all bankruptcy filings involve fraud, especially evasion by debtors to fully disclose their assets. If so, there were about 100,000 cases of fraud in Calendar Year (CY) 2001.

You'll likely have to forward bank statements or bring them to the meeting. If you show up without bank statements, the trustee will question you about where you keep your cash and how you pay your bills. You might have to produce evidence of money orders or receipts for payments.

Dishonesty often continues beyond any judgment against the perpetrator, and fraudsters often have a number of tricks up their sleeve to evade payment of any judgment debt. Fraud, however, survives bankruptcy. In other words, bankruptcy does not stop the ability to enforce a judgment directly after bankruptcy.

§ 157 prohibits devising or intending to devise a scheme or artifice to defraud and, for purposes of executing or concealing the scheme either (1) filing a bankruptcy petition; (2) filing a document in a bankruptcy proceeding; or (3) making a false statement, claim, or promise (a) in relationship to a bankruptcy ...

Section 523 of the Bankruptcy Code exempts from discharge “any debt . . . for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by . . . false pretenses, a false representation, or actual fraud. . . .” 11 U.S.C. § 523(a)(2)(A).

A finding of "presumption of abuse" alerts the bankruptcy court to the fact that a debtor filing a Chapter 7 case has sufficient income to pay into a Chapter 13 repayment plan. (By definition, a Chapter 7 debtor's income is too low to repay creditors.)