Bankruptcy fraud is a serious crime that holds strict consequences for those who attempt it. In general terms, bankruptcy fraud occurs when a person intentionally lies to the court system during the bankruptcy process. Many times bankruptcy fraud is committed alongside other crimes including mortgage fraud, identity theft or money laundering.
No one is immune from facing penalties if found guilty of bankruptcy fraud. Recently, a highly successful business owner and reality TV star of the show “Dance Moms” was sentenced to jail for bankruptcy fraud.
What is Bankruptcy Fraud?
Bankruptcy fraud can be defined in different scenarios such as the following:
- Hiding assets.
- Providing false information or filing incomplete forms.
- Filing for bankruptcy multiple times in different locations.
- Bribing a court-appointed trustee.
Types of Bankruptcy Fraud
Most bankruptcy fraud involves hiding assets from the courts. Why do people hide assets? It is usually because creditors can only take assets that have been listed by the debtor during the bankruptcy proceedings. Hiding assets can include transferring assets to relatives, friends or others in hopes it is never located, and does not ‘protect’ any money or property – it only opens up the debtor to more serious consequences such as jail time.
Other cases of fraud involve a scheme to intentionally run up credit card bills with no intention of paying them off (also known as “credit card bust-outs”).
Fraud involving filing in multiple locations can include using the correct name, using false names, or a combination of true and false information in a variety of locations. Typically, this scenario is used to aid in concealing assets and to slow down the bankruptcy process.
Consequences of Bankruptcy Fraud
Bankruptcy fraud carries a sentence of up to five years in federal prison and/or a fine of $250,000. Simply attempting bankruptcy fraud is punishable by law.
Bankruptcy fraud is overseen by the FBI, who partners with other government agencies such as the IRS and more than 70 task force groups, to convict individuals across the US. Currently, the FBI has over 300 pending bankruptcy fraud cases in the US.
Working with the U.S. Attorney’s Office, FBI investigators open a case if warranted and begin conducting interviews and reviewing financial documents. Based on the complexity of the case, the FBI will use undercover operations and court-authorized electronic surveillance to gather additional evidence.
The IRS lists several examples of recent bankruptcy fraud investigations including:
- A Dallas area man sentenced to 16 months in prison for making a false statement under oath.
- A Phoenix-area man sentenced to 120 months in prison and his wife sentenced to 12 months of home confinement, for attempting to commit bankruptcy fraud.
Bankruptcy fraud is serious. If you are considering filing for bankruptcy, it is vitally important to be truthful and honest throughout the entire process. closely with an experienced attorney to ensure you are not breaking any laws during the process. The team at the Wright Firm L.L.P. can work closely with you to ensure your bankruptcy filing process is legal and accurate.
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The Wright Firm L.L.P’s team of experienced attorneys can provide you with the knowledge and insight to assist in the bankruptcy process in Dallas County and surrounding areas. Contact us today for a consultation.