Federal Bankruptcy Fraud Attorney

Federal Bankruptcy Fraud Attorney: Charged With Concealing Assets

About 10% of bankruptcy filings involve fraudulent conduct. The FBI has approximately 300 pending bankruptcy fraud cases nationwide at any given time. Do the math. Hundreds of thousands of fraudulent filings. A few hundred prosecutions. The federal criminal justice system has essentially created a lottery – most bankruptcy fraud goes completely unpunished because there aren’t enough resources to prosecute it. If your fraud involves enough money, you become a priority target. If it’s modest, you’re statistically likely to walk away without criminal consequences. This isn’t how the system is supposed to work. It’s how the system actually works.

But when prosecution does happen, the consequences extend far beyond the 5-year maximum prison sentence under 18 USC 157. A bankruptcy fraud conviction creates a permanent bar from ever filing bankruptcy again. No matter what financial catastrophe strikes in the future – medical debt, business failure, lawsuits – bankruptcy relief becomes permanently unavailable. You’ve lost the financial safety net that exists for every other American. Professional licenses evaporate. Lawyers get disbarred. Doctors lose medical licenses. Accountants can’t practice. Real estate agents forfeit their credentials. The conviction follows you permanently in ways that most defendants never anticipate until it’s too late.

Here’s the trap that catches sophisticated people who think they understand bankruptcy: the petition you file becomes the confession that convicts you. Every schedule, every statement, every answer to every question is signed under penalty of perjury. Those aren’t just civil forms. They’re sworn statements to a federal court. When you lie on them – when you omit an asset, overstate a debt, fail to disclose a transfer – you’ve committed perjury. And perjury under 18 USC 1621 carries a maximum of 20 years. The 5-year bankruptcy fraud statute isn’t even the worst exposure. The false statements you made trying to escape your debts create decade-long prison exposure.

The 341 Meeting – An Interrogation Disguised As Paperwork

Heres the system revelation that most bankruptcy filers never understand. The “meeting of creditors” – officially called a 341 meeting – has a misleading name. Creditors almost never attend. The meeting is actually between you and the bankruptcy trustee. And the trustee’s job isnt to help you get a fresh start. The trustee’s job is to investigate your case, find assets to distribute to creditors, and identify fraud.

The trustee is officially an officer of the U.S. Department of Justice, under the office of the U.S. Trustee. Think about that. The person across the table from you at the 341 meeting works for the same department that prosecutes federal crimes. They ask you questions under oath. Your answers are recorded. If you lie, thats perjury. If you omit assets you should have disclosed, thats concealment. The meeting feels like a bureaucratic formality. Its actualy an investigation.

OK so look at what happens during this “meeting.” The trustee has already reviewed your schedules – the documents listing your assets, debts, income, and expenses. They know what you claimed. Now there comparing your claims to reality. Do your bank statements match your reported income? Do your property records match your disclosed assets? Have you made any transfers to family members that you failed to mention? The trustee is trained to spot inconsistencies. Thats there job.

Heres what defendants dont realize until too late. If the trustee suspects fraud but dosent yet have the evidence they need, they can compel additional testimony and documents through a Rule 2004 examination. This isnt optional. You must answer questions and produce records. The examination can cover any matter relevant to the administration of your case. The trustee is building a file. That file can become a criminal referral.

Your Own Petition Is Your Confession

Heres the hidden connection that transforms civil bankruptcy into criminal prosecution. Every document you file in bankruptcy is signed under penalty of perjury. Schedule A lists your real property. Schedule B lists your personal property. Schedule C claims your exemptions. Schedule D lists your secured debts. And every one of them includes a declaration that the information is “true and correct to the best of my knowledge, information, and belief.”

When you omit an asset – when you fail to list the boat your keeping at your cousins dock, the jewelry your “holding” for a friend, the bank account you opened in your mothers name – youve made a false statement under oath to a federal court. The bankruptcy fraud statute under 18 USC 157 carries 5 years maximum. But the perjury statute under 18 USC 1621 carries 20 years. The false statement you made trying to hide assets creates four times the prison exposure of the fraud itself.

Think about what this means for defendants who think there being clever. Every answer you give at the 341 meeting is under oath. Every document you sign is under penalty of perjury. Your bankruptcy case creates a comprehensive sworn record of your financial life. When investigators discover the hidden assets – and they often do, becuase trustees are experienced at finding them – they dont just have evidence of concealment. They have your own sworn statements denying what they found. Your petition becomes your confession. Your testimony becomes your conviction.

Heres the irony that catches people who should know better. The forms are designed to catch fraud. The questions are comprehensive. Did you transfer any property in the last two years? Did you make any payments to insiders? Do you have any property being held by someone else? These arent casual inquiries. There traps. If you answer falsely, the question proves you knew what you were supposed to disclose and chose not to.

Concealment vs. Mistake – When Timing Determines Everything

Heres the inversion that distinguishes federal crime from innocent error. A transfer made two years before bankruptcy might be legitimate estate planning. The same transfer made two months before filing looks like fraud. The timing determines whether your conduct is suspicious or criminal. Prosecutors and trustees understand this distinction intimately. Defendants often dont.

The legal standard requires intent. You cant accidentally commit bankruptcy fraud. If you genuinely forgot about the classic car your father stored in his garage, thats not fraud – thats mistake. But if you knew about the car and deliberately omitted it from your schedules, thats concealment. Same omission. Completely different consequences. The distinction turns entirely on what you knew and when you knew it.

OK so look at how this actualy plays out in investigations. The trustee discovers you failed to list a valuable asset. Maybe its a boat. Maybe its cryptocurrency. Maybe its an inheritance you recieved but never reported. The trustee confronts you with the omission. Now everything depends on your response. If you say “I completely forgot about that, here are the records,” the trustee might accept it as mistake. If you say “my friend was holding that for me” or “that was sold years ago” and the evidence shows otherwise, youve compounded concealment with false statements.

Heres the uncomfortable truth about intent evidence. Timing is circumstantial proof of intent. If you transferred property to your brother two weeks before filing bankruptcy, the timing itself suggests you were trying to hide it. You can claim innocent purpose. But the jury will hear: he transferred property, then immediately filed bankruptcy, and now claims it was coincidence. Timing creates inference. Inference creates conviction.

The Permanent Bar Nobody Mentions

Heres the consequence cascade that extends far beyond prison. A bankruptcy fraud conviction can result in a permanent bar from ever filing bankruptcy again. This isnt a temporary restriction. This isnt a waiting period. This is forever. No matter what financial disaster strikes in the future – medical emergency, job loss, business failure, lawsuit judgment – you cannot access bankruptcy relief. The safety net available to every other American is permanently closed to you.

Think about what this means practically. Ten years from now, you get hit with catastrophic medical bills. Twenty years from now, your business fails. Thirty years from now, a lawsuit judgment threatens everything you own. Bankruptcy exists precisely to provide relief in these situations. But not for you. The conviction for hiding assets in your first bankruptcy means you can never use the bankruptcy system again. The punishment continues for life.

And heres the professional destruction that follows. A bankruptcy fraud conviction is a crime of dishonesty. For lawyers, thats automatic disbarment in most states. For doctors, its grounds for license revocation. For accountants, CPAs lose there certification. For real estate agents, insurance agents, financial advisors – any profession that requires trust and licensing, the conviction ends your career. The 5-year prison sentence has an end date. The professional consequences dont.

Prosecutors know this. When there negotiating pleas, they understand that for certain defendants – professionals whose careers depend on clean records – the collateral consequences exceed the prison time. A surgeon facing 5 years in prison might serve 2 and rebuild. The same surgeon facing permanent license revocation will never practice medicine again. The real punishment isnt always measured in months.

When Dollar Amount Determines Prosecution

Heres the system revelation about why most bankruptcy fraud goes unpunished. Federal prosecutors have limited resources. They prioritize cases. The FBI focuses on cases with large dollar amounts, possible organized crime involvement, and defendants who file in multiple states. A defendant who hides $50,000 might never be prosecuted. A defendant who hides $500,000 probably will be.

This creates perverse outcomes. Two people commit identical conduct – concealing assets, making false statements under oath. One hides $40,000 and walks away. One hides $400,000 and goes to federal prison. The moral culpability is the same. The dishonesty is the same. The legal elements are identical. But the practical outcome depends entirely on the dollar amount becuase thats how prosecutorial priorities work.

Former federal prosecutors have admitted this openly. Budget cuts gutted enforcement capacity. In 1996, Attorney General Janet Reno launched “Operation Total Disclosure” to prioritize bankruptcy fraud prosecution. But national statistics show prosecutions began to dwindle after 2001. The law didnt change. The resources to enforce it disappeared. As one bankruptcy judge asked: “If nobody follows the law, and theres no enforcement mechanisms or enforcement resources, what good is the law?”

Heres what this means for defendants in the current enforcement environment. Small-dollar fraud may go completely unpunished – but you cant know in advance wheather your case will be the exception. Large-dollar fraud will almost certainly be prosecuted. And if you are prosecuted, the conviction rate exceeds 90%. The IRS Criminal Investigation division, which often participates in bankruptcy fraud cases, maintains a federal conviction rate over 90%. The defense isnt “they wont catch me.” The defense is “will they decide to prosecute.” Once they decide to prosecute, they almost always win.

The Prosecution Pipeline – Three Agencies Must Agree

Heres the hidden connection that explains how bankruptcy fraud cases become federal prosecutions. The process involves multiple agencies, and each one can decline to proceed. The bankruptcy trustee – the person investigating your case – is a DOJ officer but has no prosecution power. The trustee can only refer suspected fraud to the Office of the U.S. Trustee. The U.S. Trustee reviews the referral and decides wheather to send it to the FBI and U.S. Attorney. The U.S. Attorney decides wheather to actually prosecute.

This three-step process creates multiple points were cases can die. The trustee might suspect fraud but lack sufficient evidence for referral. The U.S. Trustee might receive the referral but decide the dollar amount dosent justify FBI resources. The U.S. Attorney might review the case but decline prosecution becuase there office is overwhelmed with higher-priority matters. Most bankruptcy fraud cases never make it through all three gates.

But heres what happens when they do. The U.S. Trustee Program maintains Criminal Enforcement Units with Regional Criminal Coordinators and approximately 25 Special Assistant U.S. Attorneys nationwide. These arent generalists learning bankruptcy law. These are specialists who prosecute bankruptcy fraud exclusively. They work with the FBI and IRS Criminal Investigation Division. When a case makes it through the pipeline to these specialists, conviction is the overwhelming likely outcome.

The FBI currently has approximately 300 pending bankruptcy fraud cases nationwide. That sounds like alot. Compare it to the millions of bankruptcies filed. Most fraud goes unprosecuted. But when your case becomes one of those 300, the full weight of federal law enforcement focuses on you.

How Sentencing Actually Works – The Loss Calculation Trap

Heres the specific number reality that surprises bankruptcy fraud defendants. The federal sentencing guidelines under Section 2B1.1 start with a base offense level of 7 – which produces a guideline range of just 0-6 months at Criminal History Category I. Defendants hear “0-6 months” and think they might get probation. Then they learn how loss amount works.

The guidelines add offense levels based on the dollar amount of loss. This isnt the amount you personally gained. Its the amount creditors lost becuase of your fraud. If you concealed $100,000 in assets that should have been distributed to creditors, thats a $100,000 loss. If you transferred $200,000 to family members before filing, thats $200,000 in loss. Each level of loss adds offense levels. By the time enhancements finish applying, that base level 7 can become level 18, level 22, or higher – transforming months into years.

OK so look at how the math actualy works. Loss amount of $15,000 to $40,000 adds 4 levels. Loss of $40,000 to $95,000 adds 6 levels. Loss of $95,000 to $150,000 adds 8 levels. Loss of $250,000 to $550,000 adds 12 levels. The loss amount ladder continues upward. A defendant who concealed $300,000 in assets starts at level 7, adds 12 levels for loss, and potentially adds more for sophisticated means (2 levels), obstruction of justice (2 levels), or abuse of trust if they were a fiduciary (2 levels). That base level 7 becomes level 23 or higher – producing guideline ranges measured in years, not months.

And heres the trap nobody explains. “Loss” in bankruptcy fraud dosent mean what defendants think it means. Its not just the assets you hid. Its the total harm to creditors from your fraudulent conduct. If your fraud caused creditors to receive nothing when they should have received full payment, the loss is the full amount of the debt. If your fraudulent bankruptcy filing allowed you to discharge $500,000 in debt that should have been paid, prosecutors can argue that $500,000 is the loss. The sentencing calculation can produce much higher offense levels then defendants anticipate.

The average sentence for bankruptcy fraud in 2013 was 47 months – nearly 4 years. Thats the average. Defendants with large loss amounts, sophisticated schemes, or multiple victims serve considerably longer. Bernie Ebbers got 25 years. The Phoenix loan officer got 15 years. When the numbers get big enough, bankruptcy fraud sentencing starts looking like sentences for violent crime.

What To Do If You’re Facing Bankruptcy Fraud Charges

If your facing federal bankruptcy fraud charges under 18 USC 152 or 157 – wheather from a trustee investigation, a criminal referral, or direct FBI involvement – heres what you need to understand immediatly.

Identify the specific charges. Bankruptcy fraud under 18 USC 157 carries 5 years maximum. False oaths and claims under 18 USC 152 can carry higher penalties. Perjury under 18 USC 1621 carries 20 years. Wire fraud and mail fraud charges are often added to bankruptcy fraud prosecutions, each carrying additional years. The total exposure depends on exactly what your charged with.

Understand the evidence against you. Your own bankruptcy petition is the primary evidence. Everything you signed under penalty of perjury, every answer you gave at the 341 meeting, every document you produced – the government has all of it. The question isnt wheather they have evidence. The question is wheather that evidence proves intent.

Challenge intent aggressively. Bankruptcy fraud requires knowing and intentional false statements. Honest mistakes arent crimes. If you genuinely forgot an asset, if you misunderstood what needed to be disclosed, if you relied on incorrect advice from a bankruptcy attorney – these go to intent. The government must prove you acted knowingly and with fraudulent purpose.

Calculate the collateral consequences. Prison time may not be your biggest exposure. Permanent bankruptcy bar. Professional license revocation. Career destruction. For some defendants, negotiating a resolution that avoids certain collateral consequences matters more then the length of incarceration.

Consider cooperation. If your case involves other defendants – a bankruptcy mill scheme, organized fraud, conspiracy with family members – cooperation with prosecutors can substantially reduce your sentence. The government wants the bigger targets. Your cooperation may have value.

Teresa Giudice served 15 months for concealing assets. Joe Giudice served 41 months for the same scheme. Bernie Ebbers got 25 years for WorldCom fraud. Sam Bankman-Fried got 25 years for FTX fraud. The sentencing range varies enormously based on the sophistication of the scheme, the dollar amounts involved, and the defendants cooperation or lack thereof. Seventy percent of bankruptcy fraud is simple concealment of assets – hiding what you own so creditors cant reach it. The trustee’s job is finding those hidden assets. The Rule 2004 examination can compel you to reveal them. And every lie you told under oath in your petition becomes evidence at your criminal trial. The system catches fewer people then it should. But when it catches you, the consequences last forever.