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Bankruptcy Fraud Lawyers

November 10, 2016 Federal Criminal Attorneys

Understanding Bankruptcy Fraud and Why You Need A Lawyer
Bankruptcy fraud is a federal crime. Many people turn to bankruptcy to relieve them of unpaid debts. The common civilian can file either a chapter 7, which is a total liquidation, or they can file a chapter 13. A chapter 13 will allow them to retain their property and work out a payment plan with the court’s supervision. The laws regarding bankruptcy have changed over the past decade. No matter how many mandates that the court puts on the process, there are always those people who try to sidestep the law to get out of debt.

Fraudulent Reporting of Assets

The court recognizes three types of bankruptcy fraud. They are concealing assets, filing multiple times, and petition mills. The first is self-explanatory. The most common type of fraud found in the bankruptcy court is not disclosing all income and or assets. Some people feel that if they leave off an asset they will be able to retain its possession. However, this category can also include things like transfer ownership of an asset to a friend or family member. To keep from losing an item, transferring it to another person is the oldest trick in the book. However, the court wants to know about any transfers within a specific period before the bankruptcy is filed. All it takes is one look into asset transfers to find the transaction.

Another commonly used scheme is to transfer money into offshore accounts to protect it from the United States Bankruptcy Courts. Since it is in the jurisdiction of another country, the US doesn’t have any control over it. Beware, this is a fraudulent way to handle money and keep it hidden from the courts. It is easy to see when large amounts of money disappear from a bank account that cannot be accounted for. The court is aware of such schemes. The trustee will often check and double check accounts to ensure they have been truthful with all disclosures.

Multiple Filings

Another commonly used trick is to file multiple petitions in various states. The goal is to avoid liquidation of assets, but submitting an incomplete list of assets in both state filings is also fraudulent. A person may only have one active bankruptcy petition at a time. Since a party can only file a chapter 7 once every eight years, and chapter 13 every five years, these rules extend across state borders. The act of filing two simultaneous petitions is fraud alone, not to mention selectively putting different information on the petitions. The bankruptcy court is a federal court and not a state matter. Though individual states handle things differently, in general, all proceedings are protected at a federal level.

Some people will also use different names to file the various petitions. This is specifically true of a woman who has been married and has a maiden name. She may try to file under the maiden name in one area and the married name in another. This sort of falsification is not tolerated within the court and is fraud.

Petition Mill Fraud

The other two types of fraud are done by the petitioner with intent to scam the courts. A petition mill is a very different type of fraud. This type of bankruptcy petition is done by a third party. It often happens in poor communities or for those who are facing the eviction process. It starts with an ad being placed to help those who are in the process of being evicted. A firm will take all the debtor’s information. They charge significant fees to fight the eviction on their behalf. What they do is file for bankruptcy and ruin the person’s credit. They take what precious money a person has left.

Understanding Bankruptcy and Fraud

Under the new laws, a means test must be taken. This test will determine disposable income. If a person has disposable income greater than $183.50 left over each month, they do not qualify for a chapter 7. They must file a debt reorganization plan under a chapter 13. Most people want a chapter 7 because it liquidates and forgives all debts. The repayment plan, under a chapter 13, lasts anywhere from three to five years. Regardless of which chapter is filed, bankruptcy stays on one’s credit for up to 10 years. Committing a federal crime, like bankruptcy fraud, can carry a sentence of up to five years in prison and a fine of $250,000. Additionally, restitution must be made to the court for any amounts fraudulently listed.

If you find yourself facing a fraud case of this type, you need a bankruptcy fraud attorney by your side. A simple oversight on your part may end up costing you big time. As NYC attorneys that specialize in this area of law, we want to help you settle this matter. When dealing with the federal courts, it’s no small matter. You need protection.

When you file for bankruptcy, you are expected to make a list of all of the assets and property that you own. If you do not submit this information, then you could be charged with bankruptcy fraud. Bankruptcy fraud is taken seriously.

When you file for bankruptcy, it frees you from the burden of having to pay debts. However, it is costly to your debtors. Bankruptcy law allows your creditors to recoup losses by collecting property. You can keep the assets that you need to maintain a household or job.

If you file for Chapter 7 bankruptcy, then the bankruptcy trustee can sell your property and distribute the funds among your creditors. Chapter 13 bankruptcy does not work like this. You will set up a payment plan for the next three to five years. The total payment will be equal to the value of your non-exempt property.

Ways People Conceal Property When Filing for Bankruptcy

Most people are honest when they file for bankruptcy. They list all of the property and assets that they own. Here is a list of actions that can be considered fraudulent activities.

Not putting down all of your assets
Providing false documents to the court or bankruptcy trustee
Withholding or destroying documents
Paying someone to hide the property
Hiding a property transfer
Bankruptcy Fraud Lawyers

How People Commit Fraud Before They File for Bankruptcy

Many people commit fraud before the bankruptcy proceedings begin. Here is a list of ways that people commit fraud before they file for bankruptcy.

Writing a bad check
Misrepresenting income or assets in order to obtain credit
Getting credit with no intention on paying it back
Buying a luxury item before filing for bankruptcy
Engaging in a deceptive business practice

Bankruptcy Fraud Defenses

It is estimated that 70 percent of people who commit bankruptcy fraud do so by undervaluing or hiding an asset. They do this so that the property cannot be seized. People can also commit fraud when they lie about their income. This is the second most-common way that bankruptcy fraud is committed.

They do this in order to qualify for Chapter 7 bankruptcy. They may also do this in order to qualify for lower Chapter 13 bankruptcy payments. People who are accused of bankruptcy fraud do not have to prove that they are innocent. However, the government has to prove that the person actually committed the crime.

The following defenses can be used.


The defendant can say that they did not intentionally hide their assets or property. They can also say that their attorney did not know about the missing information.

Legitimate Purpose

The defendant can say that there had a legitimate reason to hide their assets and property. For example, they may have sold the asset to take advantage of the tax benefits.

Statute of Limitations

The government may lose their right to prosecute if the Statute of Limitations has expired. In most cases, the Statute of Limitations is five years.

Renunciation or Withdrawal

The defendant can prove that they corrected the paperwork after the error was discovered.

The Importance of Getting Legal Advice

The penalties that you can face for bankruptcy fraud can be steep. For example, you could spend up to 20 years in federal prison. You may also be required to pay restitution or do community service. That is why it is important to get legal advice. Your Bankruptcy Fraud Lawyer can tell you about your legal rights. They can also tell you about the defenses that you can use.

The New York court system defines bankruptcy fraud as concealing your assets during bankruptcy or making a false account or claim. Whether you destroyed or concealed assets, you could face up to five years in prison, which is why you need a great lawyer who understands this field of law. To knowingly or willfully lie shows willful intent, and this could lead to a conviction. You have to be so careful.

The Difference between Bankruptcy Fraud Lawyers and a Bankruptcy Lawyer

With a bankruptcy fraud lawyer, they have the intention of defending you from a criminal charge. Meanwhile, a bankruptcy lawyer simply wants to get a petition for bankruptcy approved. One defends you from criminal charges while the other moves the process of bankruptcy forward. You only need to call a bankruptcy fraud lawyer if allegations have arisen of bankruptcy fraud. Regular bankruptcy lawyers cannot act as a bankruptcy fraud lawyer in most cases because they’re not equipped to defend you in this field of law.

How the Investigations Take Place

Under most circumstances, people will know that they are being investigated for bankruptcy fraud. In most cases, they will call a court hearing to determine if bankruptcy fraud has taken place. They don’t typically do this in secret. Many times, the FBI will investigate allegations of this charge, but you do have cases where the IRS will investigate. Largely, it depends on the circumstances. Before you speak directly with law enforcement, you should first speak with a lawyer because you want to ensure that you don’t say something that they could take out of context to use against you.

Bankruptcy Fraud: Is It a Federal Offense?

In truth, bankruptcy fraud encompasses a variety of different crimes, but the most common charge that people get is called 18 USC 152. This is normally known as a scheme that had the intention of frauding the courts with a false petition for bankruptcy. Understand, in some cases, all the statutes could combine to convict you of this crime.

Concealment of Assets

Fraudulent concealment happens when someone going through a bankruptcy makes the claim that they do not have the funding to cover their bills or their debts. This happens whenever someone claims that they don’t have the money when they, in fact, do have the money. In addition, people other than the one filing for bankruptcy could get charged if they aided or abetted the individual.

What are some of the penalties that you could face for this crime? Under most circumstances, the most time that you will face is five years maximum, provided it isn’t in conjunction with other crimes. For example, let’s say that the fraud committed involved mail fraud or wire fraud. In these cases, you could see a drastic increase from five years up to 20 years in prison. Having a knowledgeable lawyer on hand can help you to lower the sentencing to a more agreeable sentencing.

More Than Criminal Charges

Bankruptcy fraud comes with more than criminal charges. In many cases, you could face civil lawsuits as a result of angry creditors. As a result of a successful bankruptcy fraud charge, they could sue you in the federal and state courts, which adds to the punishment.

Corporate Bankruptcy Fraud

Maybe you have been charged with bankruptcy fraud as a result of performing actions for a corporation. Perhaps you didn’t even realize that it classified as bankruptcy fraud. To get this charge, you have to have willfully committed deceitful actions. A corporation can get the charge based on how the people acted. In addition, simply because you weren’t aware of the employee’s actions won’t be enough to defend you in the courts.

No matter what your situation, you should speak with a lawyer as soon as possible because they will be the best equipped to help you fight these charges and get a lower sentencing. If you have been charged with bankruptcy fraud, you need a skilled attorney who understands how to adequately defend you from these charges. It will mean the difference between getting convicted and successfully defending yourself from these charges and having the maximum sentence put against you.



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