Bankruptcy fraud - sustany/dvg GitHub Wiki

Bankruptcy�fraud�is a�white-collar crime�that commonly takes four general forms:

  • A�debtor�conceals�assets�to avoid having to forfeit them.
  • An individual intentionally�files�false or incomplete forms. Including false information on a�bankruptcy�form may also constitute�perjury.
  • An individual�files�multiple times using either false information or real information in several�jurisdictions.
  • An individual�bribes�a�court-appointed�trustee.
  • Commonly, the�criminal�commits�one of these forms of�fraud�with another�crime, such as identity theft,�mortgage�fraud,�money laundering, and�public corruption.

Common Forms of Fraud

Nearly 70% of all bankruptcy�fraud�involves the concealment of�assets.�Creditors�can only�liquidate�assets�listed by the�debtor; thus, if the�debtor�fails to reveal certain�assets, they can fraudulently keep them despite owing an outstanding�debt. For further concealment, the�debtor�might�transfer�undisclosed�assets�to friends, relatives, or�associates so it cannot be found. Fraudulent concealment�makes loans more expensive, because it raises the risk and costs associated with lending and�creditors�pass those costs�on to other hopeful borrowers.

Petition�mills are one type of�bankruptcy�fraud�scheme on the rise in the United States.�Petition�mills�pass�themselves off as�consulting services, purporting to help�tenants�experiencing financial difficulties avoid�eviction. While the�tenant�believes the service is negotiating on their behalf,�the�petition�mill actually�files�for�bankruptcy�in their name and drags out the�proceeding�and�charges�them exorbitant fees. The�tenant�is left with no savings�and a�credit score�in ruins.

Multiple�filing�fraud�occurs when a�debtor�files�for�bankruptcy�in multiple�jurisdictions, using the same name and information, using aliases and false information, or using some combination of real and false information. Multiple�filings�clog up the�bankruptcy court's�docket, which slows�down the whole process, including�asset�liquidation. Although multiple�filings are not criminal, they may still violate�bankruptcy�provisions, and they are often used to�provide�cover for a�debtor�trying to conceal�assets.

Legal Consequences

Federal�prosecutors�can bring�criminal�charges�for suspected�bankruptcy�fraud�under�18 U.S.C. Chapter 9.�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�intendingto commit�bankruptcy�fraud�may be punishable.

Federal Statutes

  • 18 U.S.C. � 1344:�Bank Fraud
  • 18 U.S.C. �� 151-152:�Bankruptcy Definition and�Fraud
Federal Judicial Decisions
  • Important U.S. Circuit Courts of Appeals Decisions:
    • United States v. Hughes, 401 F.3d 540 (4th Cir. 2005).
    • United States v. Butler, 211 F.3d 826 (4th Cir. 2000).
    • United States v. Ladum, 141 F.3d 1328 (9th Cir. 1998).
    • United States v. Levine, 970 F.2d 681 (10th Cir. 1992).
    • United States v. Gibbs, 594 F.2d 125 (5th Cir. 1979).

Useful Internet Sources

  • IRS:�Examples of Bankruptcy Fraud Investigations - Fiscal Year 2016,�2017
  • Credit Research Foundation:�Identifying Bankruptcy Fraud
  • U.S. Department of Justice:�Fraud Section
  • Federal Bureau of Investigation:�White-Collar Crime
  • U.S. Department of the Treasury:�Financial Crimes Enforcement Network
  • National White Collar Crime Center