In the United States of America, following the 2007, economic recession and financial crisis forced many people to opt for bankruptcy. There was also a steep rise in the reported number of bankruptcy frauds. Though the United States bankruptcy code, which is written in the Title 11 of the United States code, empowers the state legislature to pass bankruptcy laws, there are some bankruptcy legislation which are federal laws, and are commonly applicable throughout the United States. These federal laws, are basically, imposed through bankruptcy mechanisms to prevent the occurrences of frauds. All bankruptcy fraud, intentional and engineered ones, are deemed to be Federal offenses.
What is Bankruptcy Fraud?
A misconduct by a person or an entity, artificial or natural, legal or illegal, in due course of bankruptcy proceedings, or deeds, which can be classified as unethical, unacceptable or illegal, or deeds which can be classified as frauds, on the basis of all or any state and federal laws can be said to be a bankruptcy fraud. Well, the definition is a bit long and so is the process of reporting bankruptcy fraud and proving it. Bankruptcy fraud is often classified into two sections, namely, intentional and unintentional. In reality, an unintentional fraud is basically a mistake and hence, does not qualify to be punished as a fraud. In cases of the accused person can prove, successfully and truthfully, that the fraud was an unintentional mistake, then he or she can escape the said bankruptcy fraud penalties. Hence while dealing with bankruptcy, it is necessary to have a good bankruptcy lawyer by one's side for perfect legal advise.
Bankruptcy Fraud Offenses and Cases
The increasing number of bankruptcy fraud cases have raised several eyebrows in the bankruptcy courts. The legal system has also made sufficient efforts to generate awareness among people to stop the probability of unintentional, as well as intentional, bankruptcy frauds. There are some common types of bankruptcy frauds.
- Concealment of Assets: The cases of concealment of assets is the most common one and reportedly of all the bankruptcy fraud proceedings, 70% are of concealment of assets. This type of fraud is also found very commonly in individual bankruptcy filing such as the Chapter 7 bankruptcy. Here, in order to prevent the confiscation of assets, the bankruptcy filers transfer their assets and property to friends and relatives. There are also professional criminals who specialize in taking the temporary custody of such assets in exchange of a small fee. Such a concealment of assets, prevents the creditors and liquidator from liquidating the assets and recovering money.
- False Filing: The second type of offense is that of provision of false bankruptcy information to liquidator, regarding the debts and assets. In such a case again, it can be intentional as well as unintentional. Such false and intentional misleading disclosure of information is often seen in all types of bankruptcy for business.
- Multiple Filings: Multiple filings is an intentional offense by bankruptcy filings. In a bid to confuse courts, liquidator and in many cases also creditors, people file for bankruptcy in multiple courts and also multiple states. Such a filing is often considered to be a very serious federal offense. In many cases, false names and social security numbers have also been used.
- Trustee or liquidator Fraud: The trustees or liquidator fraud is often considered to be very serious, as in such a case, the filer conspires and bribes the liquidator, in a bid to save assets and money. In such a case the sentence is very severe, for both the filer as well as for the creditor.
All attempts of bankruptcy fraud are very serious felonies and often have a fine that can be high as $250,000 or can also result into 5 years of imprisonment under standard criminal procedure.