Bankruptcy Fraud: A White-collar Crime

By Author: Getlegal
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Bankruptcy is the legal proceedings that involve the filing of a legal case against a person or any business for not repaying the debts. In such cases, the property of the individual or the business is liquidated and is then divided equally among the creditors.

When the debtor claims falsely for bankruptcy then the claim may be considered bankruptcy fraud. The fraud is done mostly to conceal the property and the asset to avoid losing them. It is a white-collar crime that may involve the false or incomplete filing of forms or filing for bankruptcy many times in different states and petition mills. These frauds come under the federal offense. When done truthfully and lawfully the filing for bankruptcy can be very helpful to get a fresh start.

Different forms of bankruptcy fraud:

Concealment of Assets: It is the most commonly used form when claiming bankruptcy. In this type of fraud the debtor while filing for the claim of bankruptcy does not knowingly list all of his assets so that the creditor would not be benefited during the sale of the asset that is not known.

When filing a claim for bankruptcy ...
... it is essential to mention all the assets the debtor has, so that the creditor may get the share from the sale of the assets.

The most common way to conceal assets is the property or money is by transferring the money properties to their relatives or friends so that the asset remains safe and unknown. Another way of concealing the asset involves hiding cash in the account outside the country.

Petition Mills: The petition mills are those bankruptcy frauds that are at the top in the United States of America.

In the petition mill scheme, a person acts as a financial advisor or a legal counselor, or any agency that tends to help the tenant in overcoming the process of eviction by the landlord. The tenant pays a regular amount of fee to the agency thinking that they are helping them. Whereas, these agencies or the financial advisor take all the personal information and then file bankruptcy in the tenant’s name but without the tenant’s knowledge. By the time the tenant gets the knowledge about the claim of bankruptcy all his accounts are emptied and homes are taken away.

Multiple Filing Schemes: This type of fraud is very much similar to the fraud of concealment of assets in which the debtor intentionally tries to hide money or properties so that he may protect it from liquidation when paying for the debts.

In multiple filing scheme the debtor, many times uses his real identification information (name, address, birth date, etc) for claiming for bankruptcy in different states, maybe in many states at a time, and when the identification becomes common then the debtor uses different information (different name, address, date of birth, etc) for claiming. The debtors in this form travel from state to state in order to file for false bankruptcy.

Bust out Schemes: This type of fraud mainly involves credit card frauds. In the bust-out scheme, the individual will apply for credit and then repay on time thereby he builds a good credit history, and when his credit line increases he takes as much amount he/she can with no intention of repaying it. After maximizing the number of credit accounts the debtor files the claim for bankruptcy so that he may not have to repay the credits.

Punishment for Bankruptcy fraud: The punishment for such fraud includes imprisonment of 5 years or/and a fine of $ 250,000. It is a federal crime and the fine of it can’t be discharged.

So, bankruptcy fraud is a serious crime that involves intentional and untruthful claiming of bankruptcy in order to prevent the loss of property or money. There are many forms through which bankruptcy fraud could be done. Such fraud cannot be overlooked or taken lightly and if charged for such claims the consequences can be very severe. So, the filer should be well aware of what is bankruptcy fraud and what are the consequences related to it when its laws are violated.

For more information please visit: https://www.getlegal.com/legal-info-center/criminal-law/bankruptcy-fraud/