According to the United States Department of Justice, the Federal Bureau of Investigation (FBI) has estimated that more than one out of ten bankruptcy filings involve fraud. In most of these cases, the debtor neglected to disclose certain assets in their bankruptcy petition. This behavior diminishes the integrity of the honor system incorporated into the bankruptcy system. Bankruptcy fraud carries serious federal consequences, though, so honesty about assets and income is crucial.
One example of bankruptcy fraud made celebrity headlines in 2009. Real Housewives of New Jersey Teresa Guidice hid assets when she filed for bankruptcy with her husband, Joe. They claimed their debts totaled more than $10 million, but neglected to disclose information about the salary Teresa was paid for Real Housewives, rental properties the couple owned, and other businesses the two had together.
The 39-count indictment chock full of federal charges accused the couple of committing wire, mail, bank, and bankruptcy fraud, as well as making false statements on loan applications. Joe Guidice was sentenced to 41 months in federal prison, while Teresa was sentenced to 15 months. Since bankruptcy fraud carries a penalty of up to five years in federal prison and fines up to $250,000 per charge, the Guidice’s were fortunate with the final outcome of their sentencing.
Not Just for Wealthy People
At this point, you might think that bankruptcy fraud is a crime committed only by wealthy people. Anyone can be tempted to hide assets in bankruptcy for a variety of reasons, though. According to 18 U.S. Code § 152, the following is a list of acts that are considered bankruptcy fraud:
- Knowingly or fraudulently concealing assets that belong to the bankruptcy estate;
- Knowingly or fraudulently making false statements or oaths regarding the bankruptcy;
- Knowingly or fraudulently making a false declaration, certificate, verification, or statement under penalty of perjury;
- Knowingly or fraudulently presenting a false claim for proof against the bankruptcy estate;
- Knowingly or fraudulently receiving property from the person who filed bankruptcy after the petition has been filed;
- Knowingly or fraudulently giving, offering, receiving or attempting to obtain money or assets, compensation, remuneration, advantage, reward, or promise for forbearing to act or acting in a bankruptcy case (in other words, bribery or extortion regarding a bankruptcy case)
- Knowingly or fraudulently concealing or transferring any assets or property while contemplating whether or not to file bankruptcy;
- Knowingly or fraudulently concealing, destroying, mutilating, falsifying documents (papers, records, books) relating to the financial affairs or assets of the debtor while in contemplation of bankruptcy or after filing the petition; or
- Knowingly or fraudulently withholding any recorded documents relating to the debtor’s assets or financial affairs from the bankruptcy administrators.
As you can see, you do not have to be the debtor, or the person filing bankruptcy, in order to commit bankruptcy fraud, and everyday people can attempt to conceal assets to protect them from being part of the bankruptcy estate. It is quite easy to fall into the trap of committing fraud if you desperately want to keep your property or any cash you have saved up over the years, but it is not worth the consequences.
A bankruptcy trustee is appointed to your case after you file bankruptcy. The trustee is expected to do their due diligence in ensuring the debtor has disclosed every penny of their assets. The bankruptcy trustee has the power to investigate a wide variety of resources, including DMV records, property records, and public searches. Also, informants, creditors, and even the debtor’s family or ex-spouse can blow the whistle to the bankruptcy trustee if they know the debtor filed a fraudulent claim.
There is a big difference between “knowingly and fraudulently” filing a bankruptcy petition and “making a mistake” on your bankruptcy schedules. However, neglecting to disclose even one asset could cause your bankruptcy to be dismissed, so you should consult with an experienced bankruptcy attorney to ensure that all of your bankruptcy schedules are filled out accurately.
Are You Considering Filing For Bankruptcy?
If you feel bankruptcy is the best option for your financial situation you need to speak with an experienced bankruptcy lawyer as soon as possible. Please contact us online or call our office directly at 888.348.2616 to schedule your free consultation.