Federal Bankruptcy Fraud

Whether you are a large public corporation like Enron, a mom and pop retailer, or a reality television cast member, Federal bankruptcy law allows a troubled company, business or individual to get a fresh start by reorganizing their affairs, or distributing, consolidating or liquidating their assets for the benefit of their creditors. The American bankruptcy system is structured to have the debtor (the person or business entering bankruptcy) declare all of their assets and liabilities so that the creditors (the entities or individuals owed money by the debtor) can attempt to recover at least some of their money. This is done in such a way to provide the debtor an opportunity to regain an economic and financial footing. When the bankruptcy system is manipulated criminally or an allegation of Federal Bankruptcy Fraud is investigated by Federal law enforcement, the assistance of a bankruptcy attorney will quickly give way to that of a Federal criminal lawyer. What may have been a civil matter will now fall within the four walls of a Federal District Court.

Federal Bankruptcy Fraud: The Basics & Third Party Criminal Exposure

If a debtor hides funds, falsifies records, improperly transfers property, or conceals documents related to a bankruptcy proceeding, the debtor can be prosecuted in Federal Court for Bankruptcy Fraud pursuant to Title 18, United States Code, Section 152. If he or she is convicted, the debtor will face a lengthy term in Federal prison. If another person makes a false claim against a debtor, fraudulently receives property from a debtor, bribes a debtor, or otherwise lies regarding another’s bankruptcy proceeding, they too can face Federal charges and years in Federal prison. The United States Attorney’s Office and the FBI do not see Bankruptcy Fraud as a victimless crime and neither should you.

With the public outrage over some notorious bankruptcies, the Federal government, Department of Justice (“DOJ”), Federal Bureau of Investigation (“FBI”) and the Internal Revenue Service (“IRS”) in recent years have clamped down on criminal violations of the bankruptcy laws. According to the United States Bankruptcy Court, in 2012 alone, there were more than 1.2 million bankruptcy filings. The Federal government has initiated hundreds of bankruptcy fraud investigations. In 2013 alone, the average sentence for bankruptcy fraud was 47 months in Federal prison.

Understanding the Elements of Title 18, United States Code, Section 152

Bankruptcy Fraud can be prosecuted through several Federal criminal statutes such as Mail Fraud, Wire Fraud, Credit Card Fraud, Title 18, United States Code, Section 1029, Consipracy or Tax Fraud. However, the most prevalent charge is Bankruptcy Fraud under Title 18, United States Code, Section 152 which attempts to cover all possible methods that a debtor or other person may employ to defraud any bankruptcy proceeding or filing.

• Wire Fraud: Title 18, United States Code, Section 1343
• Mail Fraud: Title 18, United States Code, Section 1341
• Federal Bank Fraud: Title 18, United States Code, Section 1344
• Federal Credit Card Fraud: Title 18, United States Code, Section 1029
• Federal Conspiracy Crimes
• Federal White Collar Crimes

Bankruptcy Fraud makes it illegal to knowingly and fraudulently:

• (1) Conceal property belonging to a debtor
• (2) Make a false oath or accounts in relation to any bankruptcy
• (3) Make a false declaration or statement under penalty of perjury in relation to a bankruptcy
• (4) Make a false claim against the estate of a debtor
• (5) Fraudulently receive property from a debtor
• (6) Give or receive any bribe in connection with a bankruptcy
• (7) Transfer or conceal property in contemplation of a bankruptcy case
• (8) Conceal or destroy documents related to a debtor or a bankruptcy
• (9) Withhold documents from the administrators of any bankruptcy

For any violation of Bankruptcy Fraud, the conduct must be done knowingly and fraudulently, not merely by accident, mistake or error.

To do something knowingly means to have the conscious aim or objective to commit that act – in other words, voluntarily and intentionally. The government does not have to prove that the defendant intended to break the law.

To act fraudulently means that the act was done with the intent to deceive.

Federal Bankruptcy Fraud: Punishment, Sentence and Collateral Consequences

Any violation of Bankruptcy Fraud is punishable by up to 5 years in Federal prison and up to a $250,000 fine for each offense. Remember, while the “average” length of incarceration is near the maximum, other crimes and laws may be violated and push your term of imprisonment further up the sentencing guideline.

Any Federal criminal investigation into a bankruptcy will surely put the brakes on the proceeding not to mention create turmoil for the debtor, his business, family and personal life. Sometimes individuals intentionally deceive the Bankruptcy Court and their creditors, but in many other cases, an honest mistake, error or omission can be looked at by law enforcement as willful acts and can subject that person, at best, to a lengthy investigation, and at worst, to a long term in prison.

• Federal Law Enforcement: From the FBI to the US Attorney & Their Respective Roles
• From Witness to Target: Potential Exposure & Consequences of a Federal Investigation
• The Federal Court Process From Arrest to Potential Sentence
• Understanding the Federal Arrest Process: The Importance of Knowledgeable Counsel
• Federal Sentencing Guidelines: Understanding Your Criminal Exposure

For these reasons, if you or a loved one has been accused of or charged with the Federal white collar crime of Bankruptcy Fraud, it will be critical for you to consult with and retain an experienced Federal criminal defense attorney who can help you navigate the nuances of the Federal Bankruptcy Fraud law. Your livelihood, career, and financial future and freedom will all depend on the outcome. Don’t subject all that you seek to protect with your bankruptcy application be for naught. Seek out a Federal criminal attorney that can advise you throughout the process. The former prosecutors and criminal attorneys at Saland Law a can help you through every step of the way and fight on your behalf. Let Saland Law’s experience, advocacy and knowledge be your best defense.

Call the Federal Bankruptcy Fraud lawyers and former prosecutors at (212) 312-7129 or contact us online today.