Most bankruptcy fraud cases are prosecuted under 18 U.S.C. Section 152 which describes intentional conduct that would be bankruptcy fraud such as:

• concealing property of the estate;
• making a false oath or account;
• making a false declaration, verification or statement under penalty of perjury;
• presenting or using a false proof of claim against a debtor estate;
• receiving, post-petition, a material amount of property from a debtor with intent to  defeat the provisions of the Bankruptcy Code;
• offering, receiving, or attempting to obtain consideration for acting or refraining from acting in a case under the Bankruptcy Code;
• transferring or concealing property in contemplation of a bankruptcy case or with intent to defeat the provisions of the Bankruptcy Code;
• post – petition concealment or alteration of records; and
• post – petition withholding of a debtor’s records.

Although this statute specifically applies to a person who actually perpetrates any of these acts, debtors, creditors, fiduciaries and just about anyone else connected with the case could be the target of criminal bankruptcy fraud prosecution.

Concealment of Property is the most common act that triggers a criminal investigation. This includes the failure to list property or efforts to conceal property of the bankruptcy estate. The debtor must disclose estate property and list all property in which he may have ownership interest.  Concealment may be setting up secret bank accounts, transferring assets to a strawman, or physically removing tangible assets. Other concealment cases involve withholding knowledge or information that might lead to the discovery of an asset, or providing misleading information that leads others to believe that the asset belongs to a third party. In all cases, proving intent is a must for the government to obtain conviction. Our bankruptcy fraud lawyers always build a defense strategy designed to demonstrate lack of fraudulent intent.

Making false declarations is another common trigger of bankruptcy fraud prosecutions.

Knowingly and fraudulently making a false declaration, certificate, verification, or statement is a crime in itself but in the bankruptcy contest it is an element of the crime of bankruptcy fraud.

Mishandling Debtor’s Estate.

18 U.S.C. Section 153 makes it a crime to appropriate, embezzle, spend, or transfer any property belonging to a debtor’s estate, including destroying any document belonging to a debtor’s estate if this is done ”knowingly and fraudulently.”

Tampering with or falsifying records with the intent of impeding, obstructing, or influencing the administration or investigation of a bankruptcy case is another prosecuted conduct which is  addressed by 18 U.S.C. section 1519. This law is relatively new, added only in 2002, and applies to those who ”knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or makes a false entry in any record, document, or tangible object with the intent to impede, obstruct, or influence the investigation or proper administration of any matter within the jurisdiction of any department or agency of the United States or any case filed under title 11, or in relation to or contemplation of any such matter or case.”

Bankruptcy fraud is a serious federal criminal offense that may result not only in severe monetary penalties but also in a criminal conviction and even incarceration. If you are target of a bankruptcy fraud investigation in New York City or have already been arrested, call our New York City bankruptcy fraud attorneys to discuss your situation.