A few years ago I published a short blog article on a bankruptcy fraud case that had hit the news media.  You can find the article here.  That article has been the most popular blog post I have ever published.  Based upon its popularity, I have a feeling that people worry about what constitutes bankruptcy fraud and what are the types of things might get them in trouble if they file bankruptcy.

What Can Get You In Trouble

The most common instances of bankruptcy fraud involve the failure to report all income and hiding assets.  When you provide the information needed to fill out the bankruptcy schedules and other documentation to your lawyer, make sure that the information is true and complete to the best of your knowledge, information and belief.  When you sign and file your documents, you have attested under penalty of perjury to that effect.

Disclose, Disclose, Disclose

If you are not sure about whether something is an asset or represents income, disclose it anyway.  If you forget about something, regardless of whether the case has been filed or not, let your attorney know as soon as you remember.  Also, tell your attorney about any property that you have transferred out of your name in the last four years.  Being proactive can go a long way to show that you have not committed fraud or did not intend to make misrepresentations.

Consequences

If an individual is convicted of bankruptcy fraud, the penalties can be quite steep.  First, one can forfeit his or her right to get a discharge of debts which is often one’s whole purpose for filing.  One may also lose the statutory protections, or exemptions, in the property that he or she attempted to hide or give away, thus he or she may lose the property.  One may also incur criminal sanctions, including a sentence of up to five years in prison and fines up to $250,000.

Bankruptcy fraud cases are usually pursued by the IRS and the Office of the United States Trustee.  While it is true that the IRS does not pursue many cases, the “incarceration rate” for their criminal investigations for bankruptcy fraud was 92.3% in 2009, 61.9% in 2010, and 82.6% in 2011.  You can read more statistical data from the IRS here.  You can also read details about some bankruptcy fraud investigations by the IRS here.  The website of the U.S. Department of Justice provides a webpage which tells how to report bankruptcy fraud here.

As I stated in my previous article, although prosecution for bankruptcy fraud is not common, it does happen. A debtor who thinks that nobody will find out if they do not disclose an asset in which they have an interest must be weary. The penalties are harsh, and the stress and consequences just are not worth it.  Make sure to tell your bankruptcy lawyer everything!

If you are in the Philadelphia area and looking for an experienced and compassionate bankruptcy lawyer to help you find out your options, please contact the attorneys at Coleman & Kempinski P.C., Kim Coleman and Ray Kempinski, for a FREE CONSULTATION.

Photo Credit:  Jim Kuhn

Other Attorneys blogging the Bankruptcy Alphabet believe F is for:

• Failure (and “Fresh Starts”) - Christopher C. Carr (Philadelphia, PA)
• Family Farmer/Fisherman - Ryan D. Caldwell (Omaha & Lincoln, NE)
• Fees – Elizabeth Johnson (Birmingham, AL)
• Filing Requirements - Dorota Trzeciecka (Miami, FL)
• Financial Fatigue - Bill Balena (Cleveland Area, OH)
• First - Cathy Moran (Northern CA)
• Foreclosure - Bob Doig (Colorado Springs, CO)
• Foreclosure – Stuart T. Ing (Kauai, HI)
• Foreclosure – Monica D. Shepard (Jacksonville, FL)
• Forgiveness of Debt - Mark J. Marcus (Los Angeles, CA)
• Forms - J. Dinkins G. Grange (Jacksonville, FL)
• Fraudulent Transfer – Christopher McAvoy (Downriver, MI)
• Fraudulent Transfer – Jeena Cho (San Francisco, CA)
• Free Bankruptcy Consultation – Peter Behrman (Livonia, MI)
• Free Consultation – Bret Nason (Wisconsin)
• Free Credit Report – J. Dinkins G. Grange (Jacksonville, FL)
• Fresh Start – Catherine Eranthe (Marin County, CA)
• Fresh Start – Mitchell Goldstein (Metro Richmond, VA)
• Fresh Start – Daniel J. Winter (Chicago, IL)
• Future Flow Agreement - Jay S. Fleischman (New York, NY)
• Bankruptcy Attorney Fees – Kurt O’Keefe (Michigan)

14 Trackbacks / Pingbacks for this entry

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