06 Dec What is “Bankruptcy Fraud” and Are You at Risk?
Recently I have noticed that both the Internal Revenue Service website and the website for the Office of the United States Trustee have published a great deal of material about “bankruptcy fraud.” What exactly is “bankruptcy fraud” and how can you avoid doing things that might put you at risk?
In the consumer bankruptcy area, the cases I have seen that fall into the description of bankruptcy fraud usually involve an intentional failure to disclose an asset or they involve an undisclosed transfer of an asset. I remember, for example, meeting with a potential client had recently been laid off from a six-figure job, and had found himself barely scraping by working part time in a retail store. He was prepared to surrender his expensive home and car, but he was not happy when I told him that the Rolex watch he had received as a gift from his ex-wife would have to be disclosed.
This gentleman did not understand that just because “no one would know” about his expensive watch, it still had to be listed on Schedule B of his petition. I also suggested to him that his ex-wife would certainly know and that since bankruptcy paperwork is available online, he might be leaving himself open to leverage on that front.
More importantly, I would not risk my law license to help any client misrepresent his assets, and I suspect that most of the bankruptcy lawyers I know would feel the same way.
What happens if a debtor simply does not reveal the existence of an asset? Such an action can be grounds for criminal prosecution. According to Attorney Wayne Holly’s Bankruptcy Fraud Resource Center blog:
The United States Trustee Program (the “Program”) increased its bankruptcy criminal referrals by more than 25 percent in fiscal year 2007. According to the Executive Office for United States Trustees’ annual report to Congress, the Program made 1,163 bankruptcy and bankruptcy related criminal referrals in FY 2007 compared to 925 made in FY 2006.
For FY 2007, the top 10 most referred bankruptcy or bankruptcy related crimes (with the number of referrals in parentheses) were as follows:
1. False Oath/False Declaration (545)
2. Concealment of Assets (483)
3. Bankruptcy Fraud (18 U.S.C. 157) (275)
4. Perjury/False Statement (271)
5. ID Theft/Use of False SSN (195)
6. Tax Fraud (147)
7. Mortgage/Real Estate Fraud (86)
8. Concealment/Destruction of Documents (67)
9. Bank Fraud (18 U.S.C. 1344) (60)
10. Forged Documents (57)
In the Northern District of Georgia, where I practice, the United States Trustee posts press releases or newspaper articles about bankruptcy fraud on a bulletin board right outside the Section 341 hearing rooms.
There is no doubt that filing for bankruptcy can be disruptive and even a little demeaning. However, you can make a difficult situation into a really bad situation if you lie or misrepresent to your lawyer and to the Bankrutpcy Court.
Jonathan Ginsberg, Esq.
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