According to 18 USC § 152 and 18 USC § 157 Bankruptcy Fraud is committed when a person makes a misleading claim or false statement in a bankruptcy proceeding or intentionally files a fraudulent bankruptcy petition as part of a larger scheme to defraud.
Bankruptcy Fraud can be prosecuted through numerous criminal statutes such as wire fraud, mail fraud, credit card fraud, conspiracy, or tax fraud. The most prevalent charge is Bankruptcy Fraud under USC Section 152 which covers all possible methods that a debtor or other person can employ to defraud any bankruptcy filing or proceeding.
Willfully and Intentionally Committing Bankruptcy Fraud
The defendant can’t accidentally commit bankruptcy fraud. Criminal fraud always involves knowingly misleading the court, hiding assets, or taking other fraudulent actions.
Examples of Bankruptcy Fraud
Examples of bankruptcy fraud include the following
- Concealing property belonging to a debtor
- Making a false statement or declaration under penalty of perjury in connection with a bankruptcy
- Concealing or transferring property in contemplation of a bankruptcy case
- Making a false claim against the estate of a debtor
- Withholding documents from the administrators of any bankruptcy
- Illegally receiving property from a debtor
- Receiving or giving any bribe in relation to a bankruptcy
- Making a false oath or accounts in relation to any bankruptcy
- Destroying or concealing documents related to a bankruptcy or a debtor
Defenses to Bankruptcy Fraud
Good faith belief
In case the defendant honestly and in good faith believed the misleading statements or promises made as part of the scheme were true it is a valid defense in federal bankruptcy charges.
Substantial Assistance
Usually, the most commonly utilized method to avoid the penalties for federal bankruptcy fraud is substantial assistance. The prosecution is authorized to ask the court to suspend or reduce a sentence when the defendant provides substantial assistance in the arrest, identification, or conviction of any other person engaged in the scheme to defraud.
Penalties for violating 18 U.S. Code Chapter 9
Under federal law, the punishment for Bankruptcy Fraud may vary depending on the circumstances, nature and of the offense, and the defendant’s criminal history. Under 18 U.S. Code Section 157 the crime of Bankruptcy Fraud is a felony, punishable by:
- Up to five years in federal prison
- A fine of up to $250,000.
- Probation is also possible in bankruptcy fraud cases. For the probation period, the defendant will be required to comply with specific orders, such as not committing more crimes and meeting with a probation officer. Usually, probation lasts from one to three years, however, longer sentences are possible.
- The defendant will be additionally required to pay restitution and forfeit any property or money obtained from the scheme to defraud.