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Bankruptcy Fraud

Bankruptcy laws are intended to protect debtors who experience overwhelming financial hardship. These protections include:

  • An automatic stay on any collections activities
  • Protection from foreclosure and automobile repossession

Filing bankruptcy in New York will either eliminate all the applicant’s debts or substantially reduce the amount owed. When anyone uses these protections to defraud a creditor or for financial gain, penalties assessed may include major fines and even incarceration.

Bankruptcy fraud is a white-collar offense that is usually committed in one of the following ways:

  • Concealing assets to prevent them from being seized or lower the amount the debtor is required to pay their creditors
  • Intentionally filing information that is either false or incomplete
  • Failing to disclose all income received from all sources
  • Fraudulent transfer of assets
  • Running up new debt before declaring bankruptcy
  • Filing multiple bankruptcy petitions: for example, filing under different Social Security numbers or in multiple states under one Social Security number
  • Bribing a bankruptcy trustee

Chapter 7 bankruptcy fraud

Chapter 7 bankruptcy liquidates a debtor’s nonexempt assets, selling them to raise money for creditor repayment. Because it is means-tested, a common type of fraud is to lie about or conceal income to guarantee eligibility for this Chapter of bankruptcy. Other deceptive behaviors include repaying preferred creditors (e.g. family members) outside of the filing, embezzling cash or assets that should go into the bankruptcy estate, and hiding or transferring nonexempt assets to prevent them from being sold.

Chapter 13 bankruptcy fraud

Unlike Chapter 7, Chapter 13 does not require assets to be sold to repay creditors. Instead, the debtor agrees to repay some or all of their obligations over a period of three to five years. The most common form of fraud for this category is misrepresenting one’s income to reduce payments.

Penalties for bankruptcy fraud

Deceptive statements and actions during a bankruptcy filing can have grave consequences. At the very least, the court could dismiss the filing, allowing creditors to resume collection activities, and you would not be able to re-file until a certain amount of time had passed. You could also be charged with committing a federal offense and sent to prison for up to five years. A fine of up to $250,000 could also apply.

In some cases you could be charged with multiple crimes. For example, if you used the U.S. Postal Service to send in fraudulent bankruptcy paperwork, the government could also charge you with mail fraud and add years of incarceration added to your sentence.

Bankruptcy fraud can also get your friends and family in trouble. If any third party receives property from you, then knowing that you have filed for bankruptcy protection, they can be charged with a crime.

If you have been accused of bankruptcy fraud in New York, then you will definitely need an experienced white collar criminal attorney to help you mount a solid defense in federal court. They will attempt to get the charges against you dropped by proving lack of intent to defraud or showing that the prosecutor has insufficient proof to charge you with bankruptcy fraud.  They can also negotiate a plea agreement so you will receive a reduced sentence or be charged with a lesser offense. Whatever the outcome, having a New York criminal defense attorney advocate for you may give you an advantage. Contact the Law Offices of Julie Rendelman, LLC if you have been accused of bankruptcy fraud. Ms. Rendelman is an experienced criminal defense lawyer in New York City. Call 212-951-1232 to set up a free consultation.

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The Law Offices Of Julie Rendelman , LLC

212.951.1232

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New York, NY 10017

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