Bankruptcy Fraud Requires the Attention of New York City Criminal Attorneys
Definition of Bankruptcy Fraud
In 2011, a Georgia real estate broker was sentenced to 15 months in federal prison and three years of supervised release after being convicted of bankruptcy fraud. During his bankruptcy, the taxpayer made a number of false statements relating to the merits of his bankruptcy case, including falsely stating his income for the two year period before his bankruptcy filing.
Bankruptcy fraud cases like this are common as prosecutors aggressively go after people who are accused of taking advantage of the protections afforded by federal bankruptcy laws. If you have been accused of violating the laws on bankruptcy fraud, an experienced New York criminal defense lawyer can provide you with legal representation and advice to try to help keep you out of prison or to minimize the potential consequences you could face.
What is Bankruptcy Fraud?
Bankruptcy fraud is a serious white collar crime in the state of New York and throughout the country.
In order to help individuals experiencing financial hardship, federal bankruptcy laws offer certain protections to a debtor. In some cases, the debtor can have their debts wiped clean, or the amount owed significantly reduced. Bankruptcy debtors also receive foreclosure protection, protection from vehicle repossession, and an automatic stay preventing any ongoing collections activities until the bankruptcy case has been resolved.
Because these laws confer significant advantages on debtors, the fraudulent use of these court-ordered protections can result in serious financial penalties or even jail time. The courts do not take the abuse of their protections lightly.
Bankruptcy fraud occurs when any of these protections are used for the purpose of fraud or financial gain.
If you have been accused of bankruptcy fraud, you need a New York criminal attorney to deal with the rigors of a mounting a strong defense in federal court. If you’ve been questioned or accused of bankruptcy fraud, you must act quickly to get the legal help that you need.
Types of Bankruptcy Fraud
There are myriad different types of bankruptcy fraud, and both individuals and businesses may be accused of a fraud offense. Examples include:
- Failure to disclose all assets on bankruptcy filing. Nondisclosure of assets can affect the amount you are obligated to pay to creditors.
- Failing to disclose all income earned from all sources. Nondisclosure of income can affect the Chapter of bankruptcy that you are eligible to file under, as well as affect how much money creditors are able to recover from you.
- Fraudulent transfers of assets. You are restricted from transferring or concealing assets in anticipation of a bankruptcy filing.
- Lying on credit applications and/or running up debt right before bankruptcy. If you take on lots of new debts right before filing for bankruptcy protection, this can be considered a form of fraud.
- Filing multiple bankruptcy petitions. If you file multiple bankruptcy petitions under different Social Security numbers or file petitions in different states under one Social Security number, both of these are potential examples of fraud in bankruptcy.
- Filing bankruptcy under multiple different identities.
- Intentionally filing incorrect or incomplete forms. You must sign your bankruptcy forms and attest to the truth and accuracy of all information that you provide. Intentional material misstatements on official court paperwork can be considered not just fraud, but also perjury as well.
- Filing bankruptcy only to benefit from an automatic stay in order to avoid foreclosure or repossession.
- Bribing a court-appointed trustee who is involved in your bankruptcy case.
All of these different types of behaviors could be considered part of an effort to abuse the bankruptcy protections that the federal government has put in place for debtors.
Chapter 7 Bankruptcy Fraud
Chapter 7 bankruptcy is also called total liquidation bankruptcy. Non-exempt assets become part of the bankruptcy estate and are sold to generate funds for the repayment of creditors.
Common examples of bankruptcy fraud related to Chapter 7 including concealing or transferring assets to avoid having the assets sold; or repaying preferred creditors outside of the bankruptcy filing such as paying back a loan to a family member or a small local business without authorization as part of the proceedings.
Embezzling money or assets that should belong to the bankruptcy estate is also an example of Chapter 7 bankruptcy fraud. Because Chapter 7 is means-tested, some debtors will also try to conceal income or lie about their income to appear eligible for this Chapter of bankruptcy despite actually making above the income thresholds.
Chapter 13 Bankruptcy Fraud
Chapter 13 is also called wage earner’s bankruptcy. Instead of the sale of assets to repay creditors, debtors enter into a repayment agreement, and some or all debts are repaid over three to five years. Misrepresenting income to lower payments is a common example of Chapter 13 bankruptcy fraud.
Bankruptcy Fraud Penalties
Making any type of false or misleading statements on a bankruptcy filing can have serious consequences.
In some cases, the fraud may simply result in your debts not being discharged. Section 523(a)(2)(A) of the Bankruptcy Code prohibits the discharge of any debt obtained through false pretenses, a false representation, or actual fraud. The court may dismiss the bankruptcy filing with your debts still owed, and bankruptcy laws will limit how soon you can re-file to try to get protection from the debts. The creditor could continue collection efforts including repossession, foreclosure, wage garnishment, or placing a lien on property, and you would not be able to seek relief under federal bankruptcy laws.
In more serious situations, you will be charged with a federal crime and could face fines and jail time if you are convicted of violating the law. You could be charged with:
- Bankruptcy fraud, which is defined in 18 U.S. Code Section 157 to include filing a petition for bankruptcy, or any document in a petition for bankruptcy as part of a scheme or artifice to defraud. This includes a fraudulent involuntary petition. You can also be charged with this offense for making any false claims, false promises, or fraudulent representations in relation to a bankruptcy proceeding at any time before or after the filing or during the proceedings. Conviction for bankruptcy fraud can result in five years incarceration as well as fines up to $250,000.
- Other bankruptcy fraud offenses defined in Chapter 9 of the Federal Code. These offenses include concealment of assets; making false claims or oaths; bribery; embezzling from the bankruptcy estate; fraud in Chapter 11 fee agreements; and knowing disregard of bankruptcy rules or laws. A bankruptcy preparer could face up to a full year of prison time for knowingly disregarding a rule related to bankruptcy, while a debtor could face five years imprisonment for concealing assets, making false oaths or claims, bribery, or embezzling from the bankruptcy estate.
- False declarations before a court. 18 U.S. Code Section 1623 makes it a crime for you to make a materially false declaration or materially false statements while you are under oath. You could face up to five years imprisonment for this offense.
- Bank fraud under 18 U.S.C. Section 1344. Bank fraud carries a possible penalty of 30 years imprisonment and fines up to $1 million. Bank fraud has been broadly defined as an attempt to use fraudulent pretenses in order to obtain money or property from a financial institution. The U.S. Supreme Court ruled in Loughrin v. United States that you could be charged with bank fraud even if you did not specifically intend to take money from a financial institution as long as one of the objectives inherent in your fraud scheme would necessarily lead to you obtaining money from a bank.
Some bankruptcy schemes involve multiple different illegal acts. This means you could face charges under several different federal criminal laws and potentially be sentenced to a term of incarceration for each separate offense. If you use the mail or postal service to submit fraudulent paperwork, you could also be charged with mail or wire fraud- both of which carry the potential for 20 years incarceration.
You need to understand all of the potential consequences that are associated with conviction for the crimes you have been charged with and you need to create a strategic defense plan to respond to allegations of bankruptcy fraud.
Arkady Bukh has a long track record of representing clients accused of serious federal and state crimes in NYC TOP RATED ON: SUPER LAWYERS, AVVO, NATIONAL TRIAL LAWYERS
Top Rated Criminal Lawyer
Arkady Bukh has a long track record of representing clients accused of serious federal and state crimes in NYC
TOP RATED ON: SUPER LAWYERS, AVVO, NATIONAL TRIAL LAWYERS
Third Party Liability for Bankruptcy Fraud
A debtor is not the only one who can be charged with a bankruptcy fraud offense. A third party who knowingly and fraudulent receives a material amount of property from a debtor who has filed for bankruptcy protection may be charged with a crime. Fraudulently destroying or concealing any of the debtor’s financial information can also result in criminal penalties under 18 U.S. Code Section 157.
Statute of Limitations for Bankruptcy Fraud
Prosecutors have only a limited amount of time to take action for many types of federal criminal offenses. While there is no statute of limitations for federal crimes that have a potential penalty of death, or for some federal offenses related to sex crimes or terrorism, most prosecutions for federal criminal acts must begin within five years.
For crimes against financial institutions and for cases of bankruptcy fraud, however, prosecutors may have more than five years in which to bring criminal charges. Because there are different rules for the statute of limitations depending upon the specific criminal offenses you have been charged with related to fraud in bankruptcy, it is important to talk to a bankruptcy fraud lawyer about how long prosecutors have to pursue a case against you.
It is also important to realize that there are special rules for some types of bankruptcy fraud cases. When you are accused of fraud for concealing bankruptcy assets, the state of limitations does not even begin to run until a final decision has been made by the courts either discharging the debt or refusing to discharge the debt. According got 18 U.S. Code Section 3284, concealing assets is considered a “continuing offense” until final discharge or final denial of the right to discharge the debts.
What to do When You are Accused of Bankruptcy Fraud
When you have been accused of a state or a federal crime in New York, you have rights that cannot be violated by the police or the prosecuting attorney’s office. In many criminal cases, the accused person’s rights are trampled on by the state. If the defendant accused of bankruptcy fraud does not have a criminal defense attorney, this means they can face jail time or serious penalties.
Your defense attorney can help you to try to avoid prosecution by getting the charges dropped, or can negotiate a plea agreement so you will receive a lighter sentence or be charged with a lesser offense. A bankruptcy fraud attorney from Bukh Law Firm can also assist you in raising defenses to bankruptcy fraud charges including:
- Lack of intent to defraud.
- Insufficient proof of a fraud offense.
Remember, you do not have to prove that you did not commit bankruptcy fraud in order to avoid being convicted and facing serious criminal penalties. If your attorney can successfully raise doubts about whether you violated the law, this should be enough to secure a verdict of not guilty since the prosecutor has the burden of proving the case.
If you have been accused of bankruptcy fraud, you need a law firm on your team who will work to make sure your rights are protected at all stages of your criminal trial. At Bukh Law Firm, we understand what our clients are going through when they are accused of a crime. We fight to make sure they are protected throughout the criminal proceedings and that they receive a fair and just trial, but we also try to help them to move forward with their lives and be successful.
If you are accused of a crime, whether you committed it or not, you deserve a team of New York City criminal defense attorneys who are understanding and compassionate, and who will be dedicated to making sure you are not taken advantage of in the criminal justice system. Call today to learn more.