Bankruptcy Fraud

What is bankruptcy fraud?

As America navigates its way through the economic crisis, many families will feel as if filing bankruptcy is their best option at a new beginning. The bankruptcy laws provide individuals the ability to reorganize, or purge their debt. Part of the process requires those who seek bankruptcy protection to file a legal form detailing all assets and liabilities. Those who fail to disclose all assets and liabilities on the bankruptcy forms subject themselves to criminal charges of bankruptcy fraud.

During the more than 21 years that I’ve served in federal prison, I’ve met several individuals who were convicted of bankruptcy fraud. They were well-educated individuals who did not consider themselves criminal. Arthur, for example, was a corporate lawyer who should have understood the consequences of providing misleading information on an official government document. He did not. As a consequence of his prevarication, a grand jury charged Arthur with bankruptcy fraud.

In Arthur’s case, the fraud case centered on a piece of furniture. He had been a collector of high-end artwork. Arthur had purchased a handcrafted table in the 1970s from an art collection for less than $1,000. The table had appreciated in value by tens of thousands of dollars. As a discerning art collector, Arthur understood the true market value of his collection.

Personal circumstances resulted in financial complications for Arthur. He sought protection from creditors by filing bankruptcy in federal court. When listing his assets, Arthur cited his valuable artistic piece as a coffee table with a value of $1,000, which was more than the price he had paid. Yet the fair market value of Arthur’s collectable table exceeded $75,000.

More than three years passed before prosecutors brought criminal charges of bankruptcy fraud against Arthur. A disgruntled art dealer provided evidence to the government that Arthur hid assets in an effort to avoid paying his debts. Those complaints launched the criminal investigation. Government prosecutors convened a grand jury that concluded Arthur had knowingly concealed valuable assets in his bankruptcy filing. The members of the grand jury then issued a criminal indictment for bankruptcy fraud. Arthur pleaded guilty to those criminal charges of bankruptcy charges. His judge imposed a term that exceeded two years in federal prison.

Arthur represents but one example of numerous people I’ve met who serve time for bankruptcy fraud. Mark was another example. He had been a professional in the financial services sector. After a series of investments went bad, Mark felt forced to file in federal court for bankruptcy protection. The forms did not disclose Mark’s interest in some real estate holdings. Mark maintained that his accountant had prepared the asset disclosure forms. Mark and his wife, Cindy, both signed the asset disclosure forms as a part of their bankruptcy filings.

The bankruptcy trustee who played a role in the proceedings asked Mark why his real estate holdings were not disclosed on the forms. Mark said that his accountant had prepared the forms and that the missing disclosure must have been a clerical error.

“Then why does your signature, along with your wife’s signature, appear on the forms?” The trustee wanted an answer.

Mark said a mistake must have been made. The accountant later offered an amendment to the bankruptcy filing that listed all of Mark’s assets. Yet the trustee concluded that Mark and his wife should have noticed the missing assets before they signed the official form and submitted the document to the court for processing. The trustee submitted Mark’s case to prosecutors. The government charged both Mark and his wife with bankruptcy fraud. They each received sentences to more than 18 months in federal prison.

Those who face criminal charges for bankruptcy fraud should read the stories of others who have endured similar circumstances. I wrote one article that described how a franchise owner was forced into bankruptcy, and his actions led to criminal charges for bankruptcy fraud.

All of the articles available on www.criminal-indictment.com will help readers make better decisions as they navigate the criminal justice system.