Bankruptcy fraud is a form of white-collar crime where suspects allegedly violate federal law by fraudulently filing for bankruptcy in order to purposefully evade their legal financial responsibilities to their creditors. Essentially, they allegedly use the federal bankruptcy court system to commit a fraud against their creditors. Though there are several specific types of bankruptcy, the most common three categories are: liquidation of business assets (Chapter 7), reorganization of debts in order to remain in business, (Chapter 11), and personal financial reorganization (Chapter 13). In Maryland, persons being investigated for or charged with federal bankruptcy fraud are prosecuted by the United States Attorney’s Office, either in Baltimore or Greenbelt. These cases are heard in the United States District Court for the District of Maryland, located in Baltimore and Greenbelt, respectively. It is important to note that a Maryland federal bankruptcy fraud lawyer is not the same thing as a bankruptcy lawyer. Bankruptcy lawyers represent clients who seek to file for bankruptcy. Maryland federal bankruptcy fraud lawyers are white collar criminal defense and can defend you against bankruptcy fraud charges.
The most common type of bankruptcy fraud offense prosecuted by the federal government involves the alleged concealment of assets during a bankruptcy proceeding in order to keep the bankruptcy court from determining the true financial status of the debtor. A Maryland federal bankruptcy fraud lawyer can help protect you from such allegations. When a person files for bankruptcy protection, he/she has an obligation to assist the court in constructing a true inventory of all of his/her money, property, and other tangible assets to create an accurate “bankruptcy estate.” Once accomplished, the bankruptcy court is able to determine how much the debtor must immediately pay to creditors, what assets can be shielded from collection under the bankruptcy protection framework. The bankruptcy court will also determine which assets must be liquidated in order to comply with a court-ordered payment plan to the appropriate creditors. Sometimes bankruptcy debtors are accused by the government of trying to hide assets from the bankruptcy court in hopes of not having these assets calculated as a part of the court ordered repayment plan to creditors. In essence the government is accusing the debtor in this scenario of falsely representing to the bankruptcy court that he/she has access to fewer assets than he/she actually has and thus his/her ability to repay is limited, when that is actually not the case.
Attempting to conceal assets can be done in one or more of the following ways [18 U.S. Code Section 152]:
Another form of bankruptcy fraud occurs when a debtor allegedly attempts to bribe a creditor. When a debtor files for bankruptcy protection, there’s a “time out” or period where only existing debtor claims are considered by the court. The debtor might try to convince a creditor not to file any claims (or “charge off” their current claim) by offering a cash payment in exchange for a lower amount of the debt or for the creditor to not make any claim against the debtor. Once the bankruptcy petition is accepted by the court, however, debtors become parties to the federal bankruptcy proceeding. This means such a quid pro quo could be viewed by the government as bribery of a bankruptcy party or witness [18 U.S. Code Section 201(b)(3)]. Occasionally, bankruptcy petition filers are investigated and charged with bribing – or attempting to bribe – a trustee. The government also investigates and prosecutes attorneys and/or other court officers for allegations of committing bankruptcy fraud by embezzling funds or other assets that are part of the petitioner’s bankruptcy estate.
Federal bankruptcy fraud is commonly investigated by the Federal Bureau of Investigations (“FBI”) and prosecuted by the U.S. Attorney’s Office, but often these investigations also involve other federal agencies such as the Internal Revenue Service (“IRS”) (tax fraud) and possibly even the Securities and Exchange Commission (“SEC”) if securities fraud is involved in hiding assets. Such investigations can potentially be very sophisticated, and could involve investigative methods such as court-ordered electronic surveillance, telephonic wiretaps, audits, as well as interviews of potential witnesses. Often, many of these methods are used before a suspect is even aware that he/she is a bankruptcy fraud investigation target.
In order to obtain a conviction, the prosecution must prove beyond a reasonable doubt that the accused knowingly committed fraud, either by misrepresenting material facts in his/her petition or attempting to bribe someone in order to help conceal assets. Dozens of people accused of bankruptcy fraud are convicted every year in the United States. Those convicted of bankruptcy fraud face a maximum a sentence of up to five years in prison and/or a fine of up to $250,000.00. If the accused is convicted of multiple counts of criminal bankruptcy fraud, the court can sentence him/her to up to five years in prison for each count and run the sentences consecutively, one after the other. By working with a Maryland federal bankruptcy fraud lawyer, a legal professional can explain what this means for your fact-specific case. They could also help you understand what constitutes as bankruptcy fraud.
Often, criminal fraud accusations can result in civil lawsuits as well. In civil cases, the standard of proof is a preponderance of the evidence, meaning more likely than not which is a lower standard of proof than that used to obtain a conviction in criminal cases. Sometimes the civil bankruptcy fraud case will run parallel to the criminal bankruptcy fraud case. Evidence from one case will probably be admissible in the other case. Thus, it is important that your Maryland federal bankruptcy fraud attorney for the criminal fraud case work together with the civil attorney to coordinate a defense that does not lead to greater in exposure in either case.
There are two civil bankruptcy fraud penalties, which include:
Anyone being investigated for or charged with federal bankruptcy fraud related offenses in Maryland should consider contacting one of our experienced Maryland federal bankruptcy fraud lawyers immediately to make sure your rights are protected.