A Virginia federal bankruptcy fraud lawyer can help if you are facing allegations of misrepresentations, false statements, or concealing assets in connection with bankruptcy proceedings. According to the Administrative Office of the United States Courts, over 1 million people sought relief under the U.S. Bankruptcy Code in fiscal year 2013. While the vast majority of these filings are in compliance with the applicable law, some law enforcement estimates claim that as many as 10 percent of all filings contain some elements of fraud.
Bankruptcy fraud is a federal offense whether the alleged fraud is perpetrated in Virginia or any other state. If one is convicted of such an offense, they may face significant fines and incarceration in federal prison. As with any criminal proceeding, the government must prove each element of the alleged offense beyond a reasonable doubt in order to obtain a conviction. In many cases, a skilled Virginia federal bankruptcy fraud attorney can effectively defend against many of these allegations. In cases where a not-guilty verdict or dismissal of charges is not possible, a skilled litigator will work aggressively to mitigate any possible penalties.
Virginia Federal Bankruptcy Fraud Lawyers Can Help Against These Allegations
There are several ways in which the government may allege that bankruptcy fraud has occurred. Among the most common allegations are:
- Concealing assets – In return for having your debts discharged or reorganized, a person or business filing for bankruptcy must list all assets in their bankruptcy filing. There are many ways that people can be accused of attempting to conceal assets when filing for bankruptcy, including allegations that the assets were transferred to friends or family or accusations that the individual created non-existent encumbrances to create the impression that the assets have little or no value.
- Intentionally filing forms containing false or misleading information – The forms and filings associated with filing for bankruptcy are conducted under oath, meaning that individuals who erroneously file false information may end up being criminally charged.
- Multiple bankruptcy filings – Federal law limits the number of times a person or a business can file for bankruptcy in a given period of time. Those filing might not realize that all assets are viewed as a whole when bankruptcy is filed. Some people may mistakenly use a maiden name and a married name on their filings.
- Trustee fraud – Accusations of this type of bankruptcy fraud often involve allegations that the filer bribed a bankruptcy trustee in order to obtain a more favorable result in their bankruptcy proceedings. This is why anyone considering a bankruptcy filing should do so under the guidance of a well-qualified federal bankruptcy attorney.
Any accusation of bankruptcy fraud is obviously a serious matter and, if not defended against vigorously, may result in significant criminal penalties. As a result, individuals who are facing bankruptcy fraud allegations should discuss their situation with a Virginia federal bankruptcy fraud attorney who is familiar with defending against these types of cases and who has a proven track record.
What Happens if the Bankruptcy Trustee Suspects Fraud?
Often a bankruptcy fraud investigation is initiated when the bankruptcy trustee assigned to a particular case suspects that fraudulent activity has occurred. A bankruptcy trustee is a court-appointed individual whose role is to oversee the administration of one’s case. If he or she suspects fraud but does not believe that there is enough evidence to proceed with a criminal prosecution, the trustee may request a Rule 2004 examination. These proceedings are conducted under oath, and the trustee can request any information that may indicate fraudulent conduct in a bankruptcy filing. You can read more about the Rule 2004 examination process here. A Virginia bankruptcy fraud lawyer can help you mitigate liability even at this stage of the investigation.
If the trustee determines that sufficient evidence of fraud exists, he or she may file a motion in bankruptcy court, which is referred to as an “adversary proceeding.” While not criminal in nature, an adversary proceeding can still achieve the following:
- Compel the production of assets that are alleged to have been hidden or not disclosed
- Recover assets from parties who have used a bankrupt business to allegedly wrongfully obtain investments
- Cancel any discharge that the debtor would have received through bankruptcy
- Set aside transfers that have been deemed to be fraudulent, and recover the assets or property from the party that received the transfer
- Determine whether and, if so, the extent to which encumbrances on property are valid
In addition to, or in lieu of, conducting a Rule 2004 examination, the bankruptcy trustee may also choose to refer the case for criminal prosecution. The trustee assigned to the case would refer the matter to the Office of the United States Trustee, who would then turn the matter over to United States Attorney’s Office for further review and potential prosecution.
Bankruptcy Fraud Penalties
Individuals who are convicted of bankruptcy fraud under 18 U.S. Code Section 157 are subject to fines of up to $250,000 and imprisonment of up to five years, or both. In many cases, however, a skilled federal bankruptcy fraud attorney in Virginia can successfully negotiate with prosecutors to achieve a reduced term or probation over incarceration.
A Virginia federal bankruptcy fraud lawyer can also move to have any and all charges dropped, which can significantly reduce or eliminate your potential exposure. Clients who find themselves accused of such offenses often had no intention of committing bankruptcy fraud. An experienced and aggressive litigator will understand if that is the case, and will know how best to proceed given the government’s allegations and the specific facts of the case.
