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Bankruptcy Fraud Lawyer

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The federal government controls bankruptcies due to Article I, Section 8 of the U.S. Constitution granting Congress authority over the process. As a result, violations of the rules of bankruptcy could result in federal civil or criminal actions for the offense of bankruptcy fraud. The desire to manage or discharge debts while concealing assets from the proceedings can motivate people to break the rules. They want the fresh start offered by bankruptcy while still keeping valuable non-exempt assets. As with any allegations of financial crimes, the evidence will be complex. To cope with the situation effectively, a defendant should immediately consult a bankruptcy fraud defense lawyer in West Palm Beach, Florida.

What is bankruptcy fraud?

Claiming the legal protections of bankruptcy is dependent on a filer’s full financial disclosure. On its most basic level, bankruptcy fraud occurs when a filer hides or devalues assets purposefully to deceive the system.

Multiple parties may commit bankruptcy fraud, including:

  • individuals
  • businesses
  • attorneys
  • creditors

Individuals and businesses commit the bulk of frauds. On rare occasions, attorneys participate in fraud by conspiring with debtors. A filer may also be the victim of a fraud perpetuated by a bankruptcy attorney who collects fees but does not perform services or knowingly steers a client toward illegal activity.

Although creditors bear the brunt of losses when a bankruptcy court discharges debts, they can also commit bankruptcy fraud. They do this by falsifying records about what a debtor owes or has already paid.

Civil bankruptcy fraud

An accusation of civil bankruptcy fraud usually comes from a creditor. The creditor will assert that the debtor originally misled the creditor about income and ability to repay or planned all along to dodge the debt through bankruptcy.

Serial filing is another form of bankruptcy fraud. A debtor abuses the system by exploiting the automatic stay issued by a court upon filing for protection. This halts a foreclosure or other seizure. A debtor does not even complete the case but uses it to delay debt collection. A serial filer will do this over and over until the system gets wise to the tactic.

Civil offenses don’t send people to prison, but they do have consequences. If such allegations are proven, the bankruptcy court may:

  • dismiss the filer’s bankruptcy case
  • ban the debtor from filing again for several years
  • deny debt discharges
  • revoke asset exemptions
  • criminal bankruptcy fraud
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What actions can lead to federal criminal charges?

Charges of criminal bankruptcy fraud may be proven by showing the filer intentionally hid assets or devalued them. This often is accomplished in many ways before or during a bankruptcy filing.

Federal criminal charges are possible when a debtor:

  • omits or misrepresents assets on financial disclosures to the court
  • fails to disclose all sources of income
  • transfers money or assets to family members of friends
  • exchanges assets for below market value
  • attempts to bribe a bankruptcy trustee

Such actions can be difficult to get away with because multiple parties scrutinize a debtor’s disclosures. This is the job of the trustee assigned to a debtor’s case. Additionally, the judge and the lawyers for the creditors will look for fraudulent activity.

During business bankruptcies, confusing financial reports and tax filings also raise red flags during a bankruptcy case. In fact, a business might have been paying its bills based on fraudulently collected income from things like wire fraud or securities fraud. Once the fraud starts to unravel, the business owners might fall behind on payments and try to resolve everything in bankruptcy court. That step, however, could expose the fraud behind the business.

Even legitimate businesses fall prey to the temptations of fudging income and assets. Red flags of business bankruptcy fraud include:

  • cash payments to fictional employees or contractors
  • under-reporting revenue
  • false inflation of assets
  • transfer of business assets to relatives or friends
  • transfer of business assets to new corporate entities
  • bankruptcy fraud penalties

The serious consequences of criminal conviction highlight the need for a defense developed by a knowledgeable fraud lawyer in West Palm Beach. Federal law authorizes penalties of up to five years in prison and fines up to $250,000 if convicted.

Financial problems can inflict panic

Prison was the fate for a South Florida couple convicted of hiding assets in a Chapter 7 bankruptcy. The husband and wife had at one time lived an affluent lifestyle based in Boca Raton. As a physician, the husband operated a successful anesthesiology practice until changes in the health care industry and insurance billing caused the business to fail. They were living in a West Palm Beach motel by the time federal prosecutors issued criminal charges for bankruptcy fraud.

After the business unraveled, the once-successful couple filed for bankruptcy. The judge found them so lacking in credibility, that the court refused to discharge about $2.9 million in debts. The suspicions raised by the court led to a criminal investigation. They were ultimately convicted of concealing jewelry and artwork valued at over six figures. Both received prison sentences of one year and one day.

This unfortunate story illustrates how financial pressure can drive people to make mistakes that worsen their situation.

Bankruptcy fraud defenses

Intent is a crucial element for proving the crime of fraud. At times, accusations of hiding assets might be counteracted by explaining that a defendant made unintentional errors on financial disclosures. People’s financial lives can be complex. Records might be misplaced or assets forgotten.

Additionally, a defendant might form a viable defense by providing evidence that all financial information was given to the bankruptcy attorney but then the attorney failed to record everything accurately. The defendant assumed full disclosure was given but did not notice that the attorney missed things.

Submitting corrections to paperwork could resolve accusations under some circumstances.

Occasions arise as well when a debtor transferred an asset or gave someone money without knowing it would interfere with a bankruptcy filing. For example, a person might give a relative cash to deal with an emergency, like the threat of eviction. Your bankruptcy fraud attorney could explain the situation and potentially prevent criminal charges because no deception was intended.

Bankruptcy fraud criminal defense in South Florida

Better outcomes are possible when you hire your own West Palm Beach federal defense attorney instead of relying on a public defender. Public defense lawyers have burdensome case loads and probably cannot give your case the attention that it deserves. At Joffe Law, P.A., we understand how to protect your rights and shield you from aggressive prosecution. Our services are available in West Palm Beach. Call us right away.

AVAILABLE 24x7
Serious federal cases only.

AVAILABLE 24x7
Serious federal cases only.

AVAILABLE 24x7
Serious federal cases only.

AVAILABLE 24x7
Serious federal cases only.

AVAILABLE 24x7
Serious federal cases only.