In December, an Irvine-based bankruptcy attorney was disbarred after being convicted of conspiracy to commit bankruptcy fraud. The disbarment makes it clear that actual or attempted bankruptcy fraud can result in dire consequences – but you don’t have to be a lawyer to receive harsh penalties. If the trustee suspects that a filer has committed or tried to commit bankruptcy fraud in a Chapter 7 or Chapter 13 case in California, not only can there be negative ramifications for the bankruptcy, but the filer can even be criminally prosecuted. Our Roseville Chapter 7 lawyers explain what bankruptcy fraud is, and examine some of the consequences that can result from committing bankruptcy fraud.
How is Bankruptcy Fraud Legally Defined?
Bankruptcy fraud is a type of “white collar crime,” or financial crime, which is defined by federal law under 18 U.S. Code § 157. Under the legal definition established by this statute, a person commits bankruptcy fraud when he or she files a bankruptcy petition, or other bankruptcy-related document, as part of a scheme to defraud another party, including having intent to devise such a scheme.
It is also bankruptcy fraud to make “a false or fraudulent representation, claim, or promise concerning or in relation to a proceeding under title 11, at any time before or after the filing of the petition, or in relation to a proceeding falsely asserted to be pending under such title.” In other words, it is bankruptcy fraud to make false statements, or to supply false or misleading information, before or after filing, in connection with any bankruptcy proceedings, which is what is meant by “a proceeding under title 11.” (Not to be confused with Chapter 11 bankruptcy, Title 11 of the U.S. Code pertains to bankruptcy generally, including Chapter 7 bankruptcy, or “liquidation,” and Chapter 13 bankruptcy, or “reorganization.”)
Bankruptcy fraud can take several forms under these fairly broad definitions, such as filing multiple claims. One of the most common examples is concealment of the debtor’s assets, which must be listed using accurate, complete, and up-to-date information when the debtor files for bankruptcy. For example, a document called Form 106A/B (Schedule A/B: Property) requires debtors to list any buildings, land, or other pieces of property they own or have an interest in.
Bankruptcy Fraud Penalties and Consequences
For a California bankruptcy attorney, committing or attempting to commit bankruptcy fraud can result in disbarment. But what if you aren’t an attorney? Other than potentially losing your job, what other types of consequences can arise from engaging in bankruptcy fraud?
In fact, this is really a two-part question: what are the consequences of bankruptcy fraud for your bankruptcy case, and additionally, what are the criminal consequences of bankruptcy fraud?
Let’s start by answering the first question. If you intentionally hide or attempt to hide assets, or if you are suspected by the trustee to have engaged in other forms of bankruptcy fraud, the bankruptcy court could potentially deny your discharge or even dismiss your case altogether, which means not only will you remain liable for your debts, you will also lose the invaluable protection afforded by the automatic stay, which normally freezes debt collection actions while a bankruptcy case is ongoing.
In addition to losing out on the substantial financial benefits of bankruptcy, you could have even bigger worries: criminal prosecution. Though non-violent in nature, bankruptcy fraud is still considered to be a serious offense – and a conviction can result in serious criminal penalties to match. Not only does 18 U.S. Code § 157 permit convicted offenders to be heavily fined, further exacerbating any financial difficulties, it also establishes a prison sentence of up to five years, which may be imposed in place of or in addition to the fine.
Because these penalties are rooted in federal law, they apply not only in California, but to filers throughout the United States.
CA Bankruptcy Lawyers Serving Roseville, Sacramento, and Folsom
If you are looking for a skilled, experienced, and trustworthy attorney who can help you file bankruptcy individually, file jointly with your spouse, or assist with your business bankruptcy, you do not need to look any further. Serving the Roseville, Sacramento, and Folsom area, the California bankruptcy lawyers of The Bankruptcy Group have established a reputation for providing friendly, focused, and efficient representation to help make bankruptcy work for you. Whether you are a small business owner or simply an individual who is seeking a solution to make your debt more manageable, The Bankruptcy Group can assess your options, answer your questions, and help you plan your case strategically while protecting your rights as a debtor.
Our accomplished legal team includes Sacramento Chapter 13 attorneys, Sacramento Chapter 7 lawyers, Folsom Chapter 13 attorneys, Folsom Chapter 7 lawyers, and more. To learn more about how we can assist you in a free and completely confidential consultation, contact The Bankruptcy Group at (800) 920-5351 today.