Federal Bankruptcy Fraud

Bankruptcy is a complex process that provides debtors the opportunity to receive a fresh financial start. Hundreds of thousands of debtors take advantage of bankruptcy each year, though the rate has been declining since the peak of the financial crisis. The process can take several months and involves mounds of paperwork. Often, people make mistakes which may be deemed honest or deliberate. When federal agents suspect deliberate errors, they may probe the bankruptcy to find evidence of bankruptcy fraud.

All bankruptcy proceedings take place in U.S. federal courts, and the IRS pursues all cases of bankruptcy fraud. If your bankruptcy case is under investigation, you need to quickly align yourself with a federal bankruptcy fraud defense attorney in Orlando.

Defining Bankruptcy Fraud

Bankruptcy fraud is a type of white collar crime in which a person devises or attempts to devise a plan to defraud a financial institution. There are generally five ways to go about doing this:

  1. Concealing property and other assets
  2. Intentionally filing false or incomplete forms
  3. Filing for bankruptcy multiple times using false information or filing several times using truthful information in different jurisdictions
  4. Launching a petition mill
  5. Bribing a court-appointed trustee

Concealing Property and Other Assets in Bankruptcy

Bankruptcy costs lenders and creditors an exorbitant amount of money. While bankruptcy helps the debtor eliminate certain debts, those debtors must face the reality that they will never be fully compensated for the funds they provided the debtor. Thus, when a person files for bankruptcy, he must claim nonessential assets creditors can liquidate to recover some of the costs of lending.

To protect assets, debtors may fail to disclose them on their bankruptcy applications. They may also transfer undisclosed assets to friends or relatives to keep creditors from discovering them. These actions are fraudulent and may lead to harsh penalties.

Multiple Bankruptcy Filings

Each state has a residency requirement for those filing bankruptcy. You may be eligible to file bankruptcy in several states, but you can only choose one state in which to do so. Applying for bankruptcy in more than one state at the same time using your real personal information or falsified information is a form of bankruptcy fraud.

Petition Mills

Petition mills are fraudulent firms that target tenants facing eviction. Operators of these firms list their services in local newspapers to reel in tenants who cannot pay the rent. They promise tenants they will fight their evictions while posing as financial advisors like credit counselors.

Instead of fighting evictions, these firms take all the personal information of their victims and charge steep fees to file bankruptcy on their clients’ behalf without them knowing. In the end, these petition mills ruin the debtors’ credit scores and deplete their resources.

Avoiding the IRS

You can prevent an investigation for bankruptcy fraud by doing your best to provide all the most updated information about your finances and assets when documenting your bankruptcy. You should also file in one state and work with a bankruptcy lawyer to ensure a smooth process.

Fighting a Bankruptcy Fraud Investigation

If you face charges for bankruptcy fraud in Orlando, you should immediately seek the help of a federal bankruptcy fraud lawyer who has experience litigating cases in federal court. Bankruptcy fraud can lead to decades in federal prison and hundreds of thousands of dollars in legal fees. You may also be required to pay restitution to lenders and creditors.

At The Umansky Law Firm, our federal crimes lawyers who defend white collar criminal charges like bankruptcy fraud in Orlando and throughout Central Florida. We provide free consultations to help clients understand the gravity of their situations and potential results. Call 407-228-3838 24/7 or email us a description of your legal issues.