State and Federal Bankruptcy Fraud

New Jersey Bankruptcy Fraud Attorneys

Bankruptcy is a legal process which allows a business or individual to be discharged of all their debts due to an inability to pay.  During the bankruptcy proceedings, the filing parties are obligated to allege certain facts and swear to assets for the Court to assess.Most bankruptcy fraud cases involve the concealment of assets by filing parties, lies or material omissions. . Although there are different types of bankruptcy, an identification of assets is part of every bankruptcy petition. Petitioners often want to hold onto as much property and disposable income as possible. As a result, some of them conceal assets from being liquidated to satisfy creditors. Fraudulent activity often includes transferring property and large sums of money to other people, filing multiple cases in different jurisdictions to avoid paying creditors, and using stolen Social Security numbers and/or identities to open bank accounts under false names.

Bankruptcy Fraud is commonly charged in the Federal Courts because the Federal Courts have exclusive jurisdiction of Bankruptcy cases.  Notwithstanding, there could be State criminal charges based on State law as well.

Federal Bankruptcy Fraud

18 USC § 157- Bankruptcy fraud, provides:

A person who, having devised or intending to devise a scheme or artifice to defraud and for the purpose of executing or concealing such a scheme or artifice or attempting to do so–

(1) files a petition under title 11, including a fraudulent involuntary petition under section 303 of such title;

(2) files a document in a proceeding under title 11; or

(3) makes 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,

shall be fined under this title, imprisoned not more than 5 years, or both.

Federal Bankruptcy Fraud- Concealment of Assets; False Oaths and Bribery

18 USCA§ 152 criminalizes Bankruptcy Fraud in the United States Code and provides a penalty of up to 5 years and/or a find.   18 USCA§ 152; Concealment of assets; false oaths and claims; bribery, provides:

A person who–

(1) knowingly and fraudulently conceals from a custodian, trustee, marshal, or other officer of the court charged with the control or custody of property, or, in connection with a case under title 11, from creditors or the United States Trustee, any property belonging to the estate of a debtor;

(2) knowingly and fraudulently makes a false oath or account in or in relation to any case under title 11;

(3) knowingly and fraudulently makes a false declaration, certificate, verification, or statement under penalty of perjury as permitted under section 1746 of title 28, in or in relation to any case under title 11;

(4) knowingly and fraudulently presents any false claim for proof against the estate of a debtor, or uses any such claim in any case under title 11, in a personal capacity or as or through an agent, proxy, or attorney;

(5) knowingly and fraudulently receives any material amount of property from a debtor after the filing of a case under title 11, with intent to defeat the provisions of title 11;

(6) knowingly and fraudulently gives, offers, receives, or attempts to obtain any money or property, remuneration, compensation, reward, advantage, or promise thereof for acting or forbearing to act in any case under title 11;

(7) in a personal capacity or as an agent or officer of any person or corporation, in contemplation of a case under title 11 by or against the person or any other person or corporation, or with intent to defeat the provisions of title 11, knowingly and fraudulently transfers or conceals any of his property or the property of such other person or corporation;

(8) after the filing of a case under title 11 or in contemplation thereof, knowingly and fraudulently conceals, destroys, mutilates, falsifies, or makes a false entry in any recorded information (including books, documents, records, and papers) relating to the property or financial affairs of a debtor; or

(9) after the filing of a case under title 11, knowingly and fraudulently withholds from a custodian, trustee, marshal, or other officer of the court or a United States Trustee entitled to its possession, any recorded information (including books, documents, records, and papers) relating to the property or financial affairs of a debtor,

shall be fined under this title, imprisoned not more than 5 years, or both.

Affirmative Duty to Report Evidence of Bankruptcy Fraud

In the United States Code, there is an affirmative duty for judges, receivers, or trustees to report Bankruptcy Fraud to the United States Attorney’s Office.  18 USC § 3057 provides:

(a) Any judge, receiver, or trustee having reasonable grounds for believing that any violation under chapter 9 of this title or other laws of the United States relating to insolvent debtors, receiverships or reorganization plans has been committed, or that an investigation should be had in connection therewith, shall report to the appropriate United States attorney all the facts and circumstances of the case, the names of the witnesses and the offense or offenses believed to have been committed. Where one of such officers has made such report, the others need not do so.

(b) The United States attorney thereupon shall inquire into the facts and report thereon to the judge, and if it appears probable that any such offense has been committed, shall without delay, present the matter to the grand jury, unless upon inquiry and examination he decides that the ends of public justice do not require investigation or prosecution, in which case he shall report the facts to the Attorney General for his direction.

Types of Fraud Crimes in New Jersey and Federal District Court

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