NEW JERSEY CRIMINAL LAWYERS

NJ Bankruptcy Fraud

Understanding Bankruptcy Fraud: Types, Penalties, and Investigations

Bankruptcy fraud is a severe financial crime that can lead to devastating consequences for those involved. It has severe repercussions such as denial of bankruptcy discharge, fines, criminal charges, or even convictions. This article will explore what bankruptcy fraud is, the types of bankruptcy frauds prevalent in the United States today, investigations, and penalties that follow charges of bankruptcy fraud.

What is Bankruptcy Fraud?

Bankruptcy comes into play when people face financial instability. The system was created to assist financially struggling individuals to get back on their feet again and become active members of society. Moreover, creditors also benefit from the process since they can recover their money from debtors once it has been approved by the court.

For a bankruptcy petition to succeed, both parties must provide all relevant information regarding assets that should be liquidated to pay off debts. Debtors generally need to report all these assets promptly as per bankruptcy laws. These include jewelry items, furniture possession homes or vehicles they own.

One commits an act of bankruptcy fraud if he or she engages in fraudulent activities during or before filing for bankruptcy proceedings or fails entirely to declare their assets. The financier may face criminal charges if caught defrauding this process.

Types of Bankruptcy Fraud

Bankruptcy fraud is committed in several ways, making it challenging to pin perpetrators down. Here are some common types:

1) Concealment of Assets

This type of fraud represents about 70% of most bankrupt proceedings cases in the United States. Debtors committing this type leave out some valuable possessions such as real estate properties from their asset list intentionally.

2) Making False Statements

This happens when a debtor provides false information regarding his income and other important aspects needed for successfully processing his or her case’s approval.

3) Filing for Bankruptcy in Multiple States

This fraud type involves filing for bankruptcy in several states to delay the bankruptcy process and slow down asset liquidation. This gives debtors more time to hide their possessions.

4) Creditors Making False Statements

Creditors who fail to disclose payments made by debtors may engage in fraudulent activities under this type of bankruptcy fraud.

5) Creating Businesses Without Intending To Pay Back Creditlines

Debtors may create businesses and acquire needed assets while intending never to pay back loans, knowing they will eventually have to file for bankruptcy.

6) Embezzlement

Fraudsters taking some of the money obtained from a debtor’s sale of assets through embezzlement can also commit bankruptcy fraud. Bankruptcy officials, attorneys, or court personnel mostly perpetrate this kind of fraud.

It is essential to note that a person may only be charged with asset concealment if he knew about it and did so intentionally. If someone forgets to list some items like jewelry inadvertently, they cannot be held liable for bankruptcy fraud.

Who Investigates Bankruptcy Fraud?

Several key government agencies investigate bankruptcy fraud, including the Department of Justice (DOJ) body known as the United State Trustees Program (USTP), whose mandate covers overseeing the US Bankruptcy system. They are responsible for identifying potential instances of bankruptcy fraud such as multi-state filings involving organized crime members and cases with significant monetary value.

Once identified, notification goes out FBI officials and relevant district attorney offices who further investigate the matter by examining financial documentation collected from suspect cases, interviewing witnesses or potential defendants collect, and possibly other forms of evidence obtained through undercover operations or surveillance footage.

Punishment For Bankruptcy Fraud

Persons indicted for committing bankrupcy fruad face severe sanctions once charges are proven true. It revokes their credit discharge option, thus stripping them of the protection that comes with it – meaning their creditors could still sue them. Also, for a court to impose opportunistic fraud charges meant an individual knowingly misrepresented themselves or took calculated deceiving actions when interacting with the bankruptcy court.

If convicted one faces various charges such that can serve up to five years in federal prison or have accumulated fines of up to $250,000. The fine and imprisonment may increase relative to the number of counts indicted alongside bankruptcy fraud.

Now let’s analyze other principal types of financial fraud prevalent in America today.

Credit Card Fraud

Credit card fraud is especially common in the US and has grave far-reaching consequences such as identity theft, damaged credit scores and stolen funds.

In 2014 alone, credit card fraud was reported as the second-most prevalent identity theft cases according to Federal Trade Commission data, with all forms accounting for up to 17% of all Identity theft crimes committed that year.

Fraudsters use multiple tactics targeting victims like telemarketing scams paid via credit cards whose primary scheme is pretending to advice unsophisticated callers on how to fix their credit reports while secretly harvesting their account information for fraudulent use. The other strategy involves sending one phishing emails seeking sensitive details or card skimming using sophisticated gadgetry left near online transactions’ endpoints (e.g., ATMs).

Telemarketing Scams

One popular way used by telemarketing scam artists is pretending to be offering individuals help clearing off their debt profile. More often than not these have individuals paying sums again in exchange for supposed debt management counsel gaining access account details intended for fraudulent purposes financially hurting the said victim irreparably.

Phishing Emails

Perpetrators implement tricky schemes by dispatching email communications disguised as legitimate notices from authorities banks or other financial institutions. These emails seek unsuspecting individuals to share their personal information, including account details by clicking on malicious links.

Card Skimming

This type of fraud involves criminals placing small devices near ATMs and gas pumps used to capture user’s card details. The purpose is to collect card data then replicate and use that cloned card for fraudulent transactions.

Bank Fraud

The FBI reported that the United States financial institutions lost over $8.9 billion due to bank fraud in 2019 alone. This crime can take many forms, including forgery, check fraud or identify theft.

Forged Endorsements and Altered Checks
For this kind of fraud, the perpetrator capitalizes on bank trust system depositing fraudulent checks into a victim’s account successfully after altering these checks’ information using genuine routing numbers or other identity information collected from the account holder’s possession illegally.

Identity Theft
Perpetrators of identity theft steal others’ personal information such as Social Security numbers, addresses among other particulars with intent to create false credit card authenticity of which they wielded for various purposes having no intention to ever pay back.

Wire Fraud

Wire fraud happens when a person uses unfair methods like hacking or providing fraudulent identification documents meant to deceive banks from a potentially significant sum of money without any intention of redemption.

Medical Fraud

The consequences of medical fraud are grave, resulting in increased healthcare costs for all and dangerous medical procedures necessary because of malpractice engagements.

Prescription Fraud
Many teens and young adults get involved in prescription self-medication through falsifying reports meant to confuse pharmacies into dispensing controlled substances wrongfully.

Physician Fraud
When doctors defraud insurers by deliberately making errors or exaggerating billings done against clients who may not know what procedures they received, this constitutes physician fraud.

Sham Clinics

Fraudulent schemes set up sham clinics and steal victims’ personal information. Through these fraudulent claims, false treatments or tests may be underwritten, thus leading to financial loss for both the relevant health insurance companies and the unsuspecting patients.

Fraud is debilitating to livelihoods of victims who suffer financial loss from its effect. Therefore its crucial individuals regularly monitor their accounts for any suspicious transactions and never disclose personal identities to third-party strangers without honing immense discretion when doing so.