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FBI Arrests 8 for Bankruptcy Fraud

On Behalf of | Jun 17, 2016 | Bankruptcy in the News

As part of its recent crackdown on bankruptcy fraud, the FBI has arrested eight people who allegedly hid over $3 million from the bankruptcy court. In one case, the U.S. Attorney alleged that a woman gave nearly all of her assets, including a $1.8 million tax refund, $32,000 in furs, and over $100,000 in cash to her husband, and subsequently declared bankruptcy. Both the woman and her husband are charged with conspiracy to fraudulently transfer and conceal property in contemplation of a bankruptcy and other charges. In another case, a couple allegedly liquidated a certificate of deposit worth $141,000, and subsequently filed bankruptcy without telling the court about this cash. That couple was arrested and charged with multiple counts of bankruptcy fraud.

The U.S. Attorney’s Office has started aggressively pursuing cases like these where individuals filing Chapter 7 allegedly deceive the court or file misleading paperwork. “Federal bankruptcy proceedings can be a lifesaver for honest individuals overwhelmed by debt,” said William J. Maddalena, Assistant Special Agent leading the investigations, “Yet others seek to line their pockets through illicit actions.”  While these sorts of investigations can recover money or assets fraudulently hidden for the bankruptcy court’s oversight, the greater goal is to preserve the integrity of the bankruptcy system for those who need it. 

These investigations also highlight the need to have an experienced, ethical attorney as a guide through the bankruptcy process. This is because the costs for intentionally deceptive filings are steep: each bankruptcy fraud charge carries a potential penalty of 5 years in prison and a $250,000 fine. In addition, the court can order that all of the fraudulently transferred cash and assets be returned to creditors as restitution.  

Even honest mistakes in bankruptcy paperwork can be costly. Often, common mistakes can result in a less effective bankruptcy discharge or, even worse, render you ineligible to obtain a discharge of your debt. For example, transferring assets before a bankruptcy, even for the purpose of paying down a debt, can be considered a “preference” and the trustee can order that those assets be returned. Because even innocent mistakes carry a high cost, having an attorney to guide you through the bankruptcy process is important. 

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If you have questions regarding bankruptcy and debt relief, we can help. During your free consultation, the experienced, ethical attorneys of at Levitt & Slafkes, P.C. will carefully explain all of your options so you can make an informed decision about how to best proceed. Contact us today at 973-323-2953 to schedule a free initial consultation.