Felony Bankruptcy Fraud Puts You in Federal Prison

by
Richard Fonfrias, J.D.
Chicago’s Financial Rescue & Bankruptcy Lawyer
Fonfrias Law Group, LLC

You have the legal right to file for bankruptcy when you don’t have the money to pay your bills. If you file Chapter 7 bankruptcy, then your property will be sold and the money from the sale will be divided appropriately among your creditors.

However, when you file for personal bankruptcy but are not in fact broke, then you commit a federal crime called bankruptcy fraud. Here are the most common types:

When You Operate a Bankruptcy Petition Mill

This is when you pretend to help poor tenants avoid eviction. Bankruptcy mills are usually found in areas with a large number of immigrant or poor populations. In this case, a poor renter responds to a newspaper ad for a typing service offering to help the tenant avoid eviction. The typing service files for bankruptcy in the tenant’s name, charges huge fees and drags out the case for months. The tenant spends all of his money, loses his credit rating, and still gets evicted.

When You Hide Your Assets

Most bankruptcy fraud cases involve people who are trying to hide assets. This happens when you do not list all of your assets in the bankruptcy court paperwork. You may give assets to a friend or relative to hold so they won’t be seized and sold, or you may sell assets to someone at a ridiculously low price. You do this hoping creditors will sell only assets you list on court paperwork and not discover that you have other assets that are not on the list.

When You File Simultaneously

This occurs when you alone or with someone else file for bankruptcy simultaneously in more than one state. You may use your real names and information, or fake names and information, or both. Usually, you list the same assets on the bankruptcy paperwork but do not list all of your assets. This way you protect your most prized assets while allowing some assets to be sold to pay your obligations.

Bankruptcy Fraud Penalties

Bankruptcy fraud is a felony and you can be sentenced to pay a fine of up to $250,000 and/or serve five years in a federal prison.