Bankruptcy Fraud

Federal Bankruptcy Fraud – 18 U.S.C. § 157

This is the federal bankruptcy fraud criminal section that prosecutors use to prosecute people for federal bankruptcy fraud.  When I see the feds coming involved — and I've been doing this for twenty-five years — where someone related to a bankruptcy fraud case at the federal level — is when people are racking up money, racking up debt, credit cards, all sorts of different things, when it's apparent that they have no intent whatsoever to satisfy their obligations, and then as a shield they are using the federal government bankruptcy laws to try to extinguish that debt.

We see this when people get into agreements with big companies and enter deals with buying goods and services.  We see this where people do bust-out schemes with credit cards, where they get a bunch of credit cards, run them up, and then try to get rid of the debt. We see people dealing with big dollars, big numbers, and it's apparent that they've loaded up all that debt, never intending to pay — never making any accurate substantial payments.  Sometimes, they'll make tiny payments to keep things moving forward, but this has to do with a reasonable person looking at things and saying that this person would never repay any of this money.

You hear people saying that they will declare bankruptcy when they rack up a bunch of debt, attempt to avoid paying taxes, or get out of some financial obligation. The feds take these crimes very seriously, and they will prosecute you under the US Code, 18 USC 157, if you're involved with devising a plan to claim that you're bankrupt, false certain false documents with the court, and they find out about it.

The more money involved in a bankruptcy fraud case in federal court, the more likely the prosecutors there are to take the case, follow through, and prosecute it. Suppose it involves a smaller amount of money. In that case, the federal prosecutors are more likely to refer that case to the state government with jurisdiction over the bankruptcy fraud issue and let them deal with it. Also, they will look at what exactly is going on in a federal bankruptcy fraud case. Is it easy for them to prove? Do they have all the necessary elements, or are there confusion and issues where the criminal defendant would have a good defense?

The bankruptcy laws at the federal level are designed to protect against those developing or getting involved with a plan or scheme as a ploy designed to try to avoid paying their debts by using the bankruptcy courts.

What the federal government is trying to protect against by using the United States Code Section 157 is those who will go into Bankruptcy Court and file false documents or forms. People who hide assets that they have in the process of trying to declare bankruptcy do not have to pay legitimate debts that they have—making a false statement while in bankruptcy proceedings — all these things, again, are designed to guard against people trying to get away with something related to declaring bankruptcy — utilizing our criminal process in such a way that is intended to defraud or trick the bankruptcy courts – designed to avoid paying legitimate debts that an individual has.

So, if you use the bankruptcy process to make a false statement and hide assets, you will be prosecuted for bankruptcy fraud. A lot of times, if it's significant enough, the federal government will get involved. Indeed, it can be prosecuted at the state level as a fraud charge, but when the federal government gets involved, usually what I see is they have policies designed to go after people who are doing it at a severe level – a lot of money involved – or their scheme in a very sophisticated manner. If that's the case, then the federal government will come in. They will arrest you. They will seize all your assets, prosecute you, and try to send you to federal prison if they think you're committing bankruptcy fraud.

Federal Prosecution  – Amount of Loss and How Many Victims

They were trying to rack up large amounts of debt, and that's when the federal government became involved.  They're going to use their resources and their agents to get that money back, and they're going to prosecute the person criminally at the federal level, depending on how much the loss is.

In other words, how many dollars we're talking about?  That can be an enhancement to the person's sentence.  Depending on how many victims are involved is another factor that the probation department, judge, and prosecutors will look at when what's filed, what is prosecuted, and how a case is sentenced for federal bankruptcy fraud.

The Federal government takes bankruptcy fraud very seriously and imposes heavy sentencing. Our bankruptcy fraud lawyers are here to help you protect your rights if you face these felony charges of bankruptcy fraud.

Being bankrupt is to be legally insolvent. All your property is liquidated and divided among creditors to pay off your debts. When you file for bankruptcy in an attempt to conceal your assets to be released of all your debts by portraying yourself as incapable of paying, you are committing a felony that carries a sentence of a fine of up to $250,000 and five years in prison.

Often, people will rack up a significant amount of debt before declaring bankruptcy or lie about specific details related to bankruptcy to gain an advantage; those who do this are at risk of being pursued by the federal government for federal bankruptcy fraud. Bankruptcy laws are designed to help people who find themselves overwhelmed by debt and with no choice but to file bankruptcy—not for people who want to take advantage of the system. If someone is being investigated for or charged with federal bankruptcy fraud, they should obtain an attorney to guide them through the process.

The penalties for a federal bankruptcy fraud conviction will be determined by the amount of loss involved. Some of the loss may be legitimate, while others may not; this information, in addition to information related to the defendant's criminal history, will be used by the judge, prosecutor, and probation department to determine the appropriate sentence.

Defenses for Federal Bankruptcy Charges

One good defense is that you are not committing bankruptcy fraud and are bankrupt and have no funds or assets to cover all the debts you have racked up. What the government is looking at is that you're not involved in what is classically called a bust-out scheme, where you're racking up debt – credit cards and various other obligations – and then relying on the bankruptcy laws to be able to get out of paying the debt.

This will put you in a position where the federal government is going to prosecute you, and if you're devising some plan — and they can prove it — to declare bankruptcy when you're not bankrupted or you forced yourself to become bankrupt because you had the goal to rack up debt and move money around so you could later go back to get the money.

Suppose the federal government can prove that. In that case, they will prosecute you, try to get the money back, take whatever assets you have, and criminally punish you for bankruptcy fraud.

Listening would be a complete defense; I wasn't trying to defraud anybody. I didn't lie about anything. I didn't conceal any assets. If I made a mistake, it was an honest mistake. I had an innocent intent. The whole center or juxtaposition related to bankruptcy fraud is designing a plan or scheme to avoid paying some debt or centered around falsely declaring bankruptcy. If the government can't prove that you had some criminal intent — that you were lying and hiding things, they won't be able to demonstrate bankruptcy fraud against you.

So, when you evaluate bankruptcy fraud and sit down with your attorney and discuss it, you're looking at the facts of the case. It's case-sensitive. What happened? Did you lie? Do you think they could prove you lied? Did you hide assets? Do you have some assets that have yet to be reported? Do you have a bunch of debt you intentionally ran up, and now you're trying to declare bankruptcy? These are some of the issues that will be thought about and dealt with when it comes to bankruptcy fraud cases.

What you need to do is sit with your attorney, if you don't mind. Be honest. Let your attorney evaluate all of the discovery related to the federal bankruptcy fraud case and the filing under 18 USC 157, and let them let you know what type of defenses you have after you have given them all the information related to your case.

Don't hide things. Don't tell your attorney certain things because they'll come back up, and your attorney will not be as prepared to deal with them as if you would have described them and let them know.

So, if you have a federal bankruptcy fraud case, your first move is not to talk to the authorities. Your first move is to talk to your federal criminal defense attorney and let them know what happened with your case and let them help you decide your next move. These cases are severe.

You could face up to five years in federal prison if convicted. So, you want to take it seriously and make sure that if you're charged with federal bankruptcy fraud, you talk to somebody who has handled these types of cases before, had successful outcomes, and knows what it takes to properly defend you and get you the best possible resolution for your federal bankruptcy fraud case.

Types of Bankruptcy Fraud Cases

The federal government may bust you for many types of bankruptcy fraud. Some common types of bankruptcy fraud are: 1) Concealment of Assets is when a person conceals some of their assets knowing that creditors can not go after what they do not know about. 2) Launching Petition Mills is a scheme that claims to help and advise tenants on how to avoid eviction.

Once a tenant responds to this typing service, the typing service takes the tenant's name and files bankruptcy in the tenant's name without the tenant's consent. The tenant thinks they are getting help, and the typing service is draining his/her savings, ruining their credit, and postponing the inevitable eviction. 3) Multiple Filings is when a person files for bankruptcy in more than one state using the same assets but leaving out some assets to protect valuables from total liquidation when debts are paid.

The Feds can charge you with other types of bankruptcy fraud, such as bustouts, bleedouts, and pyramid schemes. If you are being accused of bankruptcy fraud, you need an experienced and knowledgeable defense attorney to help you. The Los Angeles bankruptcy fraud attorneys at Hedding Law Firm have 75 years of experience, and our credentials are unmatched in the federal court system. We have handled many bankruptcy fraud cases and have seen great results.

Developing an Effective Defense Strategy

So, if you've got a situation like this, some people might have a defense.  They might say, I deal with big numbers.  I take significant risks, but I was never intending to defraud anybody.  Things just went south on me.  It wasn't my fault, and then you bring evidence forward to show that you were trying to do things the right way — trying to be able to pay your creditors, and you weren't trying to run some scam or game, because obviously, this hurts somebody's credit when you have to claim bankruptcy.

Nobody wants to do it unless they're in the wrong position, and while in that bad position, they end up making some moves — doing something stupid, being careless, taking a risk, and being unsuccessful with that risk.  That's not bankruptcy fraud.  But when you start to lose massive amounts of money, you're in a position where you can fix that problem by stopping to take on debt and do things that are dangerous to your credit, your creditors, and your financial situation. We're in an excellent position to be able to defend you.

Federal Criminal Defense Lawyer

Getting in front of a criminal defense attorney quickly would be best. Could you let him know what's happening? I always suggest you're honest and tell him the trust about what you did and didn't do and let them help you devise the plan to defend yourself. Because you are trying to protect yourself in a federal criminal setting is not a good idea unless you have federal criminal defense experience and know how to deal with these types of cases.

Most people don't have that and should rely on their federal criminal defense attorney to set up the plan, talk to them about it, and figure out what needs to be done to put you in the best possible position. The only way to do that is to be truthful with your attorney and let your attorney help you with the best approach, what the best angle is, and how it can be figured out to get you out of the federal criminal justice system as fast as possible — see if your federal bankruptcy charges can be dismissed, or if it's a situation where some plea bargain needs to be arranged on your behalf.

But suppose, on the other hand, it's clear that whatever you're doing relies on and relates to a fraudulent move. In that case, we're going to be in a bad position. We're going to need to make some moves on your behalf to try to turn the tide and show your version of events, the mitigating circumstances that surround your arrest for federal bankruptcy fraud, and come up with a game plan moving forward so that we can get you out of the federal criminal defense system as fast and possible, get your creditors paid back and put you in the best possible position. We strive to get the best results possible and protect your rights. Please feel free to contact us for a free face-to-face consultation.

Related Content: 

Contact Us Today

Hedding Law Firm is committed to answering your questions about Federal Criminal Defense issues in Los Angeles and Encino California. We'll gladly discuss your case with you at your convenience. Contact us today to schedule an appointment.