Federal Bankruptcy Fraud – 18 U.S.C. § 157
This is the federal bankruptcy fraud criminal section that the 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 clearly racking up money, racking up debt, credit cards, all sorts of different things, when it's obviously clear that they have no intent whatsoever to satisfy their obligations, and then as a shield they are using the federal government bankruptcy laws in order to try to extinguish that debt.
We see this when people are getting into agreements with big companies enter agreements with buying goods and services. We see this where people doing bust-out schemes with credit cards, where they're getting a bunch of credit cards, running them up and then trying to get rid of the debt, and we see people who are dealing with big dollars, big numbers and it's just very clear that they've loaded up all that debt never intending to pay — never making any real substantial payments. Sometimes they'll make little tiny small payments just to keep things moving forward, but what this has to do with is that a reasonable person looking at things and saying, this person was never going to pay any of this money back.
You hear all the time people saying when they rack up a bunch of debt or attempt to avoid paying taxes or get out of some sort of financial obligations that they're just going to declare bankruptcy. 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.
Obviously, the more money that is involved when it comes to a bankruptcy fraud case in federal court, the more likely the prosecutors there are to take the case, follow through and prosecute it. If it involves a smaller amount of money, then the federal prosecutors are more likely to refer that case the state government that has jurisdiction over the bankruptcy fraud issue and let them deal with it. Also, they are going to 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 elements they need or is there confusion and issues with it where the criminal defendant would have a good defense to it?
The bankruptcy laws at the federal level are designed to protect against those individuals who are designing or getting involved with a plan or scheme in artifice, designed to try to avoid paying their debts by using the bankruptcy courts.
Really, what the federal government is trying to protect against by using the United States Code Section 157, is those people who will go into Bankruptcy Court and file false documents or false forms. People who hide assets that they have in the process of trying to declare bankruptcy and 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 things related to declaring bankruptcy — utilizing our criminal process in such a way that is designed to defraud or trick the bankruptcy courts – designed to avoid paying legitimate debts that an individual has.
So, if you use the bankruptcy process and make a false statement and hide assets, then you're going to be prosecuted for bankruptcy fraud. A lot of times if it's significant enough, the federal government will get involved. Certainly, 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 serious 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 and they will 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 is going to become involved. They're going to use their resources and their agents to try to get that money back and they're going to prosecute the person criminally at the federal level depending on how much the amount of loss is.
In other words, how much dollars we're talking about. That can be an enhancement to the person's sentence. Depending on how many victims are involved is also another factor that the probation department, judge and prosecutors are going to look at when what's filed and 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 are facing 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 in order to be released of all your debts by portraying yourself as being incapable to pay, you are committing a felony that carries a sentence of a fine up to $250,000 and/or five years in prison.
Oftentimes, people will rack up a significant amount of debt prior to declaring bankruptcy, or else lie about certain details related to bankruptcy in order 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 who can guide them through the process.
The penalties for a federal bankruptcy fraud conviction are going to be determined by the amount of loss involved. Some of the loss may be legitimate, while some 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 in determining the appropriate sentence.
Defenses for Federal Bankruptcy Charges
One good defense is obviously that you are not committing bankruptcy fraud and that you really are bankrupt and have no funds or assets to be able to cover all the debts you have racked up. Really, 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 debts – 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 obviously going to prosecute you, and if you're devising some sort of a plan — and they can prove it — to declare bankruptcy when you're really not bankrupted or you actually forced yourself to become bankrupt because you had a plan to rack up debt and move money around so you could later go back to get the money.
Obviously, if the federal government can prove that, then they are going to prosecute you, try to get the money back, take whatever assets you do have and criminally punish you for being involved in bankruptcy fraud.
Obviously, a complete defense would be listen, 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. Really, the whole center or juxtaposition related to bankruptcy fraud relates to designing a plan or a scheme in order to avoid paying some debt or centered around declaring bankruptcy in some sort of a false manner. If the government can't prove that you had some sort of a criminal intent — that you were lying, that you were hiding things and they're not going to be able to prove the bankruptcy fraud against you.
So, obviously, bankruptcy fraud, when you evaluate it and you sit down with your attorney and discuss it, you're really looking at the facts of the case. It's case sensitive. What happened? Did you lie? Can they prove you lied? Did you hide assets? Do you have some assets that have not been reported? Do you have a bunch of debt that you intentionally ran up and now you're trying to declare bankruptcy? These are some of the issues that are going to be thought about and dealt with when it comes to bankruptcy fraud cases.
Really, what you need to do is sit with your attorney. 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're going to come back up and your attorney is not going to be as prepared to deal with them as if you would have told them and let them know.
So, if you have a federal bankruptcy fraud case, your first move in not to talk to the authorities. Your first move it to talk to your federal criminal defense attorney and let them know what happened with your case and let them help you decide what your next move will be after that. These cases are serious.
You could be facing up to five years in federal prison if you're convicted. So, you obviously 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 that it takes to properly defend you and get you the best possible resolution for your federal bankruptcy fraud case.
Types of Bankruptcy Fraud Cases
There are many types of bankruptcy fraud that the federal government may bust you for. Some common types of bankruptcy frauds 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 then takes the tenants name, and without tenant's consent, files bankruptcy in the tenant's name. The tenant thinks he/she is getting help, and the typing service is basically draining his/her savings, ruining his/her 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.
There are other types of bankruptcy fraud that the Feds can charge you with such as bustouts, bleedouts, pyramid scheme. If you are being charged with bankruptcy fraud, you need an experienced and knowledgeable defense attorney to help you. The Los Angeles bankruptcy fraud attorneys at Hedding Law Firm have a combined 75 years experience and our credentials are unmatched in the federal court system. We have handled many fraud cases involving bankruptcy fraud 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 big 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 sort of a scam or game, because obviously, this hurts somebody's credit when you have to claim bankruptcy.
Related Resources:
- What Is the Federal Bankruptcy Fraud Statute of Limitations?
- Bankruptcy Fraud – United States Department of Justice
- Bankruptcy Fraud: When is it Committed?
Nobody wants to do it unless they're in a bad position and while they're 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 and 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, your financial situation, then we're in a good position to be able to defend you.
Federal Criminal Defense Lawyer
What you need to do is get in front of a criminal defense attorney quickly. Let him know what's happening. I always suggest that 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 be able to defend yourself. Because you trying to defend 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 really figure out what needs to be done in order 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 what the best approach is and 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, of if it's a situation where some sort of a plea bargain needs to be arranged on your behalf.
But if on the other hand it's clear that whatever it is that you're doing relies and relates to a fraudulent move, then we're going to be in a bad position and 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. Contact us for a free face to face consultation.