Strategic Federal And State Criminal Defense

Common bankruptcy frauds

On Behalf of | Jun 26, 2024 | White Collar Crimes |

Committing bankruptcy fraud carries severe consequences and constitutes a serious offense. This blog outlines some common types of bankruptcy frauds. Understanding these can help you spot suspicious activities and protect your financial interests.

Concealed assets

Concealing assets is the most common type of bankruptcy fraud. Debtors hide assets to avoid losing them in bankruptcy. These assets may include cash, properties, partnerships, corporations, and even lawsuits where the debtor is the plaintiff.

The debtor may also hide books and records to obscure their true financial state. Concealing assets undermines the bankruptcy process and makes it more challenging for creditors to retrieve the debts owed to them.

Fraudulent conveyance

In fraudulent conveyance, debtors transfer assets to others to hide them from creditors. The goal is to hinder, delay, or defraud creditors. Certain countries enact laws to counteract this practice. Courts or bankruptcy trustees can often reverse these transfers and reclaim the assets. This ensures that courts or bankruptcy trustees can often reverse these transfers and reclaim the assets.

Planned bust out

A planned bustout is a deliberate and fraudulent bankruptcy scheme. Typically, a business orders substantial amounts of goods on credit, sells them quickly, and then files for bankruptcy, leaving suppliers unpaid. This scheme often involves:

  • Establishing credit with many vendors
  • Making prompt payments initially to build trust
  • Ordering as much as possible, promising quick payment
  • Selling off inventory at a deep discount or moving it quickly before creditors can act

Bustout schemes can be complex, sometimes involving organized crime. They exploit the trust of vendors and result in significant financial losses.

Another bust out, now involving credit cards

In a credit card bust out, a debtor maxes out multiple credit cards with no intention of repayment. The purchases often include luxury items or large cash advances, which are not disclosed in the bankruptcy schedules. This form of fraud can leave credit card companies with substantial, unrecoverable losses.

Given the complexities of bankruptcy proceedings, it is advisable to seek legal assistance. An experienced bankruptcy attorney can provide guidance, help you comply with requirements, and ensure that all actions taken are within the bounds of the law.

Engaging in fraudulent activities, not only risks severe legal repercussions but also undermines the integrity of the bankruptcy process itself. These practices can lead to criminal charges, substantial fines, and other penalties, jeopardizing one’s financial future and credibility.