At Joseph Potashnik and Associates PC, we provide first class representation to clients charged with bankruptcy fraud in the New York City area including Long Island and New Jersey.

The purpose of bankruptcy is giving debtors a fresh start. It is a complex system and material mistakes in filing of bankruptcy petitions are not uncommon. Persons charged with willingly misrepresenting material facts in their bankruptcy petitions may be violating a set of federal statutes that provide for civil and criminal penalties for what the law considers to be bankruptcy abuse or fraud.

If you are accused or being investigated for bankruptcy fraud, consider contacting our experienced New York City bankruptcy fraud attorneys as early in the case as possible.

What is Bankruptcy Fraud

Bankruptcy fraud cases usually involve misrepresenting facts during the preparation of bankruptcy documents such as petition, schedules, and statements, all of which are submitted under penalty of perjury. Other scenarios where bankruptcy fraud occurs is during the meeting of creditors where the debtor, placed under oath, testifies regarding their financial situation.

Debtors who submit false testimony may face criminal or civil penalties.

Besides debtors, third parties may also sometimes be accused of bankruptcy fraud. For example, in the case of a debtor corporation, corporate shareholders, officers, partners, employees, agents, and fiduciaries may be subjected to criminal sanctions both under the Bankruptcy Code and other federal and state criminal statutes.

The government may employ many methods to investigate debtor’s claims including examination of submitted documents and oral examination. Debtor’s affairs are investigated by trustees or creditors committees who have broad authority to conduct such investigations.

Federal Bankruptcy Rule 2004 is commonly used to verify debtor’s information. This Rule provides that, on demand of any party in interest, the court may order the examination of any entity. The Rule is so effective that examinations conducted under it are called ”fishing expeditions” because of its ability to expose fraud.

A Rule 2004 examination is ordered by Court and debtors who fail to appear or submit documents will be held in contempt by court.

How can experienced bankruptcy fraud attorneys help

An investigation during bankruptcy process is extremely serious business. The investigating agencies employ accountants, brokers, appraisers, and other professionals to valuate debtor’s affairs and so should your defense!

Our New York bankruptcy fraud lawyers will investigate your case employing highly skilled private investigators and experts to prepare your defense. If bankruptcy fraud is detected, there could be various civil and criminal penalties. Civil remedies may include (1) denying a debtor a discharge of debt; (2) disallowing certain transfers or recovering the transferred property or its value; (3) the appointment of a trustee or an examiner; (4) the dismissal or conversion of the debtor’s case. Creditors are actually encouraged to discover fraud. They are statutorily guaranteed financial rewards if they do.

What are Bankruptcy Fraud Criminal Statutes

Criminal statutes that address bankruptcy fraud are 18 U.S.C. Section 152 that specifically prohibits knowingly and fraudulently (1) concealing property of the estate; (2) making a false oath or account; (3) making a false declaration, verification or statement under penalty of perjury; (4) presenting or using a false proof of claim against a debtor estate; (5) receiving, post-petition, a material amount of property from a debtor with intent to defeat the provisions of the Bankruptcy Code; (6) offering, receiving, or attempting to obtain consideration for acting or refraining from acting in a case under the Bankruptcy Code; (7) transferring or concealing property in contemplation of a bankruptcy case or with intent to defeat the provisions of the Bankruptcy Code; (8) post-petition concealment or alteration of records; and (9) post-petition withholding of a debtor’s records.

The statute applies to anyone who commits any of the above including debtors, creditors, fiduciaries and anyone else.

Section 153 of Title 18 makes it a crime for anyone to appropriate to their own use, embezzle, spend, or transfer any property belonging to a debtor’s estate, and any actions of the same ”persons” if they secret or destroy any document belonging to a debtor’s estate.

Section 155 of title 18 prohibits knowing and fraudulent agreements that are aimed at fixing compensation in bankruptcy cases.

Section 157 of Title 18 is actually entitled ”Bankruptcy Fraud” prohibits a person from (1) filing a bankruptcy petition; (2) filing a document in a bankruptcy case or proceeding; or (3) making a false or fraudulent representation, claim, or promise concerning or in relation to a prepetition or pending bankruptcy case or proceeding (or a proceeding falsely asserted to be pending) if these acts are done as part of the scheme to defraud.

Other bankruptcy fraud criminal charges may include tampering with or falsifying records (18 U.S.C. Section 1519) and general conspiracy.

Our team of New York bankruptcy fraud defense attorneys has all the experience and resources necessary to build a strong defense and bring your case to the optimal conclusion. When it is time to discuss your situation with a white-collar defense attorney, call us to schedule a consultation.