BANKRUPTCY FRAUD in california

Bankruptcy is a federally authorized procedure by which a debtor (i.e., an individual or corporation) is relieved of total liability for its debts by making court-approved arrangements for their partial repayment. In other words, it means that the bank cannot repay the debts it owes to creditors.

Bankruptcy is not always a criminal act. Multiple filings do not constitute violation of bankruptcy law. However, it can occur that bankruptcy becomes fraud if it violates provisions of U.S. Bankruptcy Code. The U.S. Bankruptcy Law focuses on mental state of the person in order to state the existence of unlawful conduct.

In the United States, bankruptcy fraud is a federal crime and it covers certain general forms which constitute crime under 18 USC § 157.

Below, The Margarian Law Firm  invites you to learn what the U.S. Bankruptcy Fraud means as well as how a citizen can discover signs of fraudulent actions of his or her bank. Moreover, our site provides with detailed information about different kind of financial crimes and fraud in California.


1.   Legal Definition of the Bankruptcy Fraud

2.   What is the Difference between Bankruptcy and Insolvency?

3.   Common Types of the Bankruptcy Fraud

a)   Concealment of assets

b)   Intentionally failing to complete full and correct forms

c)    Use of the false or real information in more than one state

d)   Bankruptcy fraud which involves a bribed court-appointed trustee

4.   Punishment of Fraud

5.   Legal Defenses to California Fraud Accusations

6.   Related Articles

In addition, we are ready to provide answers to your initial questions concerning Bankruptcy Fraud for free.



1.                What Bankruptcy Fraud means 

A business entity or an individual can discharge of their debts due to inability to pay if in result of a legal process they have been recognized bankrupt. Bankruptcy fraud consists of the form of a misleading or false statement or action associated with a bankruptcy filing. In the USA, the Bankruptcy Fraud is a federal crime.

The forms of bankruptcy fraud involve the following forms(but are not limited to) to:

–     False information in bankruptcy petition;

–     Non-mentioned professional help in order to prepare bankruptcy documents;

–     Knowingly failing to list all assets and creditors in the petition;

–     Intentionally taking of huge debt before filling bankruptcy petition.

Thus, it is essential to list all information while filling bankruptcy forms because any hidden information may result in accusations of bankruptcy fraud. The UST (United States Trustee) monitors bankruptcy proceeding and review bankruptcy petitions to discover fraud. The UST can invite certain individuals at hearings to clarify whether fraud has taken place. In addition, private trustees may file a motion to the UST to oversee whether the case is fraudulent, or individual creditors may apply the court in order to determine whether the fraud has been committed.

2.                What is the Difference between Bankruptcy and Insolvency?

The bankruptcy differs from insolvency. In the United States, both terms mean that the legal entity exceed assets. The difference is that insolvency is a financial state of entity, meanwhile bankruptcy is legal concept which is applied to the proceedings of formal insolvency. Insolvency may (but it is not obligatory) provoke bankruptcy. Insolvency can be fixed; meanwhile a state of bankruptcy cannot be fixed and requires the repayment of debts by an order stated by law.


3.                Common Schemes of the Bankruptcy Fraud

Generally, bankruptcy fraud has 4 main forms. Bankruptcy fraud can be committed in the following ways:


a)   Concealment of assets.

It can be done in order to evade of forfeiting them. About 70% of all bankruptcy fraud involves assets’ concealment. Creditors may liquidate only assets listed by the debtor. If the debtor cannot reveal assets, the creditor keeps the assets notwithstanding any circumstances. Additionally, offenders can transfer unrelieved assets to their relatives or friends. Nowadays, when everything is computerized, it is almost to transfer assets without being caught. However, if the offender uses help of his or her relatives or friends this scheme becomes possible and the chances to find assets minimalize.


b)   Intentionally failing to complete full and correct forms.

The most difficult is to fill forms correctly. It would be better to write down the truth and check twice the information while filling the forms. If you do not know how to fill any document, it is better to ask your lawyer. When you sign the papers you confirm that papers are truthfully and accurately. If the bankruptcy attorney catches any incorrect information, you will have to rely on the attorney to get out of it. Moreover, if the answers are falsely intentionally, it means that you can be prosecuted for bankruptcy fraud.


c)    Use of the false or real information in more than one state.

Offenders can use multiple identities or one identity to commit bankruptcy in different states. Such acts are not legal and they result prosecution for suspected bankruptcy fraud. In order to find the offender guilty, the prosecutor must prove that the defendant acted knowingly and fraudulently.


d)   Bankruptcy fraud which involves a bribed court-appointed trustee.

Probably, that is the worst type of bankruptcy fraud. The court appoints a trustee to oversee the bankruptcy proceeding and it can occur that the court-appointed trustee deceives under oath with the intent to receive a bribe from the person who is going to be recognized bankrupt.

In all situations, the prosecutor has to prove that the defendant knowingly and fraudulently committed a misrepresentation of material fact.

4.   Penalties for Bankruptcy Fraud

Bankruptcy fraud accusation involves the following penalties which the convicted can face:

–     Up to imprisonment  for 5 years in federal prison

–     Or/and a fine up to $250,000.00

–     Or both of them.


5.   Legal Defenses to California Fraud Accusations

Your defense attorney can use numerous legal defenses in order to get the best possible outcome for you. Below, we represent some of them.

–     False accusations

–     Plea bargain and dismissals

–     California Entrapment

6.   Related Articles

California Theft Crimes

Fraud Offense

Identity Theft

Dealer Fraud

Insurance Fraud

Mail Fraud

Credit Fraud

Securities Fraud

Telemarketing Fraud

Wire Fraud

Tax Evasion

Mortgage Fraud

Have bankruptcy questions about your specific circumstances?

We are a client-centered professional law firm. When The Margarian Law Firm  accepts your California fraud case, you can put your mind at ease. We handle every aspect of your case, from the very start through the very last court hearing, all for a flat fee agreed upon before we begin. Do not hesitate to contact us!

You may file your request online, by telephone or by mail. 818-553-1000

18 USC § 157 – Bankruptcy fraud

A person who, having devised or intending to devise a scheme or artifice to defraud and for the purpose of executing or concealing such a scheme or artifice or attempting to do so—

(1) files a petition under title 11, including a fraudulent involuntary petition under section 303 of such title;

(2) files a document in a proceeding under title 11; or

(3) makes a false or fraudulent representation, claim, or promise concerning or in relation to a proceeding under title 11, at any time before or after the filing of the petition, or in relation to a proceeding falsely asserted to be pending under such title,

shall be fined under this title, imprisoned not more than 5 years, or both.

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