Types of Bankruptcy Fraud

Posted by Connie Yee
Committing bankruptcy fraud by any individual is a federal crime that can result in a fine up to $250,000 and/or up to 5 years in prison. As the number of bankruptcy filing increase, the number of bankruptcy fraud tends to increase. In 2003, there were 1.7 million cases of fraud committed in the United States.

There are three ways to commit bankruptcy fraud including: concealment of assets, multiple filings and petition mills.

Concealment of assets is the most common type and make up 70% of fraudulent bankruptcy cases. This occurs when the debtor purposely fails to list all his assets on the bankruptcy claim; in an attempt to avoid liquidation on those assets. This includes transferring their assets to their friends or family, or moving it into off-shore accounts.

Multiple filings occurs when a debtor file for bankruptcy in more than one state. The debtor tends to file an incomplete listing of their assets in each state.

Petition mills is a scheme that targets financially strapped tenants from getting evicted from their home. The scheme occurs when the tenants uses a “typing service” to get advice on how to avoid eviction. However, instead of filing to stop the eviction, the “typing service” files for bankruptcy in the tenant’s name. This scheme ruins the tenant’s credit, and drain their savings.

References:
What is Bankruptcy Fraud?
Types of Bankruptcy Fraud
Bankruptcy Fraud