What Is the Statute of Limitations on Bankruptcy Fraud?
Bankruptcy fraud occurs when a person declares bankruptcy but still has financial or tangible assets. This is a federal offense. The statute of limitations for bankruptcy fraud, or the amount of time that a person can prosecuted for a charge in court, depends on a number of factors.
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Definition
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When a person files for bankruptcy protection in court he declares that he lacks enough assets, which includes either money, stocks, investment accounts or property, to pay off his debts. A bankruptcy proceeding takes a person's assets are and uses them to pay off creditors to the extent that that can be done.
Bankruptcy fraud occurs is when a person or company declares bankruptcy and goes through the bankruptcy proceeding, but has assets that have been concealed from the court and, usually, from the Internal Revenue Service. This allows the perpetrator of the fraud to escape from debt without losing personal property or wealth.
Types
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The most common type of bankruptcy fraud concerns concealing assets from the court or creditors. Other types, however, include stealing identities and filing for bankruptcy using those person's assets, the misuse of federal grant money, and forming false companies to take the brunt of the bankruptcy.
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Discharge and the Statute of Limitation
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Determining the statute of limitations in a bankruptcy fraud case can become rather complex. The type of bankruptcy fraud that has been committed can determine the statute of limitations, but so can whether the court has discharged the bankruptcy case. When a court discharges a bankruptcy case, the debtor is no longer legally required to pay off her debt. However, in some bankruptcy fraud cases, discharges that have been granted are revoked as a result of the fraud.
Under federal law, once a discharge has been denied or granted, the statute of limitations for bankruptcy law is five years. However, if the case involves the concealment of assets, then according to the U.S. Attorney General's Criminal Resource Manual, "a debtor who receives neither a discharge nor a denial of the discharge and who commits the crime of concealment of assets could have the statute of limitations begin to run on the date of dismissal or on the last day a discharge could have been granted or may have no statute of limitations at all."
Considerations
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Further complicating matters is the fact that there is a separate statute of limitations on when attorneys can file a petition to have a person's discharge revoked on the basis of alleged fraud. This is usually one year.
Consequences of Bankruptcy Fraud
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Bankruptcy fraud can result in up to a $250,000 fine and/or up to five years in federal prison. In addition, bankruptcy fraud will often be coupled with such other charges as embezzlement, identity theft or the violation of money laundering laws.
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References
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