How to Find Bankruptcy Fraud

The United States Code provides the legal standard for finding bankruptcy fraud. Title 11 contains the U.S. Bankruptcy Code. Title 18 regulates Crimes and Criminal Procedures. Provisions from both titles apply to all cases involving bankruptcy fraud.
Federal judges determine the existence of bankruptcy fraud. Yet in practice, interested parties can begin the process of review. Interested parties may file a written motion requesting a hearing before a bankruptcy judge. Alternatively, any person can report suspected fraud directly to the U.S. Department of Justice.

Instructions

Instructions

1. Conduct an asset search. Know in advance whether assets are available to reimburse bankruptcy fraud. Debts created by fraud are subject to discharge, yet recovery of damages depends on the availability of assets in each case. Decide in advance whether your personal time and expenses are justified.

2. Review bankruptcy documents. Each debtor who files Chapter 7, 11 or 13 must complete an extensive set of official forms. These forms contain questions regarding all assets and debts held by debtors. All forms must be signed under oath and filed with the clerk's office for public view. Also, the debtor's Statement of Financial Affairs includes questions regarding previous financial records, assets, debts, accounts, trusts, stocks owned, partnerships, transfers of title, and safety deposit box locations.

3. Review bankruptcy testimony. Each debtor must attend a 341 meeting with creditors. Before testifying, the debtor must swear to the accuracy of information provided. During meetings, bankruptcy trustees verify information filed with the court. Creditors can also question the debtor while under oath. Debtors also can further testify during hearings and adversary proceedings. Plan to attend all proceedings.

4. Investigate all court records. Contact the clerk's office for each court system that can provide information. Your asset search should include all counties in which the debtor lived during at least the previous two years. Examples of records that can include valuable information include collection suits in county court, judgments in district or superior courts, settlement agreements in divorce cases, criminal records and prior bankruptcy proceedings.

5. Investigate all public records. Your asset search should target title transfers, formation of business entities, real estate records and financing statements supporting liens. In particular, search county courthouse financial records and the records maintained by state authorities.

6. Investigate private records. For a fee, you can access private financial records. If you qualify, private investigators frequently provide this service. Examples of available searches include a debtor's credit report, bank deposit accounts, credit card accounts, insurance settlements and other commercial transactions.

7. Interview third parties. Any credible person with first-hand knowledge can testify in court. You can consider interviewing other creditors to compare notes.

8. Verify that fraud occurred. The look-back period is generally two years and can range up to 10 years for trust transactions. Prohibited conduct includes concealing assets, income, documents or financial records, making false oaths or offering false statements, transferring property for less than fair value, engaging in knowing omission of requested information, obtaining credit without the intent to repay and engaging in knowing disregard of bankruptcy law.

9. Check the statute of limitations. Allegations of fraud are subject to the general five- year statute of limitations for noncapital criminal offenses provided by 18 U.S.C. Section 3282(a).

Tips & Warnings

• If you hire a research company, request a written verification of fees, costs and expenses before beginning. Similarly, follow the same practice if retaining private investigators or attorneys.

• Creditors can be subject to fraud prosecutions. The same criminal standards apply.

References

• 2 year look-back period, 11 U.S.C. Section 548(a)
• Ten year look-back period, 11 U.S.C. Section 548(e)
• Actions constituting fraud, 18 U.S.C. Section 152

Resources

• U.S. Department of Justice Criminal Resource Manual, Chapter 9-41.000, Bankruptcy Fraud