How to Find the Concealment of Assets in a Fraud Bankruptcy
Bankruptcy can be a high stakes game. Debtor's are tempted to conceal assets because some forms of bankruptcy require that assets be sold to pay creditors. Creditors have an interest in finding concealed assets because those assets could provide a way to pay debts. Concealing assets is one of the most common crimes in bankruptcy, according to Stephanie Wickouski, author of Bankruptcy Crimes. Finding concealed assets involves close observation and a careful review of the debtor's personal finances, but is very similar to asset searches in divorce cases or judgment collection. A judge can decline to discharge a debtor's debts if he has found evidence of concealed assets. Concealment of assets in bankruptcy is also a federal crime.
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Instructions
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Review the stated list of the debtor's assets. Debtors must list their assets when filing for bankruptcy. You are going to be looking for two things: assets that aren't listed on the filing or assets that are undervalued by using vague descriptions. You'll need to review the debtor's stated assets in order to compare it to what you find.
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Examine real estate records. For most people, the biggest asset they have is their house, and nobody wants to lose it. You cannot hide a house, but you may hide ownership of a house. Under the bankruptcy code, sales and other transfers of real estate may be considered fraudulent -- and can be reversed -- if they occur two years before the bankruptcy if the intent of the transfer was to hinder or delay collection of debts. Examine real estate records in the county where the debtor resides, and then examine records in every jurisdiction that the debtor has resided in for three to five years. You may simplify this search with a subscription to a data brokering service, which sometimes
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Look at the vehicle the debtor drives, or look it up. If the debtor is driving a fancy vehicle, he may attempt to claim it is a company car. But discerning ownership of vehicles can be a murky area. There are numerous factors to consider when determining if a debtor or some other party owns a vehicle aside from the entity that the car is registered to, according to Wicouski, including who pays for fuel, claims the vehicle's depreciation for tax purposes and who pays for repairs.
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Look for easily concealed valuables with hard to determine valuables. Artwork, jewelry and antiques are small, portable and difficult to value. Lots of people have artwork on their walls, but it takes a trained eye to determine if it is valuable. If a debtor lists paintings or jewelry on his assets schedule, ask for receipts if you believe they may be more valuable.
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Examine business and banking records. Banking records and credit card statements may show the purchase of traveler's checks or the withdrawal of large amounts of cash. You'll want to know the reason for these withdrawals, and where the cash went. If the debtor owns a business, look for payments to relatives and friends or fictitious employees. Fraudsters may make these payments with the understanding that the recipient will return the money when the bankruptcy is concluded. These payments may be a way of siphoning cash from a business to keep it away from creditors.
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Look for unusual stashes of cash. People contemplating bankruptcy may ask their employers to delay paying bonuses to keep it from creditors. Many people defer compensation until retirement for tax planning purposes. Attorneys may hold large sums on behalf of clients in escrow accounts.
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Examine court filings. If the debtor has ever sued or been sued, filed for bankruptcy or divorce, or otherwise needed to make an appearance before a court, there is likely a public record of it. Court records will show if the debtor has recently won a lawsuit but hasn't collected yet, or if they have ever claimed to own a business or piece of property not on the asset schedule. If the debtor has ever sued for economic damages, they may have testified as to the value of their business or their cash flow, and this may differ markedly from disclosures made before the bankruptcy court.
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Tips & Warnings
Creditors can perform many of these actions themselves -- court records and land records are certainly public information. Many of these actions, however, might be the purview of the trustee in the case, who is empowered to hire investigators.
References
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