If you file for bankruptcy in Arkansas, you must list your property, debts, income and recent money transfers. If a trustee or creditor finds missing assets or errors in your forms, the case may lead to a federal investigation.
An error does not automatically amount to bankruptcy fraud. Prosecutors generally must show that you knew the information was false and meant to deceive the court, trustee or creditors.
Which actions may raise fraud concerns?
Federal law covers several forms of bankruptcy fraud. Investigators may look at acts such as:
- Hiding cash, property or financial accounts from the bankruptcy trustee
- Knowingly providing false information in schedules or sworn statements
- Transferring property to another person to keep it from creditors
- Submitting a false claim or document in a bankruptcy case
- Filing a bankruptcy petition as part of a scheme to defraud someone
- Destroying or withholding financial records related to the case
An honest mistake differs from an effort to hide property. Forgetting a small savings account may be an error you can correct. Moving a car title to a relative before filing and leaving it off your forms may point to an effort to hide it. Investigators review records, messages and timing to judge intent.
What penalties can bankruptcy fraud carry?
The bankruptcy case is civil, but suspected fraud may also lead to criminal charges. The U.S. Trustee Program may refer the case to law enforcement. The FBI may investigate, and federal prosecutors may file charges.
Each charge under Section 152 may carry up to five years in prison and a fine of up to $250,000. The bankruptcy court may also deny or revoke your discharge. Debts that might have been cleared may remain due.
Your response can create additional legal exposure
A bankruptcy fraud inquiry may expand beyond the information in the original filing. Knowingly giving a false explanation, encouraging someone else to provide a misleading account or interfering with requested evidence could lead to separate allegations. Legal guidance can help clarify what investigators are examining, identify the civil and criminal issues involved and reduce the risk of inaccurate or inconsistent statements.