Debtors filing bankruptcy cases and other parties in such cases face potential federal criminal liability if fraud is committed in connection with the case. Under 18 U.S.C. Section 157, the punishment for committing bankruptcy fraud is 5 years in prison and/or a fine. 18 U.S.C. Section 152 was enacted to cover all of the possible methods by which a debtor or other person may attempt to defeat the bankruptcy laws by keeping assets from being equitably distributed to creditors.

Different Types of Bankruptcy Fraud

Concealing property of the estate Making false oaths or accounts in a case Making a false declaration under penalty of perjury in a case Making false claims against the debtor's estate Fraudulently receiving property from a debtor Committing bribery and extortion in a case Transferring or concealing of property in contemplation of a bankruptcy case Concealing or destroying documents concerning the debtor's property or finances; Withholding documents from bankruptcy trustees

Conviction of a Crime Under Section 152

     For a conviction of a crime under Section 152, the prosecutor must prove that the act was done "knowingly and fraudulently". The term "knowingly" means that it was done voluntarily and intentionally, i.e., not by accident, inadvertence, or mistake.

     The prosecutor does not have to show that the defendant knew he was breaking the law, so ignorance of the law is no excuse. The word "fraudulently" means that the act was done with the intent to deceive. Intent to deceive is most often shown by the overall circumstantial evidence, as it is not often that a debtor will admit such an intent.

     The government will also need to prove that the defendant was contemplating bankruptcy or intended to defeat the bankruptcy laws. This can be shown by the poor financial condition of the debtor and/or his company, the failure to pay creditors, hiding or diverting assets, and secret deals by a company's insiders to defeat the claims of creditors by transferring assets to a newly-created company.

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Written by Henry Rendler