In the federal court system, bankruptcy fraud is a felony investigated by the Federal Bureau of Investigation (FBI) and aggressively prosecuted by the U.S. Department of Justice (DOJ). Bankruptcy fraud covers a variety of crimes, some of which occur during a bankruptcy matter. Others take place before the filing of a bankruptcy case.
Although the bulk of the crimes apply to activities conducted by the debtor (the person who files the case), creditors, bankruptcy trustees, court personnel, and third parties can also be convicted of bankruptcy crimes.
(If you’re looking for bankruptcy fraud penalties, go to Bankruptcy Fraud Consequences.) [LINK]
You’ll find most bankruptcy crimes in federal criminal statutes. (18 U.S.C. §§ 152, 157.) They can be organized into the following categories:
Bankruptcy fraud doesn’t happen by accident or mistake. You’ll only risk being prosecuted if it’s believed that you knowingly and intentionally committed a fraudulent act.
For instance, just because you forgot to list an asset or incorrectly stated your income or expenses probably wouldn't rise to the level necessary to bring a criminal case against you. By contrast, if you failed to list your vacation home in your bankruptcy paperwork hoping that the trustee wouldn’t find out about it, it’s likely that you’ve knowingly and intentionally done the following: hidden an asset, filed a false form and committed perjury.
(Learn more in When the Bankruptcy Trustee Suspects Fraud.)
Bankruptcy fraud is rarely the only charge brought against someone. Along with bankruptcy fraud, federal prosecutors often add counts for other federal crimes. For instance, the DOJ might prosecute someone for perjury who fails to list an asset on his bankruptcy schedules. In addition to perjury, prosecutions often include tax fraud, wire fraud, mail fraud, money laundering, bank fraud, identity theft, or conspiracy, each of which brings its own penalties.