Bankruptcy fraud is a term used to describe a variety of crimes that can occur in a bankruptcy case. In most cases, the limitation period for each bankruptcy crime (the time in which a prosecutor can bring an action) is five years and applies to wrongful acts such as:
- concealing assets
- transferring assets to keep them from creditors
- concealing or destroying records
- falsifying bankruptcy forms
- perjury (making false statements under oath)
- using a fake identity or filing in multiple jurisdictions
- bribery of a court official, and
- embezzlement from the bankruptcy estate.
You'll find most bankruptcy crimes in the federal statutes. (18 U.S.C § 152 and 18 U.S.C. § 157.) Keep in mind that differing factors, including the nature of the crime, determine when the limitation period begins.
The statute of limitations for a crime is the law that tells you how much time the government has to bring criminal charges. Once the limitation period has run, the government can no longer prosecute the crime.
Sometimes determining when the limitation period begins and ends is tricky. Crimes fall into three general types:
- Single event. The offense is a definable event that takes place on a specific date. For instance, telling a lie under oath at the 341 meeting of creditors (the hearing all bankruptcy filers attend).
- Multiple events. The crime involves a series of actions or requires several steps to accomplish. For instance, in a conspiracy case, the limitation period doesn't begin to run until a conspirator commits the last act that furthers the crime.
- Continuing crime. The offense continues until the condition that defines the crime no longer exists. An example would be hiding an asset. As long as the property stays hidden, the crime continues.
Other factors can affect the statute of limitations. For more information, read Calculating the Statute of Limitations. Also, consider consulting with a knowledgeable bankruptcy attorney about the specifics of your case.
Bankruptcy Fraud Statutes of Limitations
The law determining the applicable statute of limitations depends on the type of offense.
- Hiding assets. The law treats concealment cases differently than other bankruptcy crimes. (18 U.S.C. § 3284.) Often the debtor will conceal an asset before filing the bankruptcy case or by failing to disclose it in the bankruptcy schedules, but it doesn't come to light until after the bankruptcy case ends. Therefore, concealment is considered a continuing offense. The limitations period begins to run when the court grants a discharge (the order that wipes out qualifying debt), enters an order denying the discharge, or dismisses the case.
- Other bankruptcy crimes. The general statute of limitations for noncapital federal crimes is five years. (18 U.S.C. § 3282.) This statute of limitations applies to perjury, filing a false bankruptcy form, embezzlement, bribery, and destroying records, and all other bankruptcy crimes. It also applies to many other federal offenses brought with bankruptcy crimes, like mail or wire fraud.
Example. Daria's business was floundering, and she was considering bankruptcy. On January 1, 2013, Daria transferred a piece of real property worth $10,000 to her brother for $10. On February 3, 2014, Daria filed a Chapter 7 case, but she didn't disclose the transfer or the cash. Not suspecting that anything was amiss, the court granted Daria's discharge on May 15, 2014. Six months later her former business partner contacted the trustee to ask about the proceeds of the sale of the partnership assets. At a special examination on December 1, 2014, Daria denied everything under oath.
Daria has potentially committed several crimes. The limitation periods will expire as follows:
- Property transfer—January 1, 2018 (five years after the property transfer).
- Perjury in the bankruptcy schedules—February 3, 2019 (five years after she filed the schedules with the court).
- Concealment of the $20,000—May 15, 2019 (five years from the discharge).
- Perjury under oath at the special examination—December 1, 2019 (five years from the date of the exam).
Other limitations periods exist for other possible crimes. You should contact a knowledgeable bankruptcy attorney for information about your particular case.
(For more information on this topic, read Bankruptcy Fraud Consequences.)