Bankruptcy fraud is a crime which covers various cases involving the filing of bankruptcy. Bankruptcy is defined as the legal incapacity of a person or an organization to meet its financial obligations. This involves paying off creditors. In the United States, bankruptcy fraud is considered a white collar crime; that is, a crime that is committed by someone who enjoys a certain degree of respectability and high status in relation to his occupation.
Bankruptcy fraud can be committed in various ways. As a matter of fact, it can be quite complicated and cannot pinned down by a single definition. In general, however, bankruptcy fraud is covered by the following cases:
- Concealment of assets
- Concealment or destruction of documents
- Conflicts of interest
- Fraudulent claims
- False statements or declarations
- Fee fixing
The most common type of bankruptcy fraud is the concealment of assets. This happens when the person or entity filing for bankruptcy does not declare some of his assets in the hope that they are kept safe for access later on. If this succeeds, the individual will be able to liquidate the asset for his personal use. One way that this is done is by transferring the ownership of the assets to other people.
In the United States, one important consideration in bankruptcy fraud cases is the mental state of the action. That is, the intention behind the action is taken into consideration when deciding whether or not bankruptcy fraud has been committed. If convicted of bankruptcy fraud, one faces up to USD 250,000 in fines or up to five years in jail.