Identifying Bankruptcy Fraud -
www.crfonline.org/orc/pdf/ref11.pdf By Joe B. Brown, Brian Netoles, Sandra Taliani Rasnak, and Maureen Tighe
" The bankruptcy system is designed to give an individual or a company a chance to
reorganize their affairs, or if reorganization is not possible, to equitably distribute the
non-exempt assets of the debtor among the creditors. This is often referred to as “a
fresh start”. The amount of money a creditor will receive in a case will range from
nothing in many cases to 100 percent in a few cases. In every case there will be
significant delays from the time a bankruptcy petition is filed until the case is closed
and all creditors receive final payment.
The bankruptcy system is based on the theory that a debtor will make full disclosure
of all assets and liabilities so that the final disposition is in accordance with the
requirements of the law. Unfortunately, at times both debtors and creditors try to
obtain more than they are entitled to under the Bankruptcy Code. There are a number
of criminal statutes that prohibit this type conduct.
Although concealing assets or making false statements in a bankruptcy proceeding
make up the majority of bankruptcy frauds, there are a number of fraud schemes that
are more complicated or are primarily designed for reasons other than maximizing
the retention of assets in bankruptcy. Such schemes often use the automatic stay
provided by the Bankruptcy Code to conceal an earlier crime, maximize profit from an
ongoing fraud scheme or buy time while the perpetrator finds a way to avoid victims or
leave town. ..."
www.crfonline.org/orc/pdf/ref11.pdf