When someone is determined to do the wrong thing, and for purposes of this post, we will say “lie under penalty of perjury on federal documents for court”, ·one might wonder if it is possible to make them tell the truth. Let’s imagine what that looks like for someone’s Federal bankruptcy. Let’s say that someone has submitted their schedules disclosing their income and expenses, and they deliberately leave off thousands of dollars that they are receiving monthly. You are probably wondering how that could happen without someone checking it or finding out. One way it could happen is by claiming that you are a victim of identity theft, and requesting that the company paying you monthly stop doing direct deposit of the money, so that you will get a check instead. Then, you just cash the check and deposit the part of the money that you want the Trustee to know about. That way, it only shows up for a deposit amount that you actually deposit, instead of the full check amount. Next, you find yourself a bankruptcy lawyers who won’t actually ask you to verify or even show your bank statements. Granted, this is not proper for the bankruptcy lawyer to do, but it does happen.Has bankruptcy fraud happened? Yes it has. Has the lawyer helped commit it? Yes they did. With bankruptcy reform, lawyers were made to be more responsible and accountable for the actions of their clients. How this still goes on in today’s world, without penalty, is a question that is better posed to the Trustee’s office of bankruptcy courts.
Back to the original question of “what can you do about it”?
You can request that a Rule 2004 examination be done so that you get the opportunity to examine what the debtor has done regarding financial transactions, and if you find evidence of fraud, report it. This may initially be hard to do if the debtor is determined to keep the concealment of those funds secret, but you can prevail if you persistently stick with it and keep your eyes open. Interestingly, when a person files bankruptcy, they are afforded protections from their creditors, so the court often gives them the benefit of the doubt since they are seeking protections from those creditors. This means that merely saying you believe there is fraud, won’t be enough. You will have to supply proof. You need to get it from that 2004 exam, or seek alternative methods outside of the court and provide it when you uncover it.
Bankruptcy fraud costs ALL of us in the long run, even if you personally never file. Companies lose out on monies that they otherwise would have been able to recover (apply to the debt), and they ultimately write off the loss. Please understand that in doing that, the costs for everything associated with those debts goes up. Why? Because the money doesn’t evaporate into thin air just because the debt is written off. Products were made out of materials and salaries were paid to people to make them. A profit was supposed to be made in order to keep the cycle going. Mess up the equation, and the cost side of it has no choice but to go up (not to mention the costs of credit associated with it). So you see, we all pay for the fraud of those bold people that don’t seem to be phased by the possible $500,000 penalty for doing it.
So, if YOU have information that someone is doing any of the things that are bankruptcy fraud:
Deliberately leaving off monthly income amounts
Deliberately leaving off bank accounts
Transferring money or assets to others within 2 years of filing, to hold for you until the coast is clear (no one is looking anymore)
Deliberately leaving off expensive artwork, jewelry, real estate holdings or investment accounts
Placing someone’s name onto a bank account simply in the hopes that the Trustee will think some transactions aren’t yours (ie. they won’t take the time to ask)
Making large cash withdrawals from bank account prior to filing bankruptcy to hold into your house
You can report them to the Criminal Enforcement division of the Trustee’s office in the Federal district where they have filed bankruptcy. According to the website, the more documentation you provide them, the more likely it will be that they will investigate and possibly prosecute the person. In addition, be aware that the FBI is the agency that investigates suspected bankruptcy fraud. Here is a link that provides information on reporting suspected fraud:
Can you make someone do the right thing? We don’t know yet. Tell us if you’ve had an experience that answers this question for us!