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Bankruptcy fraud process and penalties

On Behalf of | Jan 5, 2022 | White Collar Crimes

Many borrowers take out loans in good faith and have every intention of repaying the money they owe. Sometimes despite their best efforts, however, they are unable to do so. Bankruptcy proceedings can offer these borrowers a much-needed fresh start.

If a person is accused of using bankruptcy proceedings fraudulently to avoid paying their debts even though they have the money to pay them, they can face serious penalties. These may include loan and financial officers, business owners, real estate professionals and other individuals.

Bankruptcy fraud process

The Department of Justice refers suspected bankruptcy fraud to the applicable area’s U.S. Attorney’s office and the Federal Bureau of Investigation (FBI). Field officers from the FBI may then open a case, conduct interviews and review the accused person’s financial documents.

The FBI may review evidence to determine whether the individual made false statements during the bankruptcy proceeding, filed false tax returns or concealed his or her assets.

Also, it may focus on activities such as charging large balances on credit cards with no intention to pay them off, filing bankruptcy in multiple locations and other instances where there could be identity theft or other fraud. The FBI may also work with other agencies like the Internal Revenue Service to investigate financial crimes.


If a person is accused of bankruptcy fraud and later convicted, he or she can face a prison sentence and fines. These may be in addition to penalties assessed for other related financial crimes.

An experienced attorney can help accused individuals understand the charges and provide advice about potential defenses.