Bankruptcy Fraud

Bankruptcy is a federal area of law, but there are also state law criminal bankruptcy provisions as well. The basis of most bankruptcy crimes is fraudulently concealing assets. The laundry list of specific examples of bankruptcy fraud can be found at 18 U.S.C. § 152:

Concealment of assets; false oaths and claims
A person who—

      (1) knowingly and fraudulently conceals from a custodian, trustee, marshal, or other officer of the court charged with the control or custody of property, or, in connection with a case under title 11, from creditors or the United States Trustee, any property belonging to the estate of a debtor;
     (2) knowingly and fraudulently makes a false oath or account in or in relation to any case under title 11;
     (3) knowingly and fraudulently makes a false declaration, certificate, verification, or statement under penalty of perjury as permitted under section 1746 of title 28, in or in relation to any case under title 11;
     (4) knowingly and fraudulently presents any false claim for proof against the estate of a debtor, or uses any such claim in any case under title 11, in a personal capacity or as or through an agent, proxy, or attorney;
     (5) knowingly and fraudulently receives any material amount of property from a debtor after the filing of a case under title 11, with intent to defeat the provisions of title 11;
     (6) knowingly and fraudulently gives, offers, receives, or attempts to obtain any money or property, remuneration, compensation, reward, advantage, or promise thereof for acting or forbearing to act in any case under title 11;
     (7) in a personal capacity or as an agent or officer of any person or corporation, in contemplation of a case under title 11 by or against the person or any other person or corporation, or with intent to defeat the provisions of title 11, knowingly and fraudulently transfers or conceals any of his property or the property of such other person or corporation;
     (8) after the filing of a case under title 11 or in contemplation thereof, knowingly and fraudulently conceals, destroys, mutilates, falsifies, or makes a false entry in any recorded information (including books, documents, records, and papers) relating to the property or financial affairs of a debtor; or
     (9) after the filing of a case under title 11, knowingly and fraudulently withholds from a custodian, trustee, marshal, or other officer of the court or a United States Trustee entitled to its possession, any recorded information (including books, documents, records, and papers) relating to the property or financial affairs of a debtor, shall be fined under this title, imprisoned not more than 5 years, or both.

The general federal statute proscribing bankruptcy fraud can be found at 18 U.S.C. § 157:

Bankruptcy fraud
A person who, having devised or intending to devise a scheme or artifice to defraud and for the purpose of executing or concealing such a scheme or artifice or attempting to do so—

(1) files a petition under title 11, including a fraudulent involuntary bankruptcy petition under section 303 of such title;    (2) files a document in a proceeding under title 11, including a fraudulent involuntary bankruptcy petition under section 303 of such title; or     (3) makes a false or fraudulent representation, claim, or promise concerning or in relation to a proceeding under title 11, including a fraudulent involuntary bankruptcy petition under section 303 of such title, at any time before or after the filing of the petition, or in relation to a proceeding falsely asserted to be pending under such title, shall be fined under this title, imprisoned not more than 5 years, or both.

There are at least three specific state crimes than often arise in conjunction with bankruptcy proceedings.  When a person becomes delinquent on an account, sometimes the person takes actions to thwart the execution of a lien. Section 32.33 of the Texas Penal Code addresses the crime of Hindering Secured Creditors:

A person who has signed a security agreement creating a security interest in property or a mortgage or deed of trust creating a lien on property commits an offense if, with intent to hinder enforcement of that interest or lien, he destroys, removes, conceals, encumbers, or otherwise harms or reduces the value of the property.

 For purposes of this section, a person is presumed to have intended to hinder enforcement of the security interest or lien if, when any part of the debt secured by the security interest or lien was due, he failed:

    (1)  to pay the part then due; and

    (2)  if the secured party had made demand, to deliver possession of the secured property
    to the secured party.

The punishment range is based upon the Standard Value Ladder of the secured property.

Section 32.33 also makes it a crime to sell secured property in order to avoid a creditor's collection of the security interest. This typically isn't possible for big ticket items like homes or property or automobiles because of the liens in place, but this isn't always the case when dealing with commercial equipment. The Texas Penal Code articulates the following:

A person who is a debtor under a security agreement, and who does not have a right to sell or dispose of the secured property or is required to account to the secured party for the proceeds of a permitted sale or disposition, commits an offense if the person sells or otherwise disposes of the secured property, or does not account to the secured party for the proceeds of a sale or other disposition as required, with intent to appropriate (as defined in Chapter 31) the proceeds or value of the secured property. A person is presumed to have intended to appropriate proceeds if the person does not deliver the proceeds to the secured party or account to the secured party for the proceeds before the 11th day after the day that the secured party makes a lawful demand for the proceeds or account.

Finally, the Texas Penal Code addresses self-dealing fraudulent "sales" of motor vehicles in an attempt to avoid a lien on the vehicle. Section 32.34 sets forth the following:

FRAUDULENT TRANSFER OF A MOTOR VEHICLE

A person commits an offense if the person acquires, accepts possession of, or exercises control over the motor vehicle of another under a written or oral agreement to arrange for the transfer of the vehicle to a third party and:

(1)  knowing the vehicle is subject to a security interest, lease, or lien, the person transfers the vehicle to a third party without first obtaining written authorization from the vehicle's secured creditor, lessor, or lienholder;

(2)  intending to defraud or harm the vehicle's owner, the person transfers the vehicle to a third party;

(3)  intending to defraud or harm the vehicle's owner, the person disposes of the vehicle in a manner other than by transfer to a third party; or

(4)  the person does not disclose the location of the vehicle on the request of the vehicle's owner, secured creditor, lessor, or lienholder.

(c)  For the purposes of Subsection (b)(2), the actor is presumed to have intended to defraud or harm the motor vehicle's owner if the actor does not take reasonable steps to determine whether or not the third party is financially able to pay for the vehicle.

"Transfer" means to transfer possession, whether or not another right is also transferred, by means of a sale, lease, sublease, lease assignment, or other property transfer.

An offense is:

(1)  a state jail felony if the value of the motor vehicle is less than $20,000; or

(2)  a felony of the third degree if the value of the motor vehicle is $20,000 or more.

An offense for failure to disclose the location of the vehicle on request is a Class A misdemeanor.

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