Philadelphia Federal Bankruptcy Fraud Charges: Investigation and Penalties

Philadelphia Federal Bankruptcy Fraud Charges: Investigation and Penalties

Bankruptcy fraud refers to the intentional concealment or misrepresentation of assets, income, liabilities, or other information in a bankruptcy case. This type of fraud is prosecuted under federal law and can result in severe criminal penalties, including substantial fines and years in prison. In this article, we’ll take a closer look at federal bankruptcy fraud charges in Philadelphia, including how cases are investigated and typical penalties.

Overview of Bankruptcy Fraud

When an individual or business files for bankruptcy, they are required by law to fully disclose all assets, liabilities, income sources, etc. Failing to accurately report assets and liabilities is the most common form of bankruptcy fraud. Other examples include concealing pre-bankruptcy asset transfers, lying about income, transferring assets out of the bankruptcy estate, and more.

Bankruptcy fraud undermines the integrity of the bankruptcy system. It prevents creditors from recovering funds they are rightfully owed. For these reasons, federal prosecutors take bankruptcy crimes very seriously in Philadelphia and elsewhere.

Investigating Suspected Bankruptcy Fraud

Bankruptcy fraud is often uncovered by bankruptcy trustees, the Department of Justice, FBI, IRS, or other investigators. They review bankruptcy petitions and financial disclosures searching for warning signs. Things like incomplete/inaccurate paperwork, math errors, suspicious asset transfers, or complaints from creditors may trigger an investigation.

Investigators use legal tools like subpoenas to obtain financial records, bank statements, tax returns, business documents, etc. This paper trail helps establish evidence of intentional deception. False statements under oath, fake supporting docs, mysterious asset transfers and more may demonstrate criminal intent.

Federal Charges for Bankruptcy Fraud

In Philadelphia, bankruptcy fraud cases are prosecuted in the Eastern District of Pennsylvania federal court. Common criminal charges include:

• Bankruptcy Fraud (18 U.S.C. § 152): This broadly prohibits deceit, false claims, false testimony, document falsification, and other fraud in bankruptcy cases. It carries a maximum 5 year prison sentence.
• Concealment of Assets (18 U.S.C. § 152(1)): Failing to disclose assets/property ownership can lead to up to 5 years imprisonment. Omitting valuable assets like real estate, vehicles, and bank accounts is common.
• False Bankruptcy Declarations (18 U.S.C. § 152(3)): Providing fraudulent information in bankruptcy schedules/petitions can mean up to 5 years in prison. Lying about income, expenses, debts, etc falls under this charge.

In serious cases with major losses, prosecutors may also charge bankruptcy fraud under the federal wire/mail fraud (18 U.S.C. § 1341) or bank fraud (18 U.S.C. § 1344) statutes. These carry 20+ year maximum prison terms. Other charges like money laundering, perjury, tax crimes, etc may apply too.

Penalties and Sentences for Bankruptcy Fraud

Given bankruptcy fraud’s severity, first time offenders still often face 6-12+ month prison terms under federal sentencing guidelines. However exact penalties depend case details like:

• Scale of Deception: Number/value of assets concealed, debts falsely claimed, etc. Larger frauds mean longer sentences.
• Sophistication: Complex schemes show greater criminal intent, worsening punishment. Simple paperwork errors may lead to probation.
• Financial Loss: Prison time lengthens directly with creditor losses from the fraud. Major losses mean longer incarceration.
• Defendant History: Repeat fraudsters or those with a criminal record face harsher fraud sentences. First-timers may receive lighter punishment.

In addition to months/years imprisonment, sentencing commonly involves:

• 5-6 Figure Fines: Monetary penalties in $10,000+ range are routine, sometimes reaching $100,000+ for major frauds.
• Restitution: Defendants must repay all creditors for losses caused by deception. This compensates fraud victims.
• Supervised Release: After jail time, offenders serve parole-like probation for 1-5+ years. Violating release terms risks more imprisonment.

Defenses Against Bankruptcy Fraud Charges

Once charged, the accused can raise legal defenses to fight the allegations. Common strategies in Philadelphia bankruptcy fraud cases include:

• Lack of Intent: Argue the deception was an honest mistake, paperwork error, etc – not intentional fraud. This may lead to reduced charges/penalties.
• Diminished Mental Capacity: Defendants with dementia, mental disabilities, or disorders may not have fully understood bankruptcy disclosure duties. This can negate intent.
• Reliance on Attorney Advice: Asserting that bad legal advice led to omissions/misstatements can defeat charges or mitigate punishment.
• Statute of Limitations: If too much time has elapsed between alleged crime and charges being filed, the case may be dismissed as time-barred.

Skilled white collar defense attorneys can help evaluate defenses and negotiate reduced penalties in appropriate cases. But bankruptcy fraud should not be taken lightly given the steep fines and possible years in federal prison.

Conclusion

Failing to fully disclose assets/liabilities in bankruptcy is a serious federal crime in Philadelphia carrying 5+ year prison terms in many cases. Investigators use documents and legal tools to build evidence of intentional deceit. Common charges include bankruptcy fraud, concealment of assets, false declarations under oath, and more.

While first-timers may receive probation or less than a year behind bars, major frauds, repeat offenders, and sophisticated schemes often end in years-long prison sentences. Significant fines and restitution are also imposed to punish offenders and make victims whole. Those facing bankruptcy fraud charges need an experienced legal defense to mitigate penalties.