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NY Penal Law § 185.00: Fraud in Insolvency

July 5, 2020 Federal Criminal Attorneys

Fraud of insolvency entails mishandling property for the purpose of defrauding creditors in cases where there is a looming bankruptcy or insolvency. Pursuant to New York Penal Law § 185.00, you could face prosecution for the crime of fraud in insolvency if, with the intention of defraud a creditor and with the knowledge that you are on the verge of filing for bankruptcy or being insolvent you:

  1. Remove, hide, transfer, or destroy any property that is a portion of the debtor’s estate, or somehow gain a substantial interest in the debtor’s estate,
  2. Provide misleading information on a record relating to the debtor’s estate,
  3. Misrepresent the existence of property that is a portion of the debtor’s estate, misrepresent the whereabouts of the property that is part of the estate, or misrepresent any other details which are legally required for the proper administration of the bankruptcy or insolvency proceedings.

For Example

Andrea is having a hard time paying her bills. She owes a number of different creditors a total of more than $500,000. She is aware that it is only a matter of time before she will have to file bankruptcy. Nevertheless, before her property is subject to the direction of a bankruptcy administrator, Andrea sold off some of her property to relatives at prices below market value. Some other items, she simply gave away. Andrea could be looking at charges of fraud in insolvency since she knew she was soon to file for bankruptcy and she transferred the property anyway.

Offenses that are Related

Fraud involving a security interest: New York Penal Law § 185.05

Fraudulent disposition of mortgaged property: New York Penal Law § 185.10

Fraudulent disposition of property subject to a conditional sale: New York Penal Law § 185.15

Possible Defenses

In order to successfully convicted you of this crime, the prosecutor has to demonstrate that your actions must have been “knowing.” In other words, for you to have acted knowingly, you must have been aware that your actions were in violation of the statute. For instance, if you provided a false material statement about some property that is a portion of the debtor’s estate, but you did not realize that the statement you made was the wrong information, you would not have violated this statute.

The Sentence

Fraud in insolvency is categorized as a Class A misdemeanor. If you are convicted of this crime, you could be sent to jail for up to a year. You might also receive a probation sentence of up to 3 years and be obligated to pay a fine.

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