Reporting Bankruptcy Fraud
Although it doesn't happen as often as some people suspect, bankruptcy fraud has been an issue as long as we've had a system of bankruptcy courts in place. What should you do if you suspect that someone or some company is hiding assets from the bankruptcy court or is committing some other type of bankruptcy fraud, like misrepresenting income or expenses, lying under oath, or charging up credit cards before filing a bankruptcy case?
You can report your suspicions to the proper authorities. Be aware, however, that if you use your name, you will not remain anonymous and could be sued by the debtor if what you say turns out to be wrong (see below).
Types of bankruptcy fraud
A debtor can commit bankruptcy fraud not only against the court, but against creditors, also. Creditors can commit bankruptcy fraud against the court. In some instances, even the trustee and third parties can commit bankruptcy fraud. Here are some examples:
- A creditor files a claim in a bankruptcy case knowing that the debtor owes less than the creditor is claiming.
- A debtor conceals jewelry by giving it to a relative to hold until after the case is completed.
- A debtor purposefully undervalues shares of stock on his schedules, and signs as to the accurateness under penalty of perjury or testifies about the incorrect value in court under oath.
- A debtor knowingly fails to report freelance income on his schedules.
- Either a debtor or a creditor attempts to gain favor with the trustee through bribery.
- The trustee embezzles money she's collected for the bankruptcy estate.
- A mortgage counselor files a bankruptcy petition in a client's name, but without the client's knowledge, to stop a foreclosure.
Here's an article with more information: A primer on Bankruptcy Crimes
What information should I have to make a report of bankruptcy fraud?
The Department of Justice has been charged with the responsibility for investigating and prosecuting cases of bankruptcy fraud either directly or through the Office of the United States Trustee. To report suspected cases of bankruptcy fraud, the Justice Department asks that you provide a written summary with the following information:
- Name and address of the person or business you are reporting.
- The name of the bankruptcy case, case number, and the location of where the case was filed.
- Any identifying information you may have regarding the individual or the business.
- A brief description of the alleged fraud, including how you became aware of the fraud and when the fraud took place. Please include all supporting documentation.
- Identify the type of asset that was concealed and its estimated dollar value, or the amount of any unreported income, undervalued asset, or other omitted asset or claim.
- Your name, address, telephone number, and email address.*
*Please note that you are not required to identify yourself, but knowing who made the report could be helpful to the investigation, especially if further questions arise.
Vague general assertions are less likely to lead to an investigation and prosecution than will detailed specific facts supported by appropriate documentation.
Where do I make a report of bankruptcy fraud?
Here's how to get that information to the appropriate authorities:
or by mail to:
Executive Office for the US Trustees
Office of Criminal Enforcement
441 G Street, NW Suite 6150
Washington, DC 20530
or contact a local office of the US Trustee or Bankruptcy Administrator:
- For cases in Alabama and North Carolina, contact the appropriate Bankruptcy Administrator -- find a list of offices of the Bankruptcy Administrators for those states.
- For cases in other states, find a list of the regional offices of the US Trustees.
What happens when I report bankruptcy fraud?
The Justice Department's policy is that criminal investigations will not be disclosed. The Justice Department and the US Trustee's office will not confirm or deny if an investigation is taking place or even if a matter has been referred to them.
Consequently, you will not receive an acknowledgment that you submitted this information and you may not learn the results of your submission unless the Justice Department or the US Trustee's office needs to contact you for further information or if a prosecution goes forward.
The information you submit will be reviewed promptly. If it establishes a reasonable belief that a criminal violation has occurred, the matter will be referred to the US Attorney. If the US Attorney deems the report has merit, it will be referred to the appropriate law enforcement agency for investigation.
If I make a report, will my identity be protected?
No, you cannot be assured that your identity will be protected, but you can report fraud anonymously. Furthermore, you are not immune from suit either. If the debtor or the accused person is later acquitted in a criminal proceeding, you may be sued for malicious prosecution if your identity is disclosed. Even if there is no criminal proceeding, you could face a lawsuit for slander, libel or other defamation.