Bankruptcy fraud is a serious federal offense that targets dishonesty in the bankruptcy system, whether by debtors, creditors, or others involved in a case. Under 18 U.S.C. §§ 152 and 157, conduct ranging from hiding assets to filing sham bankruptcies can lead to federal charges, even when a person has not yet received a discharge.

What Counts as Bankruptcy Fraud

Section 152 covers a wide range of specific acts, including concealing assets from the bankruptcy estate, making false statements or oaths, filing false claims, receiving property from a debtor fraudulently, and destroying or hiding financial records. The common thread is that the person acts “knowingly and fraudulently” in connection with a bankruptcy case, intending to mislead the court, trustee, or creditors. Examples include failing to list property, transferring assets to friends or relatives before filing, or lying about income, debts, or prior bankruptcies.

Section 157 focuses on schemes that use the bankruptcy process itself as a tool to carry out or hide fraud. It applies when someone devises a scheme to defraud and, to execute or conceal it, files a bankruptcy petition, files a document in a bankruptcy case, or makes false representations related to a bankruptcy proceeding (including claiming to be in bankruptcy when no case exists).

Penalties and Consequences

Each count of bankruptcy fraud under §§ 152 or 157 is punishable by up to five years in federal prison and fines up to $250,000, or both. Multiple acts can be charged separately, leading to potential stacked sentences, and prosecutors often add related charges like mail, wire, or tax fraud. Beyond criminal penalties, bankruptcy fraud can result in denial of discharge, restitution to creditors, and a lasting federal felony record that affects employment and professional licensing.

Because these statutes turn on proof of “knowing and fraudulent” intent, defenses frequently focus on showing that omissions or errors were mistakes, not deliberate deception, and on challenging how the government interprets complex financial transactions and disclosures. Contact the Sigal Law Group today for a free consultation.