Legal Definitions - bankruptcy crime

Bankruptcy Crime refers to any illegal act committed by an individual or entity involved in a bankruptcy case, intended to defraud creditors, the bankruptcy court, or other parties, or to manipulate the bankruptcy process itself. These crimes often involve dishonesty, concealment, or misrepresentation related to assets, debts, or the proceedings.

• Example 1: Concealing Assets by a Debtor

  A small business owner files for Chapter 7 bankruptcy, but before doing so, transfers a significant amount of money from the business bank account into a personal account that they do not disclose to the bankruptcy court. They also fail to list a valuable piece of equipment owned by the business on their bankruptcy schedules.

  This illustrates a bankruptcy crime because the business owner is intentionally hiding assets from the bankruptcy estate and the court, preventing those assets from being used to pay legitimate creditors.

• Example 2: Filing a False Claim by a Creditor

  A company that is owed money by a debtor in bankruptcy files a claim with the bankruptcy court for an amount significantly higher than what is actually owed. They include fabricated invoices and records to support this inflated claim, hoping to receive a larger payout from the debtor's estate.

  This demonstrates a bankruptcy crime because the creditor is knowingly submitting false information to the court to defraud the bankruptcy estate and potentially reduce the recovery for other legitimate creditors.

• Example 3: Making False Statements Under Oath

  During a "meeting of creditors" (a mandatory hearing in a bankruptcy case), a debtor is asked under oath if they have any undisclosed bank accounts. The debtor, despite having a secret offshore account, falsely states that they do not. Later, this account is discovered by the bankruptcy trustee.

  This is a bankruptcy crime because the debtor made a deliberate false statement under oath regarding their financial affairs during an official bankruptcy proceeding, attempting to mislead the court and trustee.