Clear Debt Now

Written by admin on March 3rd, 2010

Bankruptcy Fraud On the Rise

No Comments

According to the Internal Revenue Service (IRS) website there were 1.7 million bankruptcies in 2003 and 10 percent of them had fraud involved. Bankruptcy fraud is when a person or company tries to hide assets through the bankruptcy process. The IRS takes this kind of fraud very seriously and will prosecute anyone it suspects of attempting to defraud those owed money including the government.

Bankruptcy fraud cases are also prosecuted by the Department of Justice. During the bankruptcy process you have to list all your assets including retirement accounts, cash, and personal possessions. There is even a line for household goods and clothing. Failing to list assets is considered fraud and a white collar crime.

In 2009 the number of bankruptcy filings have increased due to a weak economy and high unemployment. There were 1.4 million bankruptcy filings during the last federal fiscal year ending September 30, 2009. This was 35 percent more filings compared to the prior fiscal year. Yet the number of fraud prosecutions fell.

In fact, fewer bankruptcy fraud cases were pursued in 2009 than any other year since 1986. On larger cases, the Federal Bureau of Investigation (FBI) will investigate fraud cases. The reason the FBI gives for fewer investigations is that the agency has been focusing on mortgage fraud cases instead. The US government mortgage modification program intended to help consumers stay in their homes has become a target of criminals seeking to modify mortgages on homes that do not qualify or that they don’t really own.

Consumers in financial distress may panic when bankruptcy looms. Faced with losing everything they worked for over many years makes it tempting to some to hide cash or assets that can be sold for cash. Right now the odds of being investigated are low, but that could to change. The Federal Bureau of Investigation has added agents over the last year to investigate mortgage fraud, but at some point those agents could begin investigating bankruptcy fraud also.

Bankruptcy fraud is never acceptable. It is a crime and the Justice Department, FBI, or IRS could very well investigate any case at any time. Obviously the more money or asset value that is involved the greater the chance of the government pursuing an investigation or prosecution. In fact, a bankruptcy judge can even recommend an investigation be conducted when the judge suspects fraud has occurred.

And if the government does not uncover fraud, there are cases where individuals took matters into their own hands. The largest case of fraud in 2009 was the Bernard Madoff Ponzi scheme. The company that searched for hidden assets for those who invested with Madoff was Interfor, Inc. An Interfor spokesman said they are hired by private individuals and companies to investigate 100 to 150 cases of bankruptcy fraud each year.

Most bankruptcy fraud cases are simply not large enough for the government to spend time and money investigating when understaffed and under budgeted. But consumers need to always tell the truth when listing assets during a bankruptcy. Beyond the ethical concerns, you just never know when the government may decide to pursue a case.

Related posts:

1. Bankruptcies Reach New Highs
2. Foreclosures Rise In December Disappointing Everyone
3. Loans After Bankruptcy
4. The Myths Surrounding Bankruptcy
5. Give Bankruptcy Serious Consideration before Pursuing It