To understand bankruptcy fraud – bankruptcy is derived from the Latin word, bancus (bench/table) and ruptus (broken) – one needs to understand that bankruptcy is a state declared by a person or business that cannot pay its debts. There are two types of bankruptcy, involuntary (when creditors file a bankruptcy petition to collect what they are owed or to force a restructuring) and voluntary (filed by people or businesses by those who cannot pay their creditors).
Bankruptcy fraud generally transpires in four different ways. The first may include a debtor hiding assets to avoid having to give them up. Another occurs when a person files incomplete or false forms. A third may happen when a person files multiple times (using real information in several states, or filing false information). The last occurs when a court-appointed trustee is bribed.
Bankruptcy may often involve identity theft, money laundering, public corruption and mortgage fraud. This kind of fraud is on the rise, as the stigma once associated with declaring bankruptcy has diminished. Even though someone may be accused of bankruptcy fraud, they are entitled to a well thought out and robust criminal defense. There are many reasons why this type of fraud may happen and there may also be mitigating circumstances that put a bankruptcy fraud case in a different light.