Bankruptcy was designed to be a remedy, to help people who would like assistance and guidance to be in a better financial situation. The bankruptcy system was created to provide honest debtors a fresh start. Therefore, Congress enacted bankruptcy fraud and related statutes to deter and punish those who commit bankruptcy fraud. One of the more commonly charged bankruptcy fraud provisions is 18 U.S.C. §152(1), which makes it a crime for a debtor to “knowingly and fraudulently” conceal estate assets from the court, the trustee, or creditors.
Moreover, another statute, 18 U.S.C. §152(7) makes it a crime for a debtor to knowingly and fraudulently conceal his or her property in contemplation of a bankruptcy case. Concealment by a debtor prevents a trustee, creditor, or another third party from obtaining the debtor’s property. Under bankruptcy law, the crime of concealing assets includes not only physically hiding assets, but also taking measures to prevent a trustee or creditor from discovering assets. Concealment of assets includes preventing the discovery of the asset, fraudulently transferring the asset, or withholding knowledge or information required by law to be made known. The concealment of assets can also include the intentional omission in the petition and schedules of an asset. It can also include the destruction of the asset or the transfer of the asset to a third party. A debtor commits the crime of concealment of assets when the government can prove that the concealment was done “knowingly and fraudulently.” To conceal an asset “knowingly,” means that the debtor was aware of his or her acts and did not act by a mistake or an accident. To “knowingly” conceal an asset does not require proof that the debtor knew his or her actions were breaking the law. “Fraudulently” means that the debtor acted with the intent to defraud, which means, the debtor had the intent to deceive the bankruptcy trustee, the court, a creditor, or another party, for the purpose of cheating a person out of personal property to keep the property for the debtor himself or herself. The government does not need to prove that the debtor successfully concealed the assets in order to be prosecuted; a debtor who only attempts to conceal assets can be successfully prosecuted. A debtor’s assets include whatever the debtor owns at the time he or she files bankruptcy, which can include proceeds, rental income or profits. Debtors must also disclose assets even if they have no value.
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