Bankruptcy Fraud Can Lead to Prison and Significant Financial Penalties

by Mindy Kubs | August 2019

Charles PonziIntentionally abusing the United States bankruptcy system is a crime punishable by a fine of up to $250,000.00 and five years in prison. The United States Trustee Program (“USTP”), a component of the Department of Justice, oversees the administration of all bankruptcy proceedings and refers thousands of cases for potential prosecution in its efforts to promote the integrity and efficiency of the bankruptcy system.1 Each year, the USTP submits a report to Congress detailing the number and types of criminal referrals rendered that year. During the 2018 Fiscal Year, the USTP made 2,257 bankruptcy and bankruptcy-related criminal referrals, representing a 4% increase from 2017. Common types of bankruptcy fraud include.2 Common types of bankruptcy fraud include:

  • A debtor’s Intentional failure to disclose all of its assets;
  • A debtor’s false statement or oath made under penalty of perjury;
  • A creditor’s submission of a false proof of claim;
  • A debtor’s intentional transfer or concealment of property to the detriment of creditors;
  • The falsification or destruction of documents related to the debtor’s affairs or bankruptcy proceeding; and
  • Intentional withholding or concealing documents from the trustee or court.
  • The benefits offered by the Bankruptcy Code are a privilege that can be lost when the rules are not followed. Debtors who fail to comply with the statute’s requirements or engage in any of the above fraudulent activities may be unable to eliminate their debts or, worse, find themselves in jail and/or in further debt. If you suspect a debtor or other party is engaged in bankruptcy fraud, you can submit a written summary to the USTP with following information:

  • The name and address of the person or business you are reporting.
  • The name of the bankruptcy case, case number, and the location of where the case was filed.
  • Any identifying information you may have regarding the individual or the business.
  • A brief description of the alleged fraud, including how you became aware of the fraud and when the fraud took place. Include all supporting documentation.
  • Identify the type of asset that was concealed and its estimated dollar value, or the amount of any unreported income, undervalued asset, or other omitted asset or claim.3
  • Although you are not required to identify yourself with your submission, the USTP investigators may find it helpful to contact you if they have further questions. Send the information to the local office of the United States Trustee in your area, or to the main office of the USTP as follows:


    or by mail to:
          Office of the U.S. Trustee
          ATTN: Office of Criminal Enforcement
          George C. Young Federal Building and Courthouse
          400 W. Washington Street, Suite 1100, Orlando, FL 32801


    Kozyak Tropin & Throckmorton

    Mindy Y, Kubs
    Mindy concentrates on bankruptcy matters and related commercial litigation. Her practice has included the representation of commercial and consumer debtors in all aspects of the bankruptcy process and related litigation, including pre-bankruptcy workouts; local Chapter 7 trustees in the administration of debtor estates; and creditors in bankruptcy proceedings. Mindy also has considerable experience drafting appellate briefs for submission in both state and federal court, including the United States Supreme Court.

    Share this article: