A Few Dumb Questions

[ManFromMunchkin]

Greetings:

Please excuse the following dumb questions.

I couldn't resist. These are things I've always wondered about.

Here goes.

***Let us suppose that a bankruptcy trustee determines that a debtor has either lied under oath and/or lied on his or her bankruptcy papers during his 341 meeting, by concealing assets, income, or whatever. Does the bankruptcy trustee have the authority to have the debtor arrested on the spot and hauled off to jail in handcuffs? Or does that come later? If so, about how much later?

***Approximately what percent of debtors filing for bankruptcy who are detected for some type of bankruptcy fraud serve time in prison?

Those are my questions. I have read that about 10& of bankrupcy filers commit some type of fraud on their bankruptcy petitions. The way I see it, the nightmares that the worry this would bring is not worth it, let alone the legal consequences.

I know a guy who concealed about $500 of "under the table" money he made cutting lawns one summer on his Chapter 7 bankruptcy petition. He got away with it. But what if the bankruptcy trustee assigned to his case was a next door neighbor to one of the lawns he was cutting. The trustee would have probably recognized him and busted him on the spot.

Even though it can be argued that $500 is not very much, wouldn't he have gotten some jail time if he was caught? If so, about how much?

Those are my dumb questions, things I've always wondered about.

For the sake of my curiosity, feel free to answer if you wish.

Thanks.

Munch

[bkquestions]

I want to hear the responses to these questions.

[JRScott]

Usually if he finds errors in your paperwork most will give you a chance to amend them and continue the 341.

If he finds omissions that border on fraud and does not feel like they were errors he can at the 341 dismiss the case with prejudice. This means you cannot refile for at least 6 months, cannot relist most debtors you included and when you do refile the automatic stay only is in function for 30 days unless you prove it is not abuse.

If he feels that there is sufficient evidence to prosecute you for bk fraud he most likely would not have you arrested at the 341 because he has far to many cases to do to take the time to do the paperwork. However it is likely shortly after he concludes those meetings he'll turn the paperwork over to the proper authorities and you'll be arrested in due course.

I don't know anyone that specifically has been charged with bk fraud so I'm not exactly sure of the time frames involved.

[freshstart06]

Hmmm.... At our 341 meeting our trustee gave a speech before everyone's meeting. He stated that a lot of people are given bad advice to hide assets, transfer assets, Quit their job before BK, plan 1 year to 6 months before BK to make sure everything goes through, etc... He said that we are under oath so this is the time to come clean and make any corrections on your case so it can go smooth. So he stated, if anyone had anything to hid to come clean today.

That was it. From what I understand people that are caught with "errors" or "hiding info" they give you a set time to make corrections and if after you make the corrections and you still qualify you are okay.

You would have to be "BIG TIME" to be prosecuted, ie, hiding millions in an off shores bank. under the table $500 is not going to do it. The worst something could happen in a case like that is for the trustee to ask the guy to include it in his petition. I am sure "under the table" income is hard to find out unless someone rats on them.

[Lindsay]

$500 under the table isn't that much to hide, although technically still fraud. In our area, a woman just embezzled a half of a million dollars from her church and received a prison sentence of 4 months. There was alot of outrage over that!

I think that the greatest worry with a small amount like that would be that the case would be dismissed by a trustee and I think the only way he'd find out is if someone called and reported it.

From what I've read, bankruptcy fraud is prosecuted by the United States Attorney after a referral from a US trustee or bankruptcy judge. I don't think the regular trustee arrests someone right at the 341. I think if that happened someone on the boards would have probably posted about it like, "OMG, some people who had their 341 meeting before us were taken away in handcuffs!" I've never heard anything about that.

I would think dismissal of bankruptcy would be a bigger worry unless the fraud is really bad like hiding or transferring major assets. I think its probably better to be honest in bankruptcy. I've read that 98% of people who file bankruptcy are honest in their filings, but I guess there will always be people who want to try to cheat the system.

I'm lucky with our situation because we really don't have anything. No stocks, no bonds, no insurance, no retirement, no savings. Our house has no equity and our vehicle has very little equity. Our furniture is all old and I don't even have a wedding ring.

I also heard that a certain percentage of bankruptcy filings get audited, so if there is something being hidden, it would come out then for sure.

[lrprn]

***Let us suppose that a bankruptcy trustee determines that a debtor has either lied under oath and/or lied on his or her bankruptcy papers during his 341 meeting, by concealing assets, income, or whatever. Does the bankruptcy trustee have the authority to have the debtor arrested on the spot and hauled off to jail in handcuffs? Or does that come later? If so, about how much later?

No, the debtor is not hauled off to jail on the spot. The trustee or US trustee files a court case against the debtor alleging bankruptcy abuse/fraud and the debtor is notified of the case. Check out these recent cases where filers went to jail for bk fraud:

http://www.seacoastonline.com/apps/pbcs.dll/article?AID=/20070802/NEWS/708020414/-1/rss18

http://article.wn.com/view/2007/07/31/Bankruptcy_fraud_laid_to_2_Lima_men/

http://www.************************/...happen-to-you/

***Approximately what percent of debtors filing for bankruptcy who are detected for some type of bankruptcy fraud serve time in prison?

Although the IRS estimates about 10% of bankruptcy filings contain some aspect of fraud http://www.irs.gov/compliance/enforc...117520,00.html , very few of these cases proceed through to actual jail time. The US trustee aggressively pursues the worst fraud cases with high dollar amounts involved, but local trustees aggressively pursue local cases that try to circumvent the bankruptcy law where the dollars involved aren't so high - there are far more of these cases. Depending on the severity of the fraud, the worst of these cases can more often result in case dismissal with prejudice forcing the debtor to keep all the debt forever rather than jail time. Lesser offenses may result in discharge without prejudice allowing the filer to file again this time with a truthful filing in six months.

And there are no dumb questions - hope this helps!

[B12]

I got every single one of my DUMB questions answered right here on this forum!

BTW, this place is extremely well monitored which makes for a
top notch forum. Why, they even caught a banned member posing in drag the other day! LOLOLOL

[manglicmot]

At my 341 a woman was caught red handed by one of her creditors who showed up. She was trying to hide her bonus money by not submitting six months worth of pay stubs. Her regular salary was below the median, but her bonus money put her into the six figure range.

All the trustee did was continue the meeting and she promised to provide the pay stubs. Not only was the trustee not upset, he was on her side. After the creditor got done badgering her, the trustee asked her, "you're a single mom with two kids, right?" The trustee already knew that so he was just pointing it out to let the creditor know he didn't appreciate him badgering her.