Facing Bankruptcy Fraud Allegations? Our Chicago Defense Lawyers Can Help.

The most common bankruptcy fraud charge involves those alleging a concealment of assets. When a debtor files for bankruptcy, he or she must accurately and to the best of his or her knowledge disclose all assets and liabilities. Especially in Chapter 7 bankruptcy filings, when a debtor is trying to qualify with a low enough income level, if a debtor fraudulently lists his or her assets and liabilities below what they actually are, that is considered bankruptcy fraud.

In some cases, this may have been an inadvertent mistake. If you have been charged with concealing assets or bankruptcy fraud, seek immediate criminal defense representation.

The Defense You Need When Accused Of Concealing Assets

At Cheronis & Parente LLC, our sole focus is on defending people against criminal charges, including white collar crimes at both the state and federal levels.

Our attorneys are highly effective in criminal defense cases and have extensive jury trial experience. We always strive to place our client in the best position to win. For the past three years, founding attorney Damon M. Cheronis has been selected for inclusion in Super Lawyers, in conjunction with Chicago Magazine, Rising Stars list in the area of criminal defense. This honor is based on peer review and is bestowed upon a mere 2.5 percent of Illinois attorneys.

Hidden Assets And Business Bankruptcy Fraud

Business bankruptcy fraud usually involves larger assets. Many clients are surprised to learn they did not have to actually “own” an asset at the time of bankruptcy in order for it to be considered a “concealed asset.” For example, a debtor may transfer business assets to other family members or other outside parties at the time of bankruptcy. Although the debtor does not own the asset, he or she can still be charged with bankruptcy fraud.

Hidden assets through either fraud or fraudulent transfers are closely related to other charges including:

• Theft by fraud/embezzlement
• Identity theft
• Making false statements
• Credit card fraud
• Internet fraud
• Wire fraud
• Filing multiple bankruptcies in multiple states

We will do everything possible to successfully defend you against any criminal charges. In some cases, we can reduce charges to misdemeanors or even avoid charges altogether. The best way to achieve this is early intervention. Talk to us as soon as possible.

Bankruptcy Fraud And The Uniform Fraudulent Transfer Act In Illinois

In Illinois, bankruptcy fraud involves the deliberate transfer of assets to evade creditor claims during insolvency proceedings. The Illinois Uniform Fraudulent Transfer Act (UFTA) addresses such actions by allowing creditors to challenge transfers made with the intent to hinder, delay or defraud them.

Under the UFTA, a transfer is considered fraudulent if the debtor did either of the two:

Actual fraud: This occurs when a debtor intentionally transfers assets to prevent creditors from accessing them. Indicators or “badges” of actual fraud include:

• Transferring property to an insider, such as a relative or business associate
• Concealing the transfer
• The debtor retaining control over the property after the transfer
• Transferring all substantial assets, leading to insolvency
• Receiving less than reasonably equivalent value in exchange for the transfer
• The debtor incurring substantial debt shortly before or after the transfer

Constructive fraud: It involves transfers where the debtor receives less than reasonably equivalent value, and at the time of the transfer, the debtor:

• Was insolvent or became insolvent as a result
• Was engaged in or about to engage in a business or transaction for which the remaining assets were unreasonably small
• Intended to incur debts beyond their ability to repay

Under the UFTA, creditors can seek remedies, such as voiding the fraudulent transfer or obtaining a judgment for the value of the transferred asset. It is important to note that while bankruptcy fraud involves criminal actions during insolvency, fraudulent transfers under the UFTA focus on civil remedies for improper asset transfers.

Entities investigating potential bankruptcy fraud must examine the specifics of each transaction against the act’s provisions. The clarity of the UFTA in defining key terms – including “debtor,” “creditor,” “insider” and “asset” – helps distinguish legitimate financial transactions from those intended to mislead creditors.

While the UFTA is a civil measure, people who find themselves on the receiving end of a UFTA lawsuit may also face state or federal criminal charges of bankruptcy fraud.

The Federal Bankruptcy Code’s Fraudulent Transfer Provisions

Under the Federal Bankruptcy Code, particularly 11 U.S.C. § 548, a fraudulent transfer occurs when a debtor transfers property with the intent to hinder, delay, or defraud creditors. It also applies when the debtor, while insolvent or becoming insolvent, receives less than a reasonably equivalent value in exchange for the transfer. These rules prevent debtors from unfairly moving assets ahead of bankruptcy filings.

The Federal Code defines fraudulent transfers as follows:

• Actual fraud: This happens when a transfer is made with the clear intent to defraud creditors.
• Constructive fraud: This occurs when a transfer occurs for less than fair value, and the debtor is insolvent or becomes insolvent because of it, even if there is no clear intent to defraud.

The look-back period under federal law is two years before the bankruptcy filing, which is important when determining if the bankruptcy trustee should reverse a transfer.

While both federal and Illinois laws aim to prevent fraudulent transfers, there are some key differences:

• Illinois follows the Uniform Fraudulent Transfer Act (UFTA): It includes similar provisions for actual and constructive fraud. However, Illinois law allows creditors to look back up to four years, giving them a longer window to challenge questionable transfers.
• The burden of proof in both systems usually falls on the creditor or bankruptcy trustee, but Illinois courts interpret and apply the law differently, affecting the outcome. For example, Illinois courts may emphasize the debtor’s relationship with the recipient of the transfer, while federal courts may not.
• Illinois law can apply even if a bankruptcy is not filed, whereas the federal provisions only apply during a bankruptcy case.

However, the two courts share similarities in that:

• They both focus on preventing debtors from hiding or giving away assets unfairly
• Creditors can recover the transferred assets or the value of those assets
• Courts examine the same types of “badges of fraud,” like transfers to insiders, secrecy or insolvency, to evaluate the debtor’s intent

If you are concerned about facing bankruptcy fraud charges, let our Chicago bankruptcy lawyers provide you with immediate legal representation.

Contact Us For A Consultation

To speak with an experienced and highly skilled Chicago white collar crimes defense attorney from our firm, call 872-985-0701 or schedule your initial consultation online.