Types of Bankruptcy Fraud (Part IV)

Hi readers, we have discussed 2 types of bankruptcy fraud in our previous entry. So today we will discuss further on the other 3 types of bankruptcy fraud.

Type 3: Multiple Filings

In this scheme, the debtor files several voluntarily bankruptcy in order to benefit from the automatic stay to prevent eviction, foreclosure and collection of other debts (Brown, Netoles, Rasnak & Tighe 1999). According to Kerwin (1995), the perpetrators usually denies that he has made previous filing when he files for bankruptcy. To ensure the successful of this scheme, perpetrators used false identity, variations of the debtor's name or fictitious name.

Type 4: Petition Mills

These scams were conducted by credit service companies. They usually advertise their service on radio and television. Their service among others are to help debtors clean up their bills and reorganize their debts. When debtors engaged with their service, this company will file bankruptcy petitions on behalf of low income and unsuspecting clients. The debtors often does not know a bankruptcy has been filed (Kerwin, 1995).

Type 5: Bribery

Under this scheme, the perpetrators can be the debtor, the bidder in a bankruptcy sales, trustee and even other officer of the court. A common bribery charge involve an attempt by defendant (bidder) to secure money from other bidder in consideration for defendant's agreement to refrain from bidding for an asset in bankruptcy sales (Brown, Netoles, Rasnak & Tighe 1999). This scam also involves collusion among bidders in bankruptcy sales. These examples give impact on debtor's estate because they reduce the amount of money collected from the property. Finally, the creditors will negatively impacted because any reduction of money collected from bankruptcy sales will reduce amount they can recovered from debtor. 

The second type of bribery is when the debtor bribe or threaten the trustee or any court officer to obtain favorable judgment or to ignore inadequate disclosure (Kerwin, 1995).

References:

Brown, J.B, Netoles, B., Rasnak, S.T., & Tighe, M. (1999). Identifying Bankruptcy Fraud, Credit Research Foundation.

Kerwin, R.J. (1995). Bankruptcy Fraud. The Secured Lender, 51 (6), 84-90.