What Is the Statute of Limitations on Bankruptcy Fraud?

By Cara O'Neill
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There are numerous reasons to be forthcoming on your bankruptcy petition, one of the most important being to avoid an uncomfortable conversation with the FBI, the agency that investigates bankruptcy fraud. However, if you’re already in a pickle, it makes sense to find out how long the government has to bring action against you. The answer is five years, but when that five-year period begins depends on several factors.

Transparency in Bankruptcy

Bankruptcy offers a way to gain a fresh financial start by wiping out many of your credit debts. The process requires complete transparency when filling out disclosure forms regarding both your debts and your assets. It is necessary to list all your assets because you are only allowed to keep a certain amount -- and anything over that amount is liquidated and distributed to creditors. When you sign your bankruptcy petition, you affirm that all the information is true and correct under penalty of perjury.

Bankruptcy Fraud

While there are several types of bankruptcy fraud, the most common type is fraud that results from intentionally concealing bankruptcy assets so as not to have to turn them over to the bankruptcy court. The reality is that by the time most people declare bankruptcy, they don’t have any assets left anyway. Some people, however, want the benefit of being debt-free without the inconvenience of giving up what they own and as such, may be tempted to forget to list their Faberge egg collection or their vacation property in Mexico on their bankruptcy paperwork. When this knowingly happens, the bankruptcy court calls it fraud.

Statute of Limitations

The statute of limitations in most federal cases is five years, which means that the government has five years to bring charges against you. However, it’s important to know when the statutory period begins to run. In cases that involve the concealing of assets, the five-year time period starts when the debtor receives a discharge in the bankruptcy case, meaning the day the bankruptcy is granted, or on the day the discharge is denied. If the bankruptcy petition is dismissed, the dismissal date triggers the running of the statute of limitations.

Consequences

The least severe consequence for bankruptcy fraud is a denial of your bankruptcy discharge. Significantly more severe, however, is a criminal conviction for bankruptcy fraud, which can result in up to five years in jail or up to $250,000 in fines, or both.

About the Author

An attorney for more than 20 years, Cara O'Neill currently practices in the areas of civil litigation, family law and bankruptcy. She also served as an Administrative Law Judge and taught undergraduate and graduate courses in the areas of employment law, business law and criminal law for a well-known university. Attending the University of the Pacific, McGeorge School of Law, she graduated a National member of the Order of the Barristers - an honor society recognizing excellence in courtroom advocacy. She is currently licensed in the state of California.

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