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Adversary Proceedings

Simple Overview of Fraud

Simple Overview of Fraud

It may not initially seem like bankruptcy fraud is a serious problem facing the United States. Especially if one is removed from the whole arena of bankruptcy, he or she has probably never even thought about filing for bankruptcy legally, let alone unlawful declarations of bankruptcy.
Nevertheless, considering the high numbers of Americans filing for personal bankruptcy in recent years, as well as the amounts of money and shareholders/employees that may be affected by the crooked practices of corporate debtors, fraud investigation is a major mission of the Federal Bureau of Investigation and other organizations. In short, bankruptcy fraud is something to take seriously in bankruptcy cases, and thus suspicions of such wrongdoing with adversary proceedings may have serious implications for applicants.
The following are notes on the prevalence of fraud investigation in United States bankruptcy courts:
Bankruptcy fraud is by no means exclusively a white-collar crime, as any petitioner may be guilty of misinforming creditors and the trustee. Nonetheless, the examples of Chapter 11 filers that have engaged in crimes and have thus resulted in adversary proceedings and fraud investigation have all the more resonance because of the size of the corporation involved and the extent to which these companies aimed to deceive authorities and the public (e.g. the Enron fiasco).
It is thus no wonder that the FBI, SEC and other prominent governmental subsets are so aggressive in trying to stamp out bankruptcy fraud. What’s more, the fraud investigation for evidence of illegitimacy in filing for bankruptcy often turns up signs of other misdeeds. Familiar crimes tied to fraud in bankruptcy include corruption, identity theft and money laundering. As there are many catalysts for the onset of adversary proceedings, bankruptcy fraud may manifest in a variety of different ways.
As fraud investigation results have taught us, however, certain fraudulent activities are more common than others, and therefore, are that much more dangerous. One frequent embodiment of bankruptcy fraud and grounds for prosecution is known to most experts as “concealment of assets,” which is a deliberate refusal to list assets that may be sold and distributed amongst creditors.
Another instance of fraud that is all too present in corporate debt adjustment is the occurrence of multiple filings of bankruptcy. Certainly, this applies not to legal repeat filings with the same court over time, but numerous concurrent applications in more than one state and perhaps even more than one alias. Fraud investigation within the sphere of bankruptcy, as noted, is a pressing concern for the U.S. federal government.
With so many cases on the national docket each year, however, and potentially hundreds of claimants per Chapter 11 case, the scrutiny to which this investigation must be subjected is a major undertaking in its own right. In truth, average citizens may not be able to be much help in detecting bankruptcy fraud, but nonetheless, if they or any other third parties have information regarding possible infraction of the rules by the debtor, they are encouraged to report as much.
The Office of the Trustee (or in select instances, the state bankruptcy administrator) runs a hotline whereby individuals may call in to report details on a miscarriage of bankruptcy belief, and what’s more, are assured their anonymity in the process.

Fraudulent Conveyance Objection to Discharge

Fraudulent Conveyance Objection to Discharge

Some desperate debtors, in an effort to protect their assets, will do whatever they can to keep their assets out of the reach of creditors, much as a parent would try to keep cookies away from a child by keeping them up on a high shelf. However, while the caretaker in this analogy has a right to run his or her house as is deemed suitable, in the field of bankruptcy, fraudulent transfer of properties is completely illegal.
Fraudulent conveyance, as the phenomenon is more commonly known, unfortunately has a sizable place in bankruptcy court. In the realm of bankruptcy, fraudulent transfer involves an apparent transition of assets between the debtor-defendant and another holder of these possessions, most likely someone with close ties to the debtor.
Of course, accusations of a fraudulent conveyance will not apply when the creditor has no rights to properties in the first place, as is the case with property exempted by Federal law. That said, all other types of assets other than personal property and exempt property may not be transferred to someone else in an effort to take them out of reach of creditors.
Not every conveyance of funds or assets in a bankruptcy case can be deemed a bankruptcy fraudulent transfer. As is the tendency with most crimes, an intent to violate the law or do damage must be present to warrant a conviction, although a claim of harm put forth by the creditor may be sufficient to prompt the court to hear a fraudulent conveyance case.
In situations like this, intent is often hard to prove. Nonetheless, there are certain proverbial “red flags” that may present themselves to prosecutors and which have the appearance of violations of the rules of bankruptcy. Fraudulent transfer, for one, might be suspected if the movement of funds from place to place is not reported in court statements during the initial rounds of hearings. It might also be suggested if large sums/assets are being included in the translation.
There are a number of objections to the discharge of debts which can be made during the course of normal bankruptcy proceedings, although most of them can be loosely categorized under the heading of “bankruptcy fraud.” Fraudulent conveyance is prominent among them, and the latitude which objectors are given to file is extensive, though arguably fitting given the severity of the offense. Potentially, a creditor can file an appeal based on the undisclosed conveyance of assets that occurred up to half a year before and after the start of the case. 

What You Should Know About Revocation of Plan Confirmation

What You Should Know About Revocation of Plan Confirmation

For circumstances surrounding a petition to revoke a discharge of debtor responsibilities, a bankruptcy lawsuit may come into play for creditors who are dissatisfied with the results on legal and ethical grounds. Adversary bankruptcy proceedings will not encounter a great degree of success, for example, as long as they are arguing the logistics of the plan themselves.
In this regard, once a plan is confirmed, it is confirmed. According to the Bankruptcy Code, bankruptcy court judges use some other justification than misrepresentation of information and/or falsification of documentations to secure confirmation. In the event a plan is overturned, however, and debts have already begun to be discharged, they will also be reinstated.  

Facts You Must Know About Adversary Proceedings

Facts You Must Know About Adversary Proceedings

It is wholly possible to have a bankruptcy case run from start to finish without the need for an adversary proceeding. While people may feel guilty or even like a criminal in applying for relief, a legal bankruptcy order can be resolved relatively amicably between debtors and creditors.
However, parties do not always play by the rules, so to speak. In this event, an adversary proceeding may be necessary to be brought before the court, and at that, according to a new set of rules: The Federal Rules of Bankruptcy Procedure (FRBP).
Part VII of the FRBP tries to ensure that legal bankruptcy standards are upheld when a more contentious situation develops between debtors and creditors. What does an adversary proceeding entail exactly? The following are general considerations of how adversary proceedings aim to uphold legal bankruptcy procedure:
Though the likelihood of an adversary proceeding in most bankruptcy court cases is unlikely, it does happen. Despite the shift in tone from normal bankruptcy court proceedings, as an adversary proceeding is still almost always heard in a bankruptcy court, structurally it mostly resembles a civil court case. Indeed, there are certain recurring elements between both setups. For one, the familiar plaintiff-defendant binary is carried over to adversary proceedings, and once again, it is likely that the debtor will be the defendant.
Nonetheless, there are circumstances by which the debtor may file a complaint with the clerk of court, a creditor will be summoned to appear before the bankruptcy court, and the creditor must submit a formal answer to the debtor’s allegation(s). Additionally, in some cases a request for a trial by jury may be made with the court, which is permitted in the Federal legal bankruptcy standards.
It should be noted that an adversary proceeding is a different entity than the concept of a “contested matter.” Granted, the two are not radically different from one another. Nonetheless, the latter is significantly more common than the former and involves the filing of a motion (which usually does not come with a fee attached) rather than the submission of a complaint.