White-Collar Crime

Bankruptcy Fraud: Overview

The FBI has primary investigative jurisdiction over bankruptcy fraud matters and continues to work closely with United States Trustee’s Offices and United States Attorney Offices. The FBI’s strategy for reducing the number of fraudulent filings concentrates on three tasks: targeting individuals and businesses that conceal assets, targeting individuals who make fraudulent multiple interstate bankruptcy filings; and targeting fraud where it is associated with another criminal enterprise.

The FBI will continue to coordinate high profile investigations and develop national initiatives to bring the public’s attention to the scope of the problem.

The bankruptcy system, an arm of the United States District Court, is a critical component of the U.S. government because of the impact bankruptcy filings have on the national and local economies. Abuse of the system by an individual debtor or a professional within the system itself undermines the integrity of the system as a whole. Abuse and corruption of the system reduces the effectiveness of the rehabilitation process for the debtor—which is the system’s primary function.

The bankruptcy system is designed to give individuals and companies a chance to reorganize their affairs, or to equitably distribute the non-exempt assets of the debtor among the creditors if reorganization is not possible. This is often referred to as “a fresh start.” The amount of money a creditor will receive ranges from nothing in many cases to 100 percent in a few cases.

Over the past decade, professionals involved in the bankruptcy system have seen a decrease in the stigma attached to an individual filing for bankruptcy, making bankruptcy relief more widely accepted than ever before.