Bankruptcy Fraud
Breeding Ground for Corruption

Bankruptcy court is a breeding ground for corruption. Read the question and answers below to learn how to protect yourself when entering the bankruptcy system either as a debtor, creditor, or victim of fraud trying to keep the scamsters from washing his hands of his crime against you.

Q: What are bankruptcy crimes?

A: Bankruptcy fraud is a federal crime. Its provisions are found at Title 18 of the United States Code. Bankruptcy fraud is prosecuted by the United States Attorney, typically after a reference from the United States Trustee, the Interim Trustee, or a bankruptcy judge.

Q: Why is the bankruptcy system a breeding ground for corruption?

A: The people administering the bankruptcy cases are contract workers who are paid a flat fee. There is an incentive for them to "have to do long-term administering" that allows them to then bill your estate. See the Sturman and Alpern stories on this site for examples of out a trustee billed one of them $5 million and has kept the case open since 1989.

Another problem area for breeding corruption is that these same trustees are often bankruptcy attorneys representing people in the same arena they work as a trustee.

Q: Whom do I report a corrupt bankruptcy trustee to get justice?

A: Ideally and legally you should take your evidence to the U.S. Trustee's office. They are supposed to investigate and either file civil enforcement proceedings, or refer the case to the U.S. Attorney for actual prosecuting.

We strongly urge you to thoroughly read the item below titled Protect Yourself, before you ever contact a U.S. Trustee about a crime. Remember when dealing with a U.S. Trustee, document, document, document, and never give them the originals. Read victims stories on this web site and search the internet to see the pattern of evidence going into a black hole.

Q: Can a person who defrauds you, wash their hands in bankruptcy court?

A: NO! Unfortunately, most victims report that getting the U.S. Trustee's Office to do anything is impossible. Victims are dumped into the civil division to litigate the fraud case again. The victim is forced to prove why the criminal should not be allowed to be free from the debt they owe their victim. See more below.

Q: What does the bankruptcy code say about criminals washing their hands of their crime to avoid accountability?

A: The Bankruptcy Code has long prohibited debtors from discharging liabilities incurred on account of their fraud, carrying forth a basic policy of affording relief only to an "honest but unfortunate debtor."

Congress did not favor giving perpetrators of fraud a fresh start (by allowing them to wipe out their debts in bankruptcy) over the interest in protecting victims of fraud when it wrote the Bankruptcy Laws.

Accordingly, Section 523(a)(2)(A) of the Bankruptcy Code excepts from discharge in bankruptcy "any debt . . . for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by ... false pretenses, a false representation, or actual fraud." 11 U.S.C. § 523(a)(2)(A).

Q: What is the procedure if a person that stole from me then files bankruptcy against me?

A: When bankruptcy is filed with criminal intent, as bankruptcy fraud, a business crime, the debtor may be subject to a felony prosecution in federal court. This should be distinguished from strategic bankruptcy, which is not a criminal act. First file a complaint with the U.S. Trustee. But read the Protect Yourself section below.

Q: What are bankruptcy crimes?

A: Common types of bankruptcy crimes include:

a) Using bankruptcy to wash your hands of a crime.

b) Filing false claims against a debtor to collect money;

c) Bankruptcy Trustee's stripping debtor's assets for themselves;

d) Identity Theft - criminal steals your ID and incurs debt and then files a bankruptcy in your name;

e) Debtors concealing assets;

f) Forged documents; and

g) Debtor making false statements to conceal assets.

Q: What can I do if I discover fraud in the bankruptcy system?

A: You should prepare a complaint to file with the U.S. Trustee. Unfortunately, too many citizens have reported being further victimized by the system that is supposed to be the watchdogs of graft and corruption within the bankruptcy system -- the U.S. Trustee Office.

If you do not hear back from the trustee, go directly to the U.S. Attorney.

Q: What is the U.S. Trustee?

A: The United States Trustee Program is a division of the U.S. Department of Justice. The U.S. Trustee is responsible for overseeing the administration of bankruptcy cases and private trustees under federal code 28 U.S.C. §586 and 11 U.S.C. §101, et seq.

The Program consists of 21 regional U.S. Trustee Offices nationwide and an Executive Office in Washington, DC.

They are supposed to be the enforcers in the bankruptcy system to keep everyone, especially bankruptcy trustees, operating on the up and up.

Read the items below before you file a complaint so you can protect yourself and make sure your complaint doesn't end up in the same black hole that others have.