Federal bankruptcy proceedings can be a lifesaver for honest individuals overwhelmed by debt as a result of unemployment, a medical crisis, divorce, disability, or any number of other legitimate reasons.

Unfortunately, bankruptcy can also be used by the unscrupulous to get out of paying their debts…even though they may have the financial assets to do so. And often, financial fraudsters use bankruptcy filings to prolong their illegal white-collar schemes—buying time before the game is up for good.

The FBI is the primary investigative agency responsible for addressing bankruptcy fraud. And while there are other financial crimes that require larger investments of our resources—like mortgage, financial institution, and health care fraud—we take our responsibility to pursue allegations of bankruptcy fraud very seriously. We focus on cases with large dollar amounts, the possible involvement of organized crime, and suspects who file in multiple states. Currently, we have nearly 300 pending bankruptcy fraud cases open around the country.

How the process begins. The U.S. Trustees Program, part of the Department of Justice, oversees the bankruptcy system. When it uncovers suspected fraud, it refers the information to the appropriate U.S. attorney and to the FBI. Working closely with the U.S. Attorney’s Office, our field office investigators open a case if warranted and begin conducting interviews and reviewing financial documents. Based on the complexity of the case, we can also use techniques like undercover operations and court-authorized electronic surveillance to gather additional evidence.

The culprits. They typically include private citizens, small business owners, corporate CEOs, real estate agents, politicians, and loan officers. We’ve even seen cases where bankruptcy attorneys and bankruptcy petition preparers have engaged in criminal behavior at the expense of debtors and creditors in bankruptcy proceedings.