Through the legal process of bankruptcy, people or corporations who are unable to pay their debts can get partial or complete relief from their financial responsibilities. A plan is usually devised to either reorganize the debts or sell assets to repay creditors, and it usually requires a court hearing when the debtor’s assets and liabilities are appraised. While laws pertaining to bankruptcy differ from one state to the next, they all typically seek to give debtors an organized means of getting out of their current financial situation while giving creditors a fair share of their assets.

Bankruptcy fraud is a white-collar crime that occurs when someone takes actions in a bankruptcy case by concealing assets, perjury, bribing a court-appointed trustee, withholding documents, filing multiple times, and illegal transferring of assets. The FBI and IRS are the primary investigative agencies that are involved in large dollar amounts, organized crime, and individuals that file in multiple states. Bankruptcy fraud can result in up to five years in prison, a fine of up to $250,000, or both.

When it comes to enterprises, bankruptcy can help with restructuring so that operations can continue, or if activities cannot be sustained, it can result in an orderly liquidation. Filing for bankruptcy can have a major effect on one’s creditworthiness, reputation as an individual or business, and future financial decisions, among other legal and financial ramifications.

Bankruptcy and Whistleblowing

A whistleblower might expose financial wrongdoing within a company leading to bankruptcy.