Bankruptcy fraud is a serious issue. Just ask Kenneth G. Reidenbach of nearby Lancaster, Pennsylvania. He is (or was) a bankruptcy lawyer who concealed the truth from the court and the bankruptcy trustee. Apparently, in two cases, he did not reveal real estate proceeds; and in the third case he reported his fee as $1500, when, in fact, it was $4800. He faces up to forty-five years in prison and over two million dollars in fines. His sentencing is scheduled for May 2, 2012.
The bankruptcy petition -- be in Chapter 7 or Chapter 13 -- requires the complete disclosure of all assets and liabilities. This is not much to ask. A discharge will be given to you if you simply tell the truth and abide by the laws. This is a wonderful opportunity at a fresh start, a new beginning. Abusing the system truly blackens the process for those actually in need and actually being benefited. While manipulating the facts might serve to financially gain the debtors, the question is now: was it truly worth it, Mr. Reidenbach?
Of course, debtors, also, run the risk of punishment. The gamut of penalty can run from fine to imprisonment. The FBI (since bankruptcy comes under the auspices of the Department of Justice) investigates bankruptcy fraud and it takes its job seriously. Crime requires intent, of course. Accidental omissions of fact are common; this does not mean you will be in trouble for forgetting something. Amending a petition happens all the time. It is not only common, it is anticipated. The law allows for broad authority to be given to the debtor to amend their petition. This happens when a fact is recalled or after a creditor provides a Proof of Claim which recounts the actual amount owed. Crime occurs when one knowingly, intentionally conceals or hides facts (presumably to benefit themselves). A scary list of bankruptcy and tax crimes punishments is listed at the IRS website here.
The lesson is to tell the truth. It is, in fact, all that the code requires. While this Norristown bankruptcy attorney does not know the exact facts of the cases, it would be interesting to learn how the deceit in this case came about. Did the attorney approach the debtors and say, "I can hide your assets and help you; pay me extra" or was it the debtors who found a complicit co-conspirator in the attorney? It goes without saying, but at King Law Center, and pretty much every other bankruptcy lawyer's office, this kind of thing does not happen. Again, the code is lenient with respect to amending petitions, Chapter 13s may be withdrawn at any time, and the opportunity for a fresh start is sufficient without the need to cheat or lie.
And another lesson is that trustworthiness in an attorney is important. Lawyers are fiduciaries, permitted to insider information about your life and business. They hold these secrets dear, by a mandate from the state bar and professional ethics. Bending -- or in this case, breaking -- that ethic should come with a cost. In this case, we are happy to hear that the penalty looks to be severe. If you need help with your debts, creditor harassment, or financial situation, contact an attorney who cares; we truly are there to help...although sometimes a black sheep escapes the flock. You don't need a black sheep.
