Bankruptcy Fraud Warning Signs

1. Concealment of assets
2. Serial bankruptcy cases
3. Failure to keep usual business records
4. Incomplete or missing books and records
5. Conduct well outside ordinary business or industry standards and practice
6. Unusual depletion of assets shortly before the bankruptcy filing
7. Recent departure of debtor’s officers, directors or general partners
8. Unanswered questions or incomplete information on debtor’s schedules and statement of financial affairs
9. Frequent amendments to schedules, statements of financial affairs and monthly operating reports
10. Inconsistencies among recent financial statements, tax returns and debtor’s schedules and statements of financial affairs
11. Absence of knowledgeable officers to testify at the Section 345 meeting
12. Inability to contact principals of debtor at debtor’s stated location
13. Frequent dealings in cash rather than recorded transactions
14. Sudden depletion of inventory post-petition without plausible explanation
15. Inflated salaries, payments of bonuses or cash withdrawals by officers, directors, shareholders or other insiders
16. Transfer of property to insiders, shareholders and relatives shortly before bankruptcy
17. Payoff of loans to directors, officers, shareholders, relatives or other insiders shortly before filing.
18. Transactions with non-debtor subsidiaries, parent companies or affiliated corporations owned by the same or related persons or entity
19. A history of prior litigation or post-petition litigation involving breech of contracts, fraud misrepresentations, etc
20. Complicated corporate structures and relationships.
21. Creditor confusion concerning corporate structure.
22. Fire, theft or loss prior to or after filing.
23. Failure to pay withholding and sales tax.
24. Startup of a similar business near the time of bankruptcy filing.

2 Responses to “Bankruptcy Fraud Warning Signs”

1. Kylie Batt says:

   April 21, 2010 at 1:39 am

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   1. Concealment of assets
   2. Serial bankruptcy cases
   3. Failure to keep usual business records
   4. Incomplete or missing books and records
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2. Kylie Batt says:

   April 21, 2010 at 7:12 pm

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   9. Frequent amendments to schedules, […….