Bankruptcy fraud is serious. To combat it, an “adversary complaint” is filed to civilly prosecute a debtor who is essentially trying to hide assets, or is not being forthright about a loss of assets.
You may have won a judgment against a person who then files bankruptcy or the person owes you money. You “smell a rat” and investigate and discovery that, more likely than not, that person is not telling the truth to the Federal bankruptcy judge.
There are numerous avenues to pursue such a person. One common method under Federal law is to prove that the debtor (the person who filed bankruptcy) failed to “explain satisfactorily” before he/she is “discharged” in bankruptcy “any loss of assets or deficiency of assets to meet [his/her] liabilities.” 11 U.S.C. §727(a)(5).
This method is further explained in the “7th Circuit” (Illinois is in the Federal 7th Circuit) somewhat as follows:
In re D’Agnese, 86 F.3d 732, 734-35 (7th Cir. 1996): 727(a)(5) requires the debtor to give a satisfactory explanation for the whereabouts of a debtor’s assets (emphasis in original) “The debtor’s argument in this appeal depends upon her setting up a false dichotomy between explanations that are not credible and those that are satisfactory. The debtor’s explanation, while not necessarily a lie, was,nevertheless, not satisfactory.”
In re Costello, 299 B.R. 882 (N.D.Ill. 2003): Debtor’s explanation need not be far-reaching and comprehensive, it must consist of more than a vague, indefinite, and uncorroborated hodgepodge of financial transactions. Debtor’s explanation must satisfy two criteria: must be substantiated by documentation; and documentation must be adequate to eliminate the need for the Court to speculate as to what happened to all the assets.
An experienced litigation attorney – preferably one who understands finances and accounting – should investigate a situation for you if you believe a person who owes you money is circumventing bankruptcy principles. Timing is critical as to when to take action. Do NOT delay!
Not only am I a lawyer and true trial attorney but a CPA (accountant) who can “spot” financial fraud easily and (usually) quickly.
You can contact me here 24/7/365 (and I really mean that as I will answer my phone) if you have any questions about what claims/rights you may have after in relation to potential bankruptcy fraud and to learn how I may be able to help you who may need, or simply want, a second opinion perhaps – in particular, you will find that I listen, take your phone calls and e-mails (and even text messages–BUT NOT WHILE DRIVING!!). I would be honored to help you with your matters – large or small.