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Financial Fraud, Scam and Identity Theft

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Bankruptcy Fraud: How To Identifying And Wich Are Common Fraud Schemes

Rent/Equity Skimming

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Rent or equity skimming involves acquiring title to multiple properties with no intention of paying the mortgages. The perpetrator then collects the proceeds from the property. A bankruptcy is filed to stall the foreclosure and to allow the perpetrator to continue his scheme.

Examples of Rent/Equity Skimming

Rent/Equity Skim: The perpetrator acquires partnership interest or title to the property, but does not assume the mortgages. He puts his management company in control of the property. The management company collects rent, receives exorbitant management fees, does not maintain the facilities and makes no payments to the secured lenders. The mortgagee is contacted by the perpetrator who attempts to extort the lender to buy out his interest. When the lender attempts to foreclose, the perpetrator deeds the property to a corporate entity which files bankruptcy. The transfer of title is repeated several times, with bankruptcies filed to cover all the transfers.

Property Title Skim: This fraud is similar to the one described above. The major difference is that the perpetrator convinces the victim to deed his home over to him for little or no cash. The victim then pays rent to the perpetrator who does not pay the existing mortgage or seek new financing. Bankruptcies are filed to delay foreclosure. In some instances, the perpetrator will deed a fractional interest of the property to other bankruptcy estates, without their knowledge. This complicates and delays foreclosure.

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Red Flags/Common Characteristics

· Failure to make mortgage payments
· Transfer of entire or fractional interest shortly before foreclosure
· Multiple fractional interests in real property listed on the schedules
· Frequent Quit Claim Deeds transferring interest in the property
· Numerous D.B.A.’s and individuals in chain of title
· Use of mail drop boxes as business address
· Post-petition transfers into a bankruptcy estate
· New corporation formed holding a single asset.
· Schedules amended to dramatically increase the number of pieces of real property owned.

Civil Responses To Consider

· Dismiss case pursuant to 11 U.S.C. Sections 109(g), 349, 707(a)
· Seek sanctions against attorneys and refer them to state licensing agency, if appropriate
· Motion to compel perpetrator of fraud to appear in court. Seek contempt if person fails to appear
· Provide assistance to debtor victims

Criminal Responses To Consider

Mail Fraud, 18 U.S.C. Section 1341: Misrepresentations to homeowners and the use of U.S. mail.
Wire Fraud, 18 U.S.C. Section 1343: Misrepresentations to homeowners and the use of interstate wires.
Bankruptcy Fraud, 18 U.S.C. Section 152: Concealed assets or false statements to the court or at the 341 meeting of creditors.
Bankruptcy Fraud, 18 U.S.C. Section 157: If the system is used to aid the perpetrator’s fraud scheme. Delaying creditors, allowing the debtor to continue to operate, or covering up the scheme are examples.

Next: Bankruptcy Fraud By The Debtor

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