Bankruptcy is a complex legal process that is ripe for fraud. However, the fraud is usually committed by those who are attempting to use bankruptcy protections illegally. It is hardly ever committed by attorneys or their associates who oversee the bankruptcy process.
Some attorneys act as bankruptcy trustees and oversee the estates of those who have declared bankruptcy. Once you declare bankruptcy, any asset that cannot be protected is placed into a trust to repay your creditors. In those cases, the trust becomes its own estate, sort of like a marital estate. The bankruptcy estate is divested, creditors are repaid a fraction of what they are owed, and the case is settled.
One Illinois paralegal is now facing felony charges for stealing assets from bankruptcy estates and routing the money into her own personal accounts. According to an indictment unsealed by the federal government, she used the bankruptcy proceeds to make deposits in her own account, pay off her own credit cards, and pay off her student loans.
The woman has been charged with three counts of wire fraud and three counts of embezzlement from the estate of a debtor. The estimated total losses are around $600,000.
Federal Sentencing Guidelines for Fraud
The woman has been charged by the federal government as opposed to the state government, which will always be the case when it comes to bankruptcy fraud. There are two factors here that are important. The first factor is the amount of money stolen. The second factor involves the number of victims. The higher those numbers go, the longer your sentence is likely to be according to the federal sentencing guidelines.
A theft of more than $600,000 would increase the number of sentencing points by 14. Since fraud has a base level of 6 points, the total would be 20 points placing the defendant’s sentence somewhere in the 33 to 41 months. However, since the fraud was committed against a bankruptcy trust, there could be points added for that. The number of victims, and how they are counted, will also factor into the number of points the defendant receives.
In this case, the defendant has been charged with three counts of wire fraud (18 points) plus 14 more for the amount of money stolen. That brings our total to 32 points, which could result in a prison stint of longer than a decade.
In most cases, those facing fraud charges will argue that they committed a specific act that was apparently fraudulent in good faith. Since fraud is a crime of intent, you cannot accidentally commit fraud. It is hard, however, to argue that you accidentally enriched yourself by $600,000.
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