Bankruptcy is a legal process that allows a debtor to settle debts through a payment plan or by liquidating assets to repay creditors. To file for bankruptcy, an individual's total debt must be over $1000. Bankruptcy affects a person's legal status and business activities, and the Official Assignee may recover assets transferred before filing. Common types of bankruptcy fraud include hiding assets, filing false forms, multiple filings across states, and bribing trustees. Creditors lose faith when fraud occurs frequently, tightening credit markets.

1. By: Artika

2.  Bankruptcy is the legal process that allows a
debtor to work out an orderly plan to settle
debts or liquidates a debtor’s assets and
distributes them to creditors.
(Albrecht, Albercht, Albercht & Zimbelman,
2012)

3.  To enter into a bankruptcy an individuals
total debt needs to be more than $1000.
 The usual term of the for the bankruptcy is
three years but has been extended in some
cases.
(Ministry of Economic Development, 2013)

5.  Section 7 states the nature of the
bankruptcy.
 Bankruptcy affects the legal status of a
person and has important consequences.
These include—
 (a) the bankrupt's property vests in the
Official Assignee:
 (b) the bankrupt is limited in the business
activities he or she can undertake:
 (c) the Official Assignee may be entitled to
recover assets that the bankrupt has
transferred before bankruptcy

6.  What is bankruptcy fraud?
 There are four forms of bankruptcy fraud.
 When debtors conceal assets to avoid having
to forfeit them.
 Individuals intentionally files false or
incomplete forms.

7.  Individuals file multiple times using either
false information or real information in
different states.
 It involves bribing a court-appointed trustee.
(Legal Information Institue, 2013)

8.  The monies that are defrauded from a
bankruptcy never reaches the pockets of
deserving creditors and investors.
 There is a consequence of bankruptcy fraud.
 As it occurs more frequently, creditors and
investors lose faith that their interest will be
protected.

9.  This loss of faith has a ripple effect in the
economy through:
 Tightening of credit
 Raising interest rate
 Subsequent economic reactions

10.  http://www.youtube.com/watch?v=g6DodL7
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11.  Why do you think the hiding of assets is so
common in bankruptcy?

13.  Petition mills
 Multiple filings
 False statements
 Trustee fraud
 Attorney fraud
 Forged filings
 Embezzlement
 Credit card fraud
 Bust-outs

14.  A debtor who files several bankruptcies in
two or more states lists nearly identical
assets and liabilities in each filing.
 The debtor becomes discharged from the
debts.
 If the debtor fears of getting caught, then
the debtor travels to another state and files
for another bankruptcy.

15.  Conceal property of a debtor’s estate from
creditors
 Make a false oath or account in a bankruptcy
case
 Make a false declaration, certification,
verification or statement – omitting property
from an official form required in a
bankruptcy case.
 Present a false proof of claim against the
debtor’s estate

16.  This applies to anyone engaged by a court
officer to perform a service for a debtor’s
estate.
 The statute makes it crime for such persons
to ―knowingly and fraudulently appropriate
to [their] own use, embezzle, spend, or
transfer‖ any property or hide or destroy any
documents belonging to the debtor’s estate.

17.  Bankruptcy Court
 U.S Trustee
 Court-appointed or panel trustee
 Examiners
 Debtors
 Creditors
 Adjusters

18.  Bust-Out

19.  It involves intentionally obtaining loans or
purchasing inventory on a credit basis and
concealing the proceeds from the loan or
sale of inventory.
 Insolvency is declared and bankruptcy is
filed.
 The creditors are unable to find assets which
can be used to pay them.

20.  If the scam works the perpetrators retain the
cash proceeds but escape the liability for the
unpaid debt.
 A bust-out may involve setting up a new
company.
 Fraud perpetrators set up and operate the
new company legitimately for a while in
order to establish credibility.
 The new company may take a name similar
of an existing company due to the reputation
of that company.

21.  The scam company may also submit
intentionally misstated financial statements
to the suppliers or the creditors.
 This is to inflates its financial position and
profitability.

22.  The second type of bust-out:
 The perpetrators quietly buy an established
company that already has a good reputation
and credit rating.
 The perpetrators rely on the established
credit rating to get credit from suppliers and
loans from bank.
 The perpetrators buy large amounts of
inventory on credit from numerous suppliers

23.  At first, the perpetrators pay the suppliers
promptly in order to build up their credit
rating.
 Then, the perpetrators buy larger and larger
amounts of inventory on credit and
eventually stop paying creditors.
 They stock-pile the inventory.
 They either conceal the inventory for a sale
in another location or secretly liquidate it at
bargain prices.

24.  The perpetrators can either claim insolvency
and file for bankruptcy or simply close up the
shop without filing for bankruptcy.
 The company will appear to be insolvent
because the sales of inventory at bargain or
liquidation prices reduced profits and cash
flow.

25.  The intent is to make a company insolvent
and to file bankruptcy in a scheme to
defraud creditors.
 A bust-out is difficult to detect.
 If a company claims insolvency and files for
bankruptcy, creditors may find it difficult to
determine that insolvency was deliberately
taken for the purpose of perpetuating fraud.

26.  A company’s only listed address and phone
number are a post office box and an
answering service.
 A new company is owned and managed by
persons from another state.
 A sudden change is made in a company’s
management especially if the change is made
without public notice.
 The inventory is suddenly deleted, without
explanation

27.  Some ways in which assets or income can be
fraudulently concealed:
 Payments may be made to fictitious
individuals or vendors and the amounts are
diverted to the debtor.
 Sales may not be reported in the debtor
company’s books, instead the sales proceeds
are diverted.

28.  Inventory may be shipped to an off-site
location or sold to a related party.
 Cash received in payment of receivables may
be diverted to another entity.
 Assets or income may be shifted to another
entity controlled by the debtor.

29.  Transfers of property or large payments to
related parties or individuals.
 Unusual or rapid reductions in assets.
 Missing, inaccurate, or damage records.
 Unusually large and unexplainable payments
to vendors

32.  The phrase ―money laundering‖ implies that
money which is ―dirty‖ because it was
generated illegally is ―laundered‖, or made
to appear that it came from legitimate
sources.
(Albrecht, Albercht, Albercht & Zimbelman,
2012)

34.  http://www.youtube.com/watch?v=pGocvqS
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35.  Purchasing large assets or paying periodic
expenses with cash.
 Using a post office box or general delivery
address instead of a home address when
dealing with contracts.
 Owning expensive assets without legitimate
means of being able to afford them.

36.  This Act came into force on 30 June 2013
 The Act places obligations on New Zealand’s
financial institutions and casinos to detect
and deter money laundering and terrorism
financing.
 The Act will ensure that businesses take
appropriate measures to guard against
money laundering and terrorism financing.
(Department of Internal affairs, 2013)

37.  The agencies that will supervise the new
AML/CFT are:
 The Reserve Bank - supervises banks, life
insurers, and non-bank deposit takers.
 The FMA - supervises issuers of securities,
trustee companies, futures dealers,
collective investment schemes, brokers, and
financial advisers.

38.  The Department of Internal Affairs -
supervises casinos, non-deposit taking
lenders, money changers, money remitters,
payroll remitters, debt collectors, factors,
financial lessors.
 The Ministry of Justice - responsible for
drafting and administering the AML/CFT Act
and regulations.
(Department of Internal affairs, 2013)