Bankruptcy fraud ranges from simply failing to declare assets on bankruptcy schedules to more elaborate schemes. Most bankruptcy fraud involves concealment of assets. In fact, this accounts for nearly 70% of all fraudulent bankruptcy cases. But even the simplest asset concealment requires experience to recognize, and time and effort to trace out.

What signs reveal that the debtor might have concealed assets? Some red flags include:

  • Assets listed on financial statements prior to bankruptcy are not accounted for in the bankruptcy schedules.
  • The debtor has failed to keep business records, books and records are incomplete.
  • Insufficient information is provided on debtor’s bankruptcy schedules, or there have been frequent changes to such schedules.

Forensic accountants can assist by identifying and confirming the red flags, tracing the movement of funds or assets, as well as presenting their findings and opinions related to their analyses when called upon as expert witnesses in Court. The investigative work can be as straightforward as comparing pre- and post-bankruptcy financial statements, or as complex as reviewing and analyzing reams of financial documents and conducting interviews with the debtors’ officers, staff and suppliers.