What Does Bankruptcy Fraud Look Like?

Bankruptcy fraud is a phrase we have heard before. We know it involves lying and hiding. But what does bankruptcy fraud look like in a court case?

In a recent example, Michael Stamp, the former owner of Stamp Farms, LLC in Decatur, Michigan, filed a personal Chapter 11 Bankruptcy case. He and the farm were struggling to pay debts and defaulted on its loan with Wells Fargo bank.

Bankruptcy fraud is a federal crime that occurs when a debtor (a person who files bankruptcy) intentionally hides assets or lies to the bankruptcy trustee or court about their finances.

In the bankruptcy case, Wells Fargo claimed it made a $68 million loan in December 2011. Wells Fargo stated that Stamp represented that Stamp Farms had 46,000 acres. Later, an audit found only 27,000 acres.

Stamp also ended up doing what many individuals struggling to pay their bills do – he robbed Peter to pay Paul. Stamp needed money to keep the farm going and pay off a previous loan. So Stamp provided false information to Wells Fargo in order to obtain the $68 million loan. Wells Fargo provided the loan because Stamp misrepresented the amount of land farmed and the value of the assets. After Wells Fargo provided the loan, Stamp continued to provide false information about the farm. Stamp also submitted false claims to the Federal Crop Insurance Corporation and received crop insurance payments.

Stamp’s wife, Melissa, also played a role in the bankruptcy fraud. She admitted giving $75,000 to her brother, $90,000 to her father, and concealing $50,000 in a safe in her home. None of the money was disclosed to the bankruptcy court. Her husband filed bankruptcy just one month later.

So what does bankruptcy fraud look like?

  • Not being honest about the amount of land you own
  • Not being honest about the assets you have
  • Giving away money to a family member before filing bankruptcy
  • Failing to disclose cash in your home to the bankruptcy court
  • Giving things away right before you file for bankruptcy

For her role in the bankruptcy fraud, Melissa Stamp received 20 months in jail, 20 months of supervised release, and required to pay $184,500 in restitution. Michael Stamp plead not guilty to 14 counts of conspiracy to commit bank fraud and making false statements to attain loans and crop insurance. His case is still pending.

Takeaway tips:

  • Always list ALL of your assets (the things you own, including cash, anything in a safe, safe deposit box, and/or storage unit) in your bankruptcy case
  • Always list ALL of your debts (the people or businesses you owe money to) in your bankruptcy case
  • Do not give away things or transfer the title to anything before you file bankruptcy; if you must, be sure to disclose it fully to the bankruptcy court (you may also want to speak to a bankruptcy lawyer to understand how the give away or transfer may affect your case)
  • If you commit fraud on the bankruptcy court, your debts may not be discharged (you may still owe them). You could also face significant prison time and financial penalties.

For the full article about the fraud in Michael Stamp’s bankruptcy case, by Todd Neely, a DTN Staff Reporter, click here.

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