Bankruptcy fraud, which lessened during the pandemic, could increase this year

U.S. bankruptcies — and bankruptcy fraud — greatly decreased during the pandemic because of temporary lifelines. But as government stimulus, pliant lenders, and cheap and easy funding dissipates, we’re seeing crimes rise. Changes in U.S. federal bankruptcy law could accelerate prosecution of bankruptcy fraud.

Just before he filed for Chapter 7 bankruptcy, Alan Russell Cook, the CEO of a private jet charter company, transferred $350,000 to his former girlfriend and had her open accounts in her name and in the name of a fake company to receive his personal property.

Yet he failed to tell creditors about this — or that his other bank accounts contained thousands of dollars in casino cash-outs — claiming that his company hadn’t generated a penny since 2017. In December 2021, Cook was convicted of multiple fraud charges tied to the bankruptcy case after he discharged over $6 million in personal debt. (See “CEO of Private Jet Charter Company Convicted of Bankruptcy Fraud,” the U.S. Department of Justice, Dec. 8, 2021.)

Bankruptcies such as this may have fallen drastically in 2021, but the pace of Chapter 7 and 13 filings is expected to pick up in 2022 as lifelines for those struggling financially disappear.