NY Penal Law § 185.00: Fraud in insolvency

Fraud of insolvency involves mishandling property in an effort to defraud creditors in cases where a there is an impending bankruptcy or insolvency. Under New York Penal Law § 185.00, you could face prosecution for fraud in insolvency if with intent to defraud a creditor and knowing that you are on the brink of filing for bankruptcy or being insolvent you:

1. Remove, conceal, transfer, or destroy property that is part of the debtor's estate, or obtain a substantial interest in the debtor's estate,

2. Falsify a record relating to the debtor's estate,

3. Misrepresent the existence of property that is part of the debtor's estate, misrepresent the location of the property that is part of the estate, or misrepresent any other information which is legally necessary for the proper administration of the bankruptcy or insolvency proceedings.

Rachel is unable to pay her bills. She owes over $500,000 to several different creditors. She knows that it is only matter of time before she must file bankruptcy. Before her property is subject to the direction of a bankruptcy administrator, Rachel sold some of her property to relatives for less that market value. Other property she simply gave away. Rachel could be charged with fraud in insolvency since she knew she was about to file for bankruptcy and she transferred property anyway.

1. Fraud involving a security interest: New York Penal Law § 185.05
2. Fraudulent disposition of mortgaged property: New York Penal Law § 185.10
3. Fraudulent disposition of property subject to a conditional sale: New York Penal Law § 185.15

In order to be convicted of this crime, your actions must have been "knowing." For you to have acted knowingly you must have been aware that your conduct was in violation of the statute. For example, if you made a false material statement about property that is part of the debtor's estate, but you did not realize that the statement was incorrect, you would not have violated this statute.

Fraud in insolvency is a Class A misdemeanor. If you are convicted of this offense you could be sent to jail for up to a year. You could also receive a probation sentence of up to 3 years and be required to pay a fine.

1. As used in this section, "administrator" means an assignee or trustee for the benefit of creditors, a liquidator, a receiver or any other person entitled to administer property for the benefit of creditors.

2. A person is guilty of fraud in insolvency when, with intent to defraud any creditor and knowing that proceedings have been or are about to be instituted for the appointment of an administrator, or knowing that a composition agreement or other arrangement for the benefit of creditors has been or is about to be made, he (a) conveys, transfers, removes, conceals, destroys, encumbers or otherwise disposes of any part of or any interest in the debtor's estate; or (b) obtains any substantial part of or interest in the debtor's estate; or (c) presents to any creditor or to the administrator any writing or record relating to the debtor's estate knowing the same to contain a false material statement; or (d) misrepresents or fails or refuses to disclose to the administrator the existence, amount or location of any part of or any interest in the debtor's estate, or any other information which he is legally required to furnish to such administrator .

Even though fraud in insolvency is a misdemeanor and not a felony, you should still take it seriously as a conviction has consequences to be avoided. While you could receive a probation sentence, there is also the possibility that you will be sent to jail. The staff at the Law Offices of Stephen Bilkis & Associates has years of experience successfully defending clients in New York criminal courts who have been charged with fraud, grand larceny, white collar crimes, and other serious crimes. Contact us at 800.696.9529 to schedule a free, no obligation consultation regarding your case. We serve those accused of larceny in the following locations: the Bronx, Brooklyn, Long Island, Manhattan, Nassau County, Queens, Staten Island, Suffolk County and Westchester County.