In a recent bankruptcy case a debtor who habitually lied about his income to get credit cards is facing up to 90 years in jail for lying to three credit card companies about his income. Under Title 18 of the U.S. Code, Section 1014 it is a federal crime to lie to certain types of banks in order to get credit. Undoubtedly it is unusual for ordinary debtors to be convicted under this law, but with more debtor’s defaulting could we see more prosecutions?
…other experts said, the statute usually is employed against someone who has attracted prosecutorial attention involving other financial matters — even outright fraud. If prosecutors think you’re a bad guy, they’ll hit you with whatever they think will stick, as mobster Al Capone found in the ’30 when convicted of tax evasion.
“This is pretty unusual,” said Nessa Feddis, vice president and senior counsel for the American Bankers Association, which represents credit card issuers and nearly all of the nation’s banks. “Generally speaking, banks don’t go around looking to prosecute customers who lie about their income. The person charged may have done something particularly egregious.”
While it may be unusual, banks are facing a record number of defaults. Might they feel tempted to dig into the history of how a bankruptcy debtor was able to qualify for a credit card if they want to avoid a bankruptcy discharge? Maybe, it depends on how much it’s worth it to them. If the bankruptcy debtor only owes a few thousand dollars and has income which makes sense for the amount of debt they have, then the credit card company probably won’t pursue a fraud case.
However, if the bankruptcy debtor’s income and debt levels are mismatched, they may want to investigate possible fraud. For example, a debtor who’s income was under $30,000 for the past two years; but who had credit cards with $40,000 limits might become a target of credit card companies on the lookout for fraud. Debtors who know they were not truthful about their income when applying for credit cards should inform their Dallas bankruptcy attorney immediately.