What Is Financial Fraud in Divorce?

Financial fraud occurs when someone intentionally deceives another for personal gain. This can involve manipulating financial statements or submitting false information. Unfortunately, financial fraud can also taint the divorce process.

Types of Financial Fraud in a Divorce

Divorce is a complex emotional rollercoaster, and unfortunately, finances can add another layer of stress. While most divorces involve a fair division of assets and debts, some spouses may resort to financial fraud to unfairly benefit themselves.

Here's a look at some of the most common types of financial fraud during divorce:

  • Hiding assets. This is the most common type of fraud. Spouses may squirrel away cash, transfer ownership of property to friends or family, or underreport the value of investments to reduce the marital estate.
  • Income misrepresentation. Misrepresenting income can significantly impact spousal and child support. This can involve underreporting income through cash jobs, manipulating paystubs, or claiming fictitious deductions.
  • Increased debt. Just like hiding assets, some spouses try to inflate their debts to make themselves appear less financially responsible, thereby reducing their support obligations. Conversely, they might try to hide legitimate debts to increase their supposed financial standing.
  • False debt. This involves creating fake debts or liabilities to reduce the marital estate. This could be fabricating loans from friends or family or doctoring financial statements.
  • Insurance scam. Some spouses might fake an illness or injury to collect on life insurance or disability benefits, using those funds to improve their financial situation during the divorce.

Common Signs of Financial Fraud in Divorce

Here are some red flags that may indicate financial fraud:

  • Secrecy about finances. A spouse who becomes unreasonably secretive about bank statements and credit card bills or refuses to discuss financial matters could be hiding something.
  • Unexplained spending. Sudden drops in bank account balances, large cash withdrawals, or unexplained maxed-out credit cards can signal hidden financial activity.
  • Missing documentation. If your spouse is unable to produce important financial documents, like tax returns or investment statements, it's a cause for concern.

Committing Financial Fraud Is a Serious Offense

If it is proven to the court that financial fraud has occurred, the offending party can face serious consequences. Specifically, the court may award the other party a larger portion of marital assets or pursue charges of perjury and/or fraud.

Taking Action If You Suspect Fraud

Here are some steps you can take to protect yourself:

  • Gather information sooner rather than later. Before you even consider divorce, start collecting copies of financial documents like tax returns, bank statements, and investment account statements.
  • Consider hiring a forensic accountant. If you suspect fraud, a forensic accountant can analyze financial records to uncover hidden assets or income.
  • Work with an experienced attorney. An attorney can advise you on your rights and help you navigate the complexities of uncovering financial fraud.

Talk with Our Divorce Attorneys

At Arnel Law Firm, we can help you with your divorce case, including in cases where you suspect financial fraud. From studying documents obtained during the subpoena process to working with a forensic accountant, our team can work to help you obtain a favorable case outcome.

Request an initial case consultation by calling (718) 550-3024.