David Johnson, a bankrupt, has been sentenced to four months in prison, suspended for 18 months, for telling the Official Receiver that he had used funds from his estate to pay threatening loan sharks when, in fact, he had spent the money on repaying his wifes debt.

Mr Johnson, 46, from Melksham, pleaded guilty to a single charge of trying to account with fictitious losses and expenses and was sentenced at Bristol Crown Court. The verdict followed an initial investigation by The Insolvency Service and prosecution by the Department for Business, Innovation and Skills (BIS).

The lorry mechanic was first made bankrupt in July 2004. His only asset was a voidable transfer that he had made to his wife just before bankruptcy. According to the rules governing such transfers, the trustee could make a claim on these funds even after his discharge.

On 22 June 2010 the trustee obtained a court order against Mrs Johnson to repay 45,264 to the 2004 bankruptcy estate.

By this time Mr Johnson had been discharged from bankruptcy. He re-mortgaged some agricultural land and used this money to pay off his wifes 45k debt. But when he was made bankrupt for the second time on 26 January 2012, he claimed to have used this money to repay loan sharks, hence the funds were unrecoverable to pay his creditors.

Mr Johnson said: I did not have any credit facilities available due to my financial problems at this time and I could not get the money from anywhere else. I actually paid them back through their solicitor and I believe the money went straight from the mortgage company to the solicitor. I am not prepared to provide the names or addresses of either of the loan sharks as I am aware of what could happen to me.

This was patently untrue and was discovered by the Official Receiver leading to Mr Johnson being prosecuted.

Deputy Chief Investigations Officer Liam Mannall from the Department for Business Innovation and Skills said:

Mr Johnson has narrowly escaped an immediate term of imprisonment. Bankrupts are required to be open and honest with the Official Receiver about their financial circumstances. Those who are not run the same risk as Mr Johnson, and will be investigated and prosecuted through the criminal courts by the Department for Business Innovation & Skills.

Source: http://www.bis.gov.uk