On 27 May 2010 Hanningfield, Jim Devine, Elliot Morley, and David Chaytor appeared at Southwark Crown Court for a preliminary hearing. Hanningfield was charged with six counts of false accounting and his trial at Chelmsford Crown Court began on 16 May 2011. Prosecuting counsel Clare Montgomery QC accused Hanningfield of claiming for overnight stays in London when he had in fact returned to his home in Essex. On one occasion, when he claimed reimbursement for an overnight stay in London, he was actually on a plane to India.

Hanningfield denied all charges. He told police he had been 'singled out' during in an interview in August 2009, he had told police: "I have done the same as 500 or 600 other peers."

He was found guilty of claiming almost £14,000 for overnight stays in central London that never happened. He was later ordered to pay back £37,000 by the courts.

On 26 May 2011, Hanningfield was found guilty on all six counts, including claiming almost £14,000 for overnight stays in central London that never happened, instead he had travelled back to his home in Essex.

On 1 July 2011, Hanningfield was sentenced to nine months' imprisonment, after the court heard evidence from his psychiatrist, Professor Valerie Cowie, stating that "he expressed suicidal ideas" and "he told me he would be absolutely crushed by a custodial sentence". The prosecution pointed out that he had been well enough to attend the House of Lords during the previous week. The sentence handed down was the shortest imposed on anyone convicted of dishonesty in the expenses scandal. Hanningfield's appeal against his conviction was rejected by the Court of Appeal on 20 July 2011.

On 12 September 2011, it was reported that Hanningfield had been released from prison on home detention curfew, after serving just a quarter of his nine-month sentence. He was re-arrested days later on charges relating to his Essex county council expenses.

In October 2011, Hanningfield began a legal action against Essex Police for wrongful arrest on suspicion of fraudulent use of a county council credit card, a few days after he had been released from prison. He sent a letter before the claim informing them that he was seeking £3,000 for unlawful arrest and detention, £1,500 for trespass, and £2,000 in costs. In February 2013 he was awarded £3,500 damages for unlawful arrest and the search of his home without a search warrant. He was represented by the barrister Rupert Bowers KC.

In December 2011 the House Committee in the Lords recommended that Baroness Uddin and Lord Hanningfield should not be allowed back to the Lords until the outstanding expenses had been repaid. Hanningfield returned to the House of Lords in April 2012 after repaying £30,000, but did not speak again in the chamber until October 2013.

In September 2012 Hanningfield was ordered to repay a further £37,000 covering a six-year period of expenses, under the Proceeds of Crime Act. Hanningfield called this "unfair" and said that to pay it he would need to raise a mortgage and to take up after-dinner speaking and attend the House of Lords more often, earning the £300 daily attendance fee, to repay the mortgage.

In May 2014 it was announced that Hanningfield would likely be suspended from Parliament over the incident, and he was subsequently temporarily suspended from the House of Lords. His suspension ended in May 2015. Again represented by Rupert Bowers KC, the case was ultimately dropped when Parliament claimed privilege over the matters indicted.

As a life peer there was nothing to stop him returning as a legislator in the House of Lords following a twelve month suspension. Last week the Daily Mirror caught him allegedly collecting £300 in expenses after clocking into the Houses of Parliament for less than 30 minutes.