July 20, 2018

Can You File Bankruptcy if You Have Been the Victim of Identity Theft?

If you have been a victim of identity theft, you can file bankruptcy but you need to be prepared for potential complications.

Identity theft is a big problem in 2018 and a number of large retailers and even credit bureaus have been hacked. Personal and financial information about millions of Americans is available for sale on the “dark web” and criminals use this stolen data to open credit card accounts, sign for personal loans, and even buy houses and cars. You will not know that there was a problem at all until the bills start to arrive.

I have personally been a victim of identity theft twice. One time, a thief got hold of my credit card number and charged $5,000 to a custom suit maker in Hong Kong. In another instance, a fraudster hacked my American Express account and purchased (and picked up) a high end desktop Mac. In both of these situations the credit card company accepted my fraud report and canceled all charges. [Read more…]

Troublesome Transfers Disrupt Bankruptcy Planning

gift for no considerationOne of the more frustrating parts of bankruptcy practice occurs when I have to tell a prospective client that he cannot file because he recently transferred property out of his name in an attempt to protect that property from creditors.  Most of the time, the transfers are made by someone who owes money to a creditor that he cannot pay and he wants to protect assets from that creditors.

Recently, for example I spoke to a man who has well over $100,000 of equity in his home and over $150,000 in credit card debt.  Recognizing the risk to his house, this gentleman executed a quit claim deed to his wife, transferring all of his interest in the house to her.  Five months after the transfer he called me to say that he was ready to file bankruptcy.  Unfortunately, I had to advise him not to file now because Section 727 of the Bankruptcy Code says that a transfer of property for no purpose other than to frustrate the intent of creditors within a year prior to filing is considered a fraudulent transfer and would prevent such a filer from receiving a discharge.

Another type of troublesome transfer can arise when an elderly parent attempts to transfer assets to an adult child in an effort to qualify for Medicaid.   Usually the problem arises not for the transferor but for the transferee. [Read more…]

Chapter 13 Bankruptcy Fraud Case Reaches 11th Circuit Court of Appeals: Why You Should Care

conviction for bankruptcy fraudEarlier this week, the 11th Circuit Court of Appeals issued a ruling in the bankruptcy fraud case of United States v. Turner. Here are the relevant facts:

Mr. Turner owned a parcel of rental property that was destroyed by fire. His insurance carrier issued a check to him for $40,000. Two days after receiving this check, Mr. Turner filed Chapter 13. Three days after filing, Turner deposited the check, used $11,500 to pay off the mortgage on the destroyed property and kept the rest of the money.

Several weeks after these financial transactions, Mr. Turner filed his bankruptcy schedules. He did not list receipt of the $40,000 check. He also claimed that the balance on the rental property mortgage was $50,000, rather than $11,500.

The bankruptcy trustee discovered these inaccuracies and moved to convert Mr. Turner’s case to Chapter 7, which the court approved. Three years later the United States attorney filed an action against Turner for bankruptcy fraud for making false statements and he was convicted. The 11th Circuit agreed to consider Turner’s appeal. [Read more…]

Bankruptcy Fraud: Don’t Cross that Line!

bankruptcy fraudNews reports indicate that former baseball star Lenny “Nails” Dykstra has been charged with bankruptcy fraud by a California based United States Attorney.  Dykstra filed for Chapter 7 bankruptcy in 2009, scheduling $31 million in debts and only $50,000 in assets.

In the complaint, prosecutors allege that Dykstra sold or destroyed over $400,000 worth of property.  Among the property that Dykstra allegedly sold – presumably to raise case – were sports memorabilia and furnishings from the home he lost in the bankruptcy.

Obviously most of the Chapter 7 cases filed in the Northern District of Georgia, or in most bankruptcy courts do not involve millions of dollars of debts incurred by a high profile debtor.  However, there is an important lesson that all bankruptcy filers can learn from the charges levied against Mr. Dykstra. [Read more…]

Real Housewife Star Teresa Guidice Faces Allegations of Bankruptcy Fraud

United Press and about two dozen tabloid web sites and blogs are reporting that reality TV star Teresa Guidice, and her husband Joe have been sued by their Chapter 7 trustee for failing to report assets in their bankruptcy petition.  Guidice, one of the “Real Housewives of New Jersey,” apparently signed a book contract for a cookbook that will pay her $250,000 but failed to reveal that asset on her petition.  The trustee also alleges that the tax returns submitted by Teresa and her husband were fraudulent as well.

Setting aside the question of why a book publisher thinks it can make back a quarter of a million dollars on sales of  Teresa Guidice’s “Skinny Italian” cookbook, what Teresa and her husband are facing is a complaint under Section 727(a)(4) of the Bankruptcy Code, which bars a Chapter 7 discharge to a debtor who knowingly and fraudulently, in or in connection with the case—

(A) made a false oath or account;
(B) presented or used a false claim;
(C) gave, offered, received, or attempted to obtain money, property, or advantage, or a promise of money, property, or advantage, for acting or forbearing to act; or
(D) withheld from an officer of the estate entitled to possession under this title, any recorded information, including books, documents, records, and papers, relating to the debtor’s property or financial affairs;
According to the trustee, Teresa’s book contract is an asset of the estate and these funds should be available to creditors.  If the trustee is successful with his complaint, Teresa and Joe’s Chapter 7 case will be dismissed and their creditors will have free rein to initiate collection activities against them.

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