January 20, 2020

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…]

Examples of Bankruptcy Fraud

bankruptcy fraudLast October, I wrote a post on this blog about bankruptcy fraud, and pointed out that everything included in a bankruptcy filing is subject to scrutiny by the office of the United States Trustee, which is an arm of the United States Department of Justice.  In other words, false statements on a bankruptcy petition could land a debtor in hot water – dismissal of the bankruptcy case, fines and even prison.

Because the bankruptcy process can seem informal, it can be easy to forget that a Chapter 7 or Chapter 13 filing is made up of documents filed in a federal district court and subject to investigation by the F.B.I.

Attorney Gini Nelson, a New Mexico bankruptcy lawyer, recently published a post about bankruptcy fraud in the Bankruptcy Law Network blog.  Gini’s post includes a link to the IRS.gov site containing examples of bankruptcy fraud investigations.   I found the IRS.gov link especially interesting in that one can get a sense of the type of fraud that bankruptcy debtors have attempted and the level of fraudulent activity that generated prosecution.  Given the highly interconnected and electronic public record access that is available to bankruptcy trustees as well as government investigators I can’t believe any of these folks believed that they would not be caught.

Page optimized by WP Minify WordPress Plugin