Bankruptcy Fraud Can Mean Big Trouble

Bankruptcy Fraud Can Mean Big Trouble

The federal bankruptcy process is streamlined to provide timely financial relief to deserving individuals. A Chapter 7 “erase-your-debts-and-start-fresh” bankruptcy generally takes a mere 4-5 months, start to finish. The debtor discharges burdensome unsecured debt, and may get additional relief by restructuring secured debts.

A trustee is assigned to each bankruptcy case. The trustee has hundreds of cases each month to review, and a bankruptcy judge will preside over thousands of bankruptcy court cases. Consequently, the Chapter 7 process relies heavily upon the honesty and candor of the debtor who is required to accurately account for all income, expenses, assets and debts. The vast majority of debtors are honest, but the Department of Justice (DOJ) estimates that one out of ten cases have some element of fraud attached to it. When fraud is suspected, bankruptcy trustees aggressively investigate and use the resources of the DOJ, the FBI, and the IRS.

Bankruptcy fraud carries a maximum penalty of 5 years in prison and a $250,000 fine. Those convicted on federal bankruptcy fraud charges spend an average of 31 months in prison. Still, some people never learn. . .

The Portland Division of the FBI recently issued a press release concerning a bankruptcy debtor’s guilty plea to fraud charges. Viengkham Virasak, 44, of Corvallis, Oregon, incurred debt in his family members’ names and then filed bankruptcy cases in their names. Virasak actually discharged $87,500 in debt, and then filed other bankruptcy cases when he was discovered.

In May, former baseball player Lenny Dykstra was indicted on bankruptcy fraud charges. The indictment alleges that Dykstra took and sold items from his $18 million mansion after filing for bankruptcy protection. Once an individual files Chapter 7 bankruptcy the assets of the individual become part of a “bankruptcy estate” which is the responsibility of the trustee. The trustee claims that “Dykstra stole and destroyed more than $400,000 worth of property in the estate.”

Bankruptcy fraud is serious business. Dishonest acts during bankruptcy could cause the court to deny your discharge, or you may face criminal charges. Whatever your financial situation, it is best to discuss your options with an experienced bankruptcy. The bankruptcy laws are written to help the honest, but unfortunate debtor. Your attorney can work to achieve the best legal result possible and keep you out of trouble.

I Have My Bankruptcy Discharge. Now What?

I Have My Bankruptcy Discharge. Now What?

You should obtain a copy of your credit report immediately after receiving your bankruptcy discharge. Federal law entitles you to one free credit report from the “big three” credit reporting agencies, Experian, Equifax, and TransUnion, every twelve months. The easiest way to obtain your free credit report from each of these agencies is by visiting AnnualCreditReport.com.

After receiving your free credit reports, check each report for errors. First, any debt discharged by your bankruptcy should be listed as “Discharged in Bankruptcy” with a “Zero Balance.” Second, there should not be any negative activity reported after the date that you filed your bankruptcy case. This includes any new collection agency report after your filing date. Third, any debt that was reaffirmed should not be listed as “Discharged in Bankruptcy,” and should list your on-time payments. Finally, in some cases inaccurate information will be reported. For instance, a car voluntarily surrendered back to a creditor during a bankruptcy is not a “repossessed vehicle” and should not be reported as such.

Correcting any errors on your credit report is simple and easy. Each reporting agency has procedures from contesting erroneous information, either by mail or on-line. Once the credit agency has updated its records, it must issue you a free corrected report. Review this new report for errors; do not assume that the report has been correctly amended. You may need to correspond with the agency several times and supply documentation regarding your bankruptcy case. It is your responsibility to ensure that your credit report is accurate. Neither the bankruptcy court, nor your attorney, nor your creditors are responsible for sending the credit reporting agencies information regarding your bankruptcy case.

Updating and correcting your credit reports is the first step on the road to rebuilding your credit after bankruptcy. Fortunately, this step is free and takes very little effort. Be sure to correct your credit reports and then closely monitor your credit regularly for the first two years after your bankruptcy discharge. With timely payments and by carefully protecting your credit file, your credit score will increase quickly.

Can I Keep My Vehicle During Chapter 7 Bankruptcy?

Can I Keep My Vehicle During Chapter 7 Bankruptcy?

One of the most serious questions a client may ask is, “If I file Chapter 7 bankruptcy, can I keep my vehicle?” Like many simple, straight-forward legal questions, there are no simple, straight-forward legal answers. However, while each case is different, the vast majority of bankruptcy debtors keep their vehicles during Chapter 7.

Keeping a vehicle during Chapter 7 bankruptcy starts with a simple accounting: is the fair market value of the vehicle more than the amount owed on the loan? In other words, does the debtor have equity in the vehicle? If there is no equity in the vehicle, the Chapter 7 trustee cannot take and sell it since there is no benefit to the unsecured creditors.

On the other hand, if there is vehicle equity, that equity must be protected otherwise the trustee can take and sell the vehicle to reach the unprotected equity. The vehicle’s equity may be protected by one or more legal exemptions. The total amount of exemptions available to a debtor is determined by state and/or federal law and varies from state to state, and case to case. In some cases the ownership of the vehicle may protect the vehicle’s equity, such as in cases of joint ownership with a non-filing party.

If the vehicle has unprotected, non-exempt equity, the debtor has a few options. First, instead of taking and selling the vehicle, the trustee may accept a cash payment. Generally this cash payment is less than the amount of available equity, because there are actual costs involved in selling the vehicle. Second, the debtor may consider a Chapter 13 bankruptcy. A payment equal to the amount of non-exempt equity must be paid to the debtor’s unsecured creditors during the Chapter 13 plan, but this payment is stretched over 36-60 months. Third, the debtor may choose to allow the trustee to sell the vehicle. Any claimed exemption will be paid to the debtor from the proceeds of the sale. Finally, the debtor may choose to trade or sell the vehicle prior to bankruptcy and use any proceeds for necessary household expenses.

The truth is that it is rather unusual for a debtor to have a vehicle equity issue during Chapter 7 bankruptcy. If you have a vehicle with a great deal of equity, your bankruptcy attorney can discuss your options for keeping your vehicle and protecting your equity.

Can I Keep My Vehicle During Chapter 7 Bankruptcy?

Can I Keep My Vehicle During Chapter 7 Bankruptcy?

One of the most serious questions a client may ask is, “If I file Chapter 7 bankruptcy, can I keep my vehicle?” Like many simple, straight-forward legal questions, there are no simple, straight-forward legal answers. However, while each case is different, the vast majority of bankruptcy debtors keep their vehicles during Chapter 7.

Keeping a vehicle during Chapter 7 bankruptcy starts with a simple accounting: is the fair market value of the vehicle more than the amount owed on the loan? In other words, does the debtor have equity in the vehicle? If there is no equity in the vehicle, the Chapter 7 trustee cannot take and sell it since there is no benefit to the unsecured creditors.

On the other hand, if there is vehicle equity, that equity must be protected otherwise the trustee can take and sell the vehicle to reach the unprotected equity. The vehicle’s equity may be protected by one or more legal exemptions. The total amount of exemptions available to a debtor is determined by state and/or federal law and varies from state to state, and case to case. In some cases the ownership of the vehicle may protect the vehicle’s equity, such as in cases of joint ownership with a non-filing party.

If the vehicle has unprotected, non-exempt equity, the debtor has a few options. First, instead of taking and selling the vehicle, the trustee may accept a cash payment. Generally this cash payment is less than the amount of available equity, because there are actual costs involved in selling the vehicle. Second, the debtor may consider a Chapter 13 bankruptcy. A payment equal to the amount of non-exempt equity must be paid to the debtor’s unsecured creditors during the Chapter 13 plan, but this payment is stretched over 36-60 months. Third, the debtor may choose to allow the trustee to sell the vehicle. Any claimed exemption will be paid to the debtor from the proceeds of the sale. Finally, the debtor may choose to trade or sell the vehicle prior to bankruptcy and use any proceeds for necessary household expenses.

The truth is that it is rather unusual for a debtor to have a vehicle equity issue during Chapter 7 bankruptcy. If you have a vehicle with a great deal of equity, your bankruptcy attorney can discuss your options for keeping your vehicle and protecting your equity.

Can I Keep My Vehicle During Chapter 7 Bankruptcy?

Can I Keep My Vehicle During Chapter 7 Bankruptcy?

One of the most serious questions a client may ask is, “If I file Chapter 7 bankruptcy, can I keep my vehicle?” Like many simple, straight-forward legal questions, there are no simple, straight-forward legal answers. However, while each case is different, the vast majority of bankruptcy debtors keep their vehicles during Chapter 7.

Keeping a vehicle during Chapter 7 bankruptcy starts with a simple accounting: is the fair market value of the vehicle more than the amount owed on the loan? In other words, does the debtor have equity in the vehicle? If there is no equity in the vehicle, the Chapter 7 trustee cannot take and sell it since there is no benefit to the unsecured creditors.

On the other hand, if there is vehicle equity, that equity must be protected otherwise the trustee can take and sell the vehicle to reach the unprotected equity. The vehicle’s equity may be protected by one or more legal exemptions. The total amount of exemptions available to a debtor is determined by state and/or federal law and varies from state to state, and case to case. In some cases the ownership of the vehicle may protect the vehicle’s equity, such as in cases of joint ownership with a non-filing party.

If the vehicle has unprotected, non-exempt equity, the debtor has a few options. First, instead of taking and selling the vehicle, the trustee may accept a cash payment. Generally this cash payment is less than the amount of available equity, because there are actual costs involved in selling the vehicle. Second, the debtor may consider a Chapter 13 bankruptcy. A payment equal to the amount of non-exempt equity must be paid to the debtor’s unsecured creditors during the Chapter 13 plan, but this payment is stretched over 36-60 months. Third, the debtor may choose to allow the trustee to sell the vehicle. Any claimed exemption will be paid to the debtor from the proceeds of the sale. Finally, the debtor may choose to trade or sell the vehicle prior to bankruptcy and use any proceeds for necessary household expenses.

The truth is that it is rather unusual for a debtor to have a vehicle equity issue during Chapter 7 bankruptcy. If you have a vehicle with a great deal of equity, your bankruptcy attorney can discuss your options for keeping your vehicle and protecting your equity.

Can I Keep My Vehicle During Chapter 7 Bankruptcy?

Can I Keep My Vehicle During Chapter 7 Bankruptcy?

One of the most serious questions a client may ask is, “If I file Chapter 7 bankruptcy, can I keep my vehicle?” Like many simple, straight-forward legal questions, there are no simple, straight-forward legal answers. However, while each case is different, the vast majority of bankruptcy debtors keep their vehicles during Chapter 7.

Keeping a vehicle during Chapter 7 bankruptcy starts with a simple accounting: is the fair market value of the vehicle more than the amount owed on the loan? In other words, does the debtor have equity in the vehicle? If there is no equity in the vehicle, the Chapter 7 trustee cannot take and sell it since there is no benefit to the unsecured creditors.

On the other hand, if there is vehicle equity, that equity must be protected otherwise the trustee can take and sell the vehicle to reach the unprotected equity. The vehicle’s equity may be protected by one or more legal exemptions. The total amount of exemptions available to a debtor is determined by state and/or federal law and varies from state to state, and case to case. In some cases the ownership of the vehicle may protect the vehicle’s equity, such as in cases of joint ownership with a non-filing party.

If the vehicle has unprotected, non-exempt equity, the debtor has a few options. First, instead of taking and selling the vehicle, the trustee may accept a cash payment. Generally this cash payment is less than the amount of available equity, because there are actual costs involved in selling the vehicle. Second, the debtor may consider a Chapter 13 bankruptcy. A payment equal to the amount of non-exempt equity must be paid to the debtor’s unsecured creditors during the Chapter 13 plan, but this payment is stretched over 36-60 months. Third, the debtor may choose to allow the trustee to sell the vehicle. Any claimed exemption will be paid to the debtor from the proceeds of the sale. Finally, the debtor may choose to trade or sell the vehicle prior to bankruptcy and use any proceeds for necessary household expenses.

The truth is that it is rather unusual for a debtor to have a vehicle equity issue during Chapter 7 bankruptcy. If you have a vehicle with a great deal of equity, your bankruptcy attorney can discuss your options for keeping your vehicle and protecting your equity.

New Federal Protection for Exempt Bank Funds

A new federal rule set to take effect on May 1, 2011, will increase protection for exempt funds in a garnished bank account. Federal law already protects many federal benefits, but it is currently the responsibility of the individual to claim these funds as exempt. Often the bank will freeze a bank account pursuant to an order and the individual must request a court hearing to release the funds.

Under this new Treasury Department rule, an electronic tag will be added to automatic deposits from government agencies. These funds include Social Security, Supplemental Security Income (“SSI”), Veteran’s Administration (“VA”) benefits, federal Railroad Retirement, federal Railroad Unemployment and Sickness benefits, federal Civil Service Retirement benefits and federal Employee Retirement System benefits. Banks are required to exempt all tagged deposits made during the previous two months and protect those deposits from garnishment. The consumer is no longer required to take any action to claim or identify exempt funds. The rule makes banks not liable to creditors for refusing to garnish the tagged funds, even if the money is co-mingled with other non-exempt money.

The National Consumer Law Center estimates that more than 1 million people each year have accounts garnished that contain exempt federal funds. Recipients are often sick or elderly and may be forced to forego needed food and medicine when an account is frozen.

This new rule applies to all federally chartered federal and state banks and credit unions. While there is no cap on the amount of protected funds, the automatic protection only applies to the previous two months. Exempt funds must be deposited electronically to receive the identifying tag. Deposits made by paper checks are still exempt, but the bank is under no obligation to identify these funds or protect them from garnishment. The rule does not apply to military retirement or state issued benefits.

There are many powerful consumer protection laws. If you have a judgment against you and are at risk of a bank or wage garnishment, consult with an experienced bankruptcy attorney and discover how the law can help. Your attorney can discuss your legal options to make the best of a bad situation.

The Costs of Representing Yourself in a Bankruptcy Case

The Costs of Representing Yourself in a Bankruptcy Case

Remember that time is money.

- Benjamin Franklin (1748)

Several years ago Ian Walker, a professor of economics at Warwick University in England, developed a mathematical formula to show the personal cost of an activity like mowing your lawn or washing your car. The formula looks like this:

V=(W((100-t)/100))/C

V is the value per hour;

W is your hourly wage;

t is your tax rate (e.g. 15%, 20%, etc.)

C is the local cost of living, which is a baseline of 1.0. If you live in an area that is 50% more expensive than the national average, use 1.5

For a person making $20.00 per hour, and a tax rate of 25%, the value per hour is $15.00, or $.25 per minute. Spending an hour mowing your lawn is therefore a value over paying the neighbor boy $30. So let’s look at whether representing yourself in a bankruptcy case is a “value.”

A represented debtor in a Chapter 7 bankruptcy must at minimum collect financial information; spend time with counsel during the initial interview and petition signing; complete credit counseling; attend the 341 meeting; and complete a course in financial management. A pro se (Latin meaning “for himself”) bankruptcy debtor must spend time on these things as well. However, the pro se debtor has a lot to learn including applicable exemption laws, and the bankruptcy rules and procedures. Setting that “learning time” aside for the moment, let’s look at some actual administrative costs the pro se debtor must perform “for himself:”

Time spent preparing the petition. Even the simplest petition will take the pro se debtor time to read the instructions and properly prepare the schedules. Your bankruptcy attorney uses sophisticated petition preparation software and is skilled at completing these forms. 6 hours.

Most pro se debtors drive to the bankruptcy court to personally file the bankruptcy case, and must pay the filing fee with cash, a cashier’s check, or money order. Your bankruptcy attorney has access to the court’s electronic filing system and can file your case within minutes from the office. Time 2 hours.

Extra time at the 341 meeting. The trustee will schedule extra time to spend on your case. Usually, pro se cases are set at the end of the trustee’s docket, so you will have to wait extra time for your examination. 30 minutes.

Communications with the trustee. The trustee generally requires income information, bank records, tax records, vehicle titles, recorded deeds, and other information. The bankruptcy attorney will provide these documents to the trustee while a pro se debtor must prepare and send them. 2 hours.

Communications with the bankruptcy court. The clerk’s office at the bankruptcy court can assist a pro se debtor on certain procedures, but is prohibited from giving legal advice. Pro se debtors generally spend a considerable amount of time on the phone with the clerk’s office. 2 hours.

The pro se debtor’s total so far for these simple administrative activities is 12.5 hours, or $187.50. Now let’s add the time spent researching the bankruptcy laws and processes; and the time spent on correcting or amending the bankruptcy pleadings. Additionally, the bankruptcy judge requires that any pro se debtor must appear personally in court to reaffirm a debt - an appearance is not required for represented debtors. This “extra” time can easily amount to another 40 hours!

The moral of this story is: the representation provided by your experienced bankruptcy attorney is not an expense, it is a savings! By having a licensed, experienced bankruptcy attorney handling your case you will get peace of mind and your case will be handled efficiently without surprises. The actual cash savings to the pro se debtor is small at best, while the truth is that many pro se cases experience problems that result in lost property or case dismissal. Don’t be “penny wise and pound foolish.” Hire qualified counsel and get the legal relief you need.

Protecting Your Lawsuit During Bankruptcy

Any claim that a debtor may have at the time a bankruptcy case is filed is considered an asset and must be disclosed to the bankruptcy court. This includes lawsuits that are currently pending in court or through an administrative process, and those that are not yet filed. Social Security Disability claims, Worker’s Compensation claims, unemployment claims, class action lawsuits, and personal injury lawsuits are all claims that must be disclosed to the bankruptcy court.

Keeping any money obtained from a legal claim (after settlement or adjudication) depends on several factors. For instance, if the bankruptcy case is a Chapter 13, the debtor does not lose any property, but must pay unsecured creditors an amount equal to the value of non-exempt property. Another factor is whether the claim or any money received from the claim is “property of the bankruptcy estate.” Some legal claims, like retroactive social security benefits, are protected by law and are excluded from the debtor’s bankruptcy case. Money from a legal claim may be protected using federal or state law exemptions. In some cases a claim is entirely exempt; in other cases a claim is protected only to a certain dollar amount.

The Bankruptcy Code states that the debtor must disclose “all legal or equitable interests” in property as of the date the bankruptcy case is filed. The debtor who fails to report an interest in a claim and later receives money is at risk of losing the entire payment. The bankruptcy judge and trustee will be very reluctant to permit a debtor to keep money that was hidden from the court, and the court is likely to disallow any claim of exemption. In some extreme cases, the trustee may complain that an omission is intentional and ask to revoke or deny a discharge on the basis of fraud!

The federal bankruptcy laws contain powerful protections for the honest debtor. It is extremely important to discuss any pending or potential claim with your bankruptcy attorney. Reporting any claim is the first step in protecting any money from turnover to creditors. Your attorney can also cooperate with any concurrent litigation to maximize your recovery.

Amana Couple Convicted of Bankruptcy Fraud in Pensacola, Florida

The Schuerers were convicted of Bankruptcy Fraud in Pensacola, Florida, and ordered to serve 30 months in in prison, pay a $25,000 fine and a $200 special assessment was imposed on each defendant. Also, the couple was ordered to pay the U.S. Trustee $394,984. So the moral of this story is do not "sell" your property to friends or family prior to filing bankruptcy.



CEDAR RAPIDS, Iowa - Gerald and Fay Schuerer of Amana were convicted of defrauding bankruptcy creditors out of more than $350,000 in property this week following a six-day trial in Pensacola, Fla.

Gerald Schuerer, 60, and Fay Schuerer, 58, were convicted of mail fraud and bankruptcy fraud on Monday, Nov., 8, following three hours of jury deliberations, according to the United States Attorney for the Northern District of Iowa.

The couple had formerly owned the Ox Yoke Innterstate in the Amana Colonies before running into financial trouble with a convenience store business that later closed. They had been indicted by a federal grand jury in Florida, where they had moved and filed their bankruptcy case to take advantage of the state’s more liberal bankruptcy filing laws.

Evidence presented at trial indicated the couple protected from creditors before their bankruptcy filing through sham sales to relatives with understandings that they would reacquire the assets after their bankruptcy protection was granted.

Among the assets were a vehicle, boats, jewelry, stocks and other investments worth about $380,000.

The Schuerers were released on bond pending sentencing by United States District Court Judge Casey Rogers at a date to be set later. The maximum possible sentence for the offenses would be 30 years in prison, a fine of $500,000, and six years supervised release.

The case was investigated by the Federal Bureau of Investigation with help from the Office of United States Bankruptcy Trustee in the northern districts of Iowa and Florida. It was prosecuted through efforts of the Bankruptcy Fraud Task Force of the Northern District of Iowa.

The federal government plans to seek restitution for the Schuerers’ creditors at sentencing, according to a prepared statement released by United States Attorney Stephanie Rose.

Debt Collection and Your Rights

Debt collectors can be ruthless. Persistent telephone calls at home and work, embarrassing letters in red envelopes, calls to friends and family, and even public posts to your Facebook account are all dirty tactics that debt collectors employ to harass you into paying. Fortunately, there are laws that protect you from unlawful creditor harassment.

The Fair Debt Collection Practices Act, or FDCPA, is a federal law that protects against abusive collection practices by third party collectors. Third party collectors include collection agencies and collection attorneys. The FDCPA does not apply to business debts or to original creditors. The FDCPA prohibits certain abusive practices including:

* Telephone calls before 8 a.m. or after 9 p.m. (your time);
* Requesting payment beyond what is actually owed;
* Using abusive, profane or obscene language;
* Threatening legal action which is not permitted by law (e.g. criminal action);
* Telephone calls at work after being instructed that your employer prohibits phone calls
from debt collectors;
* Contacting you directly after being instructed that you are represented by an attorney

Another federal protection is the Fair Credit Reporting Act (FCRA). The FCRA is designed to promote accuracy and ensure the privacy of the information used in consumer credit reports. The FCRA contains a dispute process for correcting inaccurate information placed on your credit report. More information about the Fair Debt Collection Practices Act and the Fair Credit Reporting Act can be found on the Federal Trade Commission’s Bureau of Consumer Protection website. The FTC is charged with enforcement of both acts.

Hiring a bankruptcy attorney provides immediate relief from creditor harassment under the FDCPA, and all collection action must cease the instant you file a bankruptcy case. This protection lasts the duration of your bankruptcy and is replaced with the bankruptcy discharge at the end of your case. A creditor who violates these bankruptcy prohibitions can face a contempt of court charge in the federal bankruptcy court.

Don’t let creditor harassment overwhelm your life. Take charge by consulting an experienced bankruptcy attorney about your debt and learn how the federal and state laws can protect your property, your income, and your peace of mind.

Rising Gas Prices Impact Debtors in Bankruptcy

Rising Gas Prices Impact Debtors in Bankruptcy

Debtors in bankruptcy are required to disclose all household income and expenses. While the debtor’s income is often relatively easy to determine through pay stubs and bank records, calculating expenses can be more elusive. When completing your bankruptcy schedules it is important to be realistic. Often changes in the economy can significantly affect your budget. The recent spike in gas prices has impacted the budgets of American families, and changes calculations within your bankruptcy case.

The U.S. Energy Information Administration recently determined that the average price for a gallon of regular unleaded gas in the United States is $3.567. That is a change of almost $.78 from the same time last year. Many economists believe that the national average will climb to over $4.00 per gallon. In fact, in some states (notably California) gas is already over the $4.00 mark.

It is important to account for this increase in your family’s budget. If you drive 12,000 miles per year and your car averages 25 miles per gallon, you use 480 gallons of gas per year, or 40 gallons per month. At the national average price of $3.567 per gallon, you spend almost $143 per month on gas. That is already $31 more per month/per vehicle than a year ago. If gas prices climb to $4.00 per gallon, the additional cost to a two income, two car family will be approximately $97 per month more than last year.

Higher gas prices have also contributed to an increase in food prices. According to the U.S Department of Agriculture, food prices for a family of four with school-aged children averaged $1184.50 during the month of January. That's $26.20 per month more than the same time last year.

While not every budget increase will necessitate a change in your bankruptcy schedules, any significant change that occurs after you sign your bankruptcy schedules should be brought to the attention of your bankruptcy attorney. While only a small percentage of cases will be affected by increases to a debtor's expenses, it is important to keep your attorney apprised of changes in your finances during your case.