Monthly Archives: November 2014

How to Go to Jail for Filing Bankruptcy

It doesn’t happen often, but about once a year I read about someone in this part of the Country going to jail for being stupid.  I’m sorry, I shouldn’t be rude about it; but there just isn’t much you can call smart about going to jail for Bankruptcy fraud.

The most recent fact scenario happened in Arkansas, but I have seen very similar facts several times in Oklahoma.  (Fortunately, none have been my clients.)  Here is how this particular story plays out.  Client has something he doesn’t want to lose.  Client also has a ton of debt.  The client is concerned (rightly or wrongly) that if he files for bankruptcy and owns this asset he wants to keep that the Trustee will take it away from him.  Maybe the client is right, and maybe he isn’t.

Where the client goes really, really wrong is the client decides that he is smarter than the system.  Instead of talking to a good, Bankruptcy lawyer about how to best protect this asset and still get relief from his debts, the client decides to transfer the asset to someone else and just say nothing.  The client is gambling that no one will ever be the wiser.  Maybe the transfer is even semi-legitimate.  Possibly the client transfers the asset to someone to whom he owes a significant debt, and maybe if that had been properly disclosed it would have been a viable pre-bankruptcy plan; but NOTHING is viable if it is concealed.

So, client goes to lawyer.  Lawyer asks client if he has sold or given away anything of value in the last two years that hasn’t already been discussed.  Client says, no, of course not.  Bankruptcy is filed with none checked on the question on the Statement of Financial Affairs regarding transfers.  Bankruptcy trustee appointed to administer the case finds a record of the asset in question — trust me, they have ways.

At this point nothing good is going to happen.  The Debtor MIGHT just lose his discharge — or he might go to prison.  It really depends on the facts.  The point here is that this is completely avoidable.

If you have an asset you really don’t want to lose, call a good, bankruptcy lawyer sooner rather than later.  Give yourself some time, because even if (and this is a big if) you would, in fact, lose that asset if you were to file for bankruptcy; there may be a legal and legitimate way to change that result.

Regardless, it isn’t worth going to prison over.  Talk to a lawyer.  Be honest and up front with the lawyer.  Sometimes they really do know the solution to that which scares you.


There May Be Some Justice in this World After All

CNN is reporting that the FBI has arrested the owner of a debt collection business in Georgia and six of his employees.  The collectors in this case were lying to people, telling them that the collectors were Federal agents, and if this debt wasn’t paid the person they were calling was going to be arrested.

There are two things that make this story unusual.  First, of course, the arrest of seven people by the FBI.  The second, however, is what enabled that arrest — the debt collectors were inside the United States.

It is not uncommon for me to get calls from terrified clients, because they have just gotten a call like this; and some of these callers are very good and very persuasive.  In most cases, however, if you could trace the call you would find that it came from a VoIP number — in Pakistan, Eastern Europe or Northern Africa — take your pick.

So, it is really refreshing to see the FBI getting involved in one of these scams when the scammers are within reach.

If you get a phone call like this.  The first question I tell my clients to ask is for a mailing address to send a cashier’s check to pay this debt.  Now, since these people were in Georgia they might have given out a mailing address; but the overseas scammers won’t.  They will tell you that there is no time for that, the debt must be paid right now by electronic funds transfer out of your bank account.  I tell my clients to take a deep breath and try to think of any legitimate creditor who won’t take a cashier’s check drawn on a Federally insured financial institution.  That is a dead giveaway that you aren’t dealing with someone legit.

The next thing, though, is to try and remember the last time you knew someone who was arrested for not paying their credit cards.  Now, you can be arrested for ignoring or disobeying an order of the Court (like failing to appear at a Hearing on Assets); but you won’t get a phone call giving you an out for that.  So, keep thinking, the last time you knew someone who was arrested for not paying an old credit card account was when?

Now, consider what it costs a State to incarcerate someone.  So, the State is going to do that to collect a debt owed to some debt collector?  Really?

The long and the short of this is, if you get a phone call from someone claiming to be collecting a credit card or medical bill, and that person threatens to have you arrested if you don’t pay — and probably if you don’t pay RIGHT NOW.  Your first thought really should be that this is probably a scam.