How bad can it be when you lie in bankruptcy? The process of having your debts discharged is very serious. Although the bankruptcy process for a chapter 7, or a chapter 13 does not seem long, much happens during that time. It is expected that you honestly complete and file the petition. It is also expected that when you are sworn to tell the truth at the meeting of creditors that is exactly what you do. There are also certain other events in life such as inheritances which must be reported to the trustee. Under some circumstances the money dad leaves may belong to your creditors.
Let’s start with the chapter 13. The client had been in a confirmed chapter 13 case for about a year. His mother died and left money to each of her children. He was one. He had hoped to have the money and to pay his creditors a small portion of the total debt. After all, he got the confirmation order. Neat little plan? You bet. Right up to the time the chapter 13 trustee found out. How did that happen? Try a jealous relative. Someone close thought it unfair that he was in bankruptcy and not paying his debts in full. They called the chapter 13 trustee. He agreed.
Fortunately for the client, since he was still paying into the chapter 13 plan, the trustee filed a motion to increase the plan so that unsecured creditors were paid in full. It cost the client some extra money, but there were no additional penalties. He did not lie in his bankruptcy petition, nor did he lie to anyone in his bankruptcy at the meeting of creditors. His was more a crime of omission when he did not come forward about the inheritance.
Let me tell you about a client from five years ago. His was a crime of commission. Everything about the case was a lie. He was so convincing that I even cut my fee owing to his circumstances. This was in 2005 when my fees were already very low under the old law. It turned out he had inherited property from his dad and kept it completely to himself. It was out of the area. Who would know? On top of that he stole a great deal of money from a friend.
I filed the bankruptcy. He had a very capable and competent trustee. Not a man to mess with. The case went without a hitch. Case filed. Meeting of creditors completed. Report of no assets and discharge filed. How long can a trustee administer a case? This guy found out the answer is, forever. How did the trustee find out? A detective called him who was investigating the theft. The cop found reference to the bankruptcy on a credit report. He was not trying to drop a dime on my client. He just wanted information on how bankruptcy might affect the prosecution.
Five years later the trustee leaped into action. He:
- Had me and the client appear for a further examination in his office.
- Filed a motion to have the discharge revoked. He obtained the order.
- Foreclosed on the real property
- Referred the case for prosecution. The US Attorney in Cleveland took the case and indicted the client for a number of bankruptcy crimes. The client pled guilty, and is awaiting sentencing. He also pled guilty to the State theft charge.
This case is a glowing example why you should not lie in your bankruptcy case. The sad fact is that the amount of debt discharged was just a fraction of the total amount stolen. He could have paid it all off with what he stole. He would have had just one State legal problem instead of a federal felony rap.
You can lie to your Cleveland bankruptcy attorney. You can lie in your bankruptcy petition. You can lie in your meeting of creditors, and you can get a discharge. Don’t ever expect you are in the clear. They find out. Maybe they learn from friend or family. The ax will fall. Even five years later.
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