Bankruptcy Crimes

<p><img src="/AM/images/letters/a.gif" align="LEFT" border="0" vspace="5" hspace="5">re you guilty of bankruptcy crimes? Don't dismiss the possibility too lightly. Consider these examples
from Stephanie Wickouski's book:

</p><ul>
<li>A man files bankruptcy using the wrong Social Security number.

</li><li>A lawyer files a personal bankruptcy case on his own behalf, but does not list his interest in bank
accounts that are held in the name of a corporation.

</li><li>A creditor receives payments from a bankruptcy debtor that were not approved by the bankruptcy
court.

</li><li>A non-lawyer collects fees from an individual to file a bankruptcy petition on that individual's behalf;
the petition is filed without the required information, or is not filed at all.

</li><li>A debtor's lawyer files a disclosure with the court that contains an incomplete disclosure of the law
firm's representation of other clients, some of which are creditors in the case.
</li></ul>

<p>All of these were actual cases in which defendants either pled or were found guilty of bankruptcy fraud.
All received jail sentences, in some cases as long as six years.<small>^{<a href="#1" name="1a">1</a>}</small>

</p><p>Anyone who practices bankruptcy law or is involved in a case as an insolvency accountant or
turnaround manager runs the risk of committing bankruptcy crimes. Even those debtor representatives who
do not commit crimes themselves have to be ready to recognize criminal behavior by their clients.

</p><p>Consider the following: A chapter 7 trustee puts the debtor's house on the market using a real estate
agent. The agent reports that each time she attempts to show the house, the debtor refuses to allow her
access. The trustee has a talk with the debtor, informing him that the next conversation will be with the
judge if he continues to deny access in contravention of the trustee's efforts to carry out his duties.

</p><p>The debtor agrees to allow access to the house, but insists that the real estate agent give telephone
notice several hours prior to any showing of the house. The real estate agent gives the notice only to find
that the debtor has dumped clothes and trash throughout the house each time she brings a prospective
purchaser through. Has the debtor committed a bankruptcy crime by interfering with the trustee's efforts
to carry out his Bankruptcy Code-mandated duties?

</p><p>Suppose the trustee gets a sale contract despite the debtor's interference, gives notice of the sale and
seeks court approval. Before a hearing on the sale can be held, the debtor sees the prospective purchaser
at a local health club and threatens the purchaser and his family with physical harm if he does not back out
of the contract. The purchaser backs out of the contract only to have the debtor's investment-club buddies
make an offer to purchase the house for a lesser amount. The trustee objects to the sale on the basis that the
debtor has interfered with a bona fide sale offer, that the proposed sale to the debtor's investment-club
buddies is a fraud designed to allow the debtor to stay in the house and that the entire effort by the debtor
constitutes a bankruptcy crime. Is the trustee right? Stay tuned.

</p><p><i>Bankruptcy Crimes</i> is designed to help you find answers to questions about what behavior constitutes
bankruptcy crimes and how you should respond. The book is excellent. From its explanation of the origin
of the word "bankruptcy" (derived from Italian <i>"banka rotta"</i> which, translated, means broken bench or
table, referring to the Middle Age practice by which creditors broke the tables of defaulted debtors) to a
discussion of the ethical dilemmas faced by lawyers in pre-bankruptcy planning, Ms. Wickouski's book
covers her topic completely.

</p><p>Take a look at the index and you will see that no subject related to bankruptcy crimes goes untouched.
The evolution of what constitutes a bankruptcy crime, the development of the treatment of bankruptcy
crimes, analyses of federal criminal statutes regarding specific bankruptcy crimes and statutes that make
crimes of other behavior in bankruptcy cases, prosecution and defense, penalties and legal ethics—all are
covered.

</p><p>In addition to the completeness of coverage, the book is well-written. Clear, concise, crisp sentences
and easy transitions between paragraphs and topics make for enjoyable reading about a sometimes
not-so-enjoyable but critically important subject.

</p><p>Was the trustee in the case of the debtor who interfered with the sale of his house right that the debtor
had committed bankruptcy crimes? The judge approved the sale over the trustee's objection and the trustee
made the debtor's behavior known to the U.S. Attorney's office. Nothing further ever happened. Read the
book to see whether something should have happened.

</p><p>If you practice in the bankruptcy arena, this book is a must-read for protecting yourself from becoming
personally involved in a bankruptcy crime.

</p><hr>
<h3>Footnotes</h3>

<p>^{<small><a name="1">1</a></small>} <i>Bankruptcy Crimes</i> at 2 and 3. <a href="#1a">Return to article</a>