Reporting Bankruptcy Fraud, Filing Adversary Complaint, and Seeking Relief from Stay
My question involves bankruptcy in the state of: California
Just hours before the 7-8-11 court ordered MSC, the defendants in a civil Elder Abuse case, filed for Automatic Stay under Chapter 13 Bankruptcy protection. Unfortunately, my surviving parent is the victim of the abuse and one of my siblings is the perpetrator. Although I know them to be guilty, I still feel badly that it has come down to this.
In order to get the civil litigation back on track, I must make these assertions to protect my parent. I have substantial, compelling evidence to prove the defendants guilty of 879 Bankruptcy Fraud—18 U.S.C. § 157. This offense alone carries a 250k fine, 5 years in prison or both.
Does filing a Complaint to Determine Dischargeability under 11 U.S.C. 523(a)(6) also apply to Chapter 13 petitions?
I am in the process of retaining yet another attorney (District Court practice issues) that specializes in Bankruptcy Law. From what I have read, I need to file a proof of claim, an adversary proceeding complaint, an objection to discharge due to fraud and anything else I can learn to doe on behalf of my handicapped and victimized parent.
Best situation analogy: The bank robbers come in, shoot the teller, get away with the loot, spend the loot and then file for Chapter 13 because they no longer have the "CMI" to make ends meet.
I've read that the IRS considers stolen money and/or property "taxable" unless the stolen money or property is returned in the same year it was taken. It's my understanding that the Chapter 13 Trustee can "require" the debtor to furnish copies of their tax returns for the years in question at their confirmation hearing, is this correct? I have documentation that proves understated income and understated assets totaling hundreds of thousands of dollars for these 3 years. My question is how bad can it get for my sibling? I understand that there will be (huge) taxes and penalties due for tax evasion, but can or will they arrest them for this? No matter what they did, they are still our flesh and blood and another of my parent's offspring, so what do you do given such hard choices?
Any help or advice is welcomed :confused:
Re: Reporting Bankruptcy Fraud, Filing Adversary Complaint, and Seeking Relief from S
"Does filing a Complaint to Determine Dischargeability under 11 U.S.C. 523(a)(6) also apply to Chapter 13 petitions?"
No. You would be looking at Section 1328(a)(4), which may or may not apply in your situation. There must be an award in a civil action for willful or malicious injury that causes personal injury or death. You would need to get the Stay lifted so that you can continue the civil action for the purposes of determining liability and damages - if you are dealing with a “personal injury”.
"It's my understanding that the Chapter 13 Trustee can "require" the debtor to furnish copies of their tax returns for the years in question at their confirmation hearing, is this correct?"
Not quite. While a Trustee can look at back taxes I think you are referring to 11 USC 521(e) which requires a debtor to supply future taxes if so requested. But you have the ability to seek a Rule 2004 examination which would give you the ability to obtain the back tax returns. In addition, once you have filed your AP you can obtain tax returns through the normal mode of discovery.
While you clearly are distressed over this matter you need to sit back and calmly and rationally discuss this with a qualified attorney. You have an uphill battle that will be very costly.
I would elaborate more but I must get to work. If I have a chance today I will come back to this but. . . you really need an attorney - a good one.
Des.
Re: Reporting Bankruptcy Fraud, Filing Adversary Complaint, and Seeking Relief from S
Thank you so much Des. This whole ordeal has been nothing but uphill battles leaving financial devestation in its wake.
Would my parent be afforded more protection under Chapter 7? Everything they owned was lost or stolen, to include their identity, credit card fraud, and the list goes on...
There just isn't anymore money to keep paying attorneys.
Again, all help is appreciated.
Re: Reporting Bankruptcy Fraud, Filing Adversary Complaint, and Seeking Relief from S
Quote:
Quoting
ibbetty
Would my parent be afforded more protection under Chapter 7?
If the person who had committed the abuse had filed Chapter 7 then your parent would be able to seek to have the claim held non-dischargeable under 523(a)(6) - "willful and malicious injury" to person or property.
In the context of a 13 the injured party is looking only at a "willful OR malicious injury" to his/her person (personal injury) which implies a physical or maybe even psychological injury. But, in a 13 there has to be an "award" stemming from a civil action outside the context of the bk for the section to apply. Most bk courts do not require that the award be entered before the bk was filed. It has been held that the parties can go back to the other court to finish the litigation and bring the "award" back to the bk court for a further determination as to whether or not it meets the "willful or malicious personal injury or death" standard for non-dischargeability.
The defendant no doubt was advised to stay away from Chapter 7.
You specifically asked about 523(a)(6), which does not apply in a Chapter 13. Have you looked at 523(a)(4)?
523(a)(4) holds debts non-dischargeable if there was "fraud or defalcation while acting in a fiduciary capacity". This portion of 523 was carried into Chapter 13 under 1328(a)(2). I have no idea if it would apply in your case. I can tell you that there must have been an "express trust" between the debtor and your parent before a "fiduciary capacity" can arise. I would imagine that an express trust is created if the debtor had been appointed as a conservator. But, without that type of appointment, I am not sure if you could make the argument. It is something to look at.
You also want to look at whether or not you could force a conversion to Chapter 7 or a dismissal under 11 USC 1307(c). You are in California therefore the "Warren" factors would apply.
In re Warren, 89 B.R. 87(9th Cir. BAP 1988). These factors include:
i. The amount of the proposed payments and the amount of the debtor’s surplus;
ii. The debtor’s employment history, and ability to earn and likelihood of future increases in income;
iii. The accuracy of the plan’s statement of debts, expenses and percentage of repayment of unsecured debt, and whether any inaccuracies are an attempt to mislead the court;
iv. The probable or expected duration of the plan;
v. The extent of preferential treatment between classes of creditors;
vi. The type of debt sought to be discharged and whether any such debt is non dischargeable in Chapter 7;
vii. The extend to which secured claims are modified;
viii. The extent of the special circumstances such as inordinate medical expenses;
ix. The frequency with which the debtor has sought relief under the Bankruptcy Reform Act;
x. The motivation and sincerity of the debtor in seeking Chapter 13 relief; and
xi. The burden that the plan’s administration would place on the trustee.
Again, I hope this helps in some way.
Des.
Re: Reporting Bankruptcy Fraud, Filing Adversary Complaint, and Seeking Relief from S
Thanks Des. Unfortunately, there was no "expressed" trust only a familial understanding that was so violated. However, I have finally received a copy of their Chapter 13 filing and schedules, wherein intentional and absolute fraud is present.
The Statement of Financial Affairs is a work of pure fiction, but I will refer specifically to:
• Item 1: Income from employment or operation of business:
Their reported "gross" income for the past two years was explicitly understated;
• Item 2: Income other than from employment or operation of business: Was checked “NONE”.
This answer is absolutely bogus;
A good portion of the “documented” theft/financial abuse occurred within the required two year reporting period. According to the IRS, stolen money is taxable unless it’s returned the same year it was stolen.
That being said, my parent has no more money to “chase” this vanishing rainbow, so who would I go to with the “proof” they committed fraud on their petition?
Background: When the abuse was discovered, I was able to track the theft from my parent’s bank offsets and check endorsements. There was over $106,000 that was deposited into various bank accounts that belonged to the debtor during one of the two years they are required to report.
• Regrettably, from their respective bank accounts I don’t know where the money went…so who can follow the money from there?
• Is there anyone/agency I can get this information to that would get their bankruptcy dismissed?
I have scheduled a phone interview with a Bankruptcy attorney to discuss this, but he has made it clear this is beyond the scope of his normal practice. Should I just save the money, and report this myself to the…Trustee, the debtor’s attorney or who?
Any help is greatly appreciated.
Re: Reporting Bankruptcy Fraud, Filing Adversary Complaint, and Seeking Relief from S
ibbetty,
If you have verifiable proof that over $100k disappeared within the past 2 years you turn it over to the Trustee. Same for the failure to disclose, disclose, disclose on any of the Schedules or Statements. However, there is a fine line here. The 13 trustee's job is not to "follow the money" as the 13 trustee is not a liquidating agent. He/she is a disbursing agent. Debtor makes monthly payments and the trustee pays it out to creditors. He/she does, however, have a duty to make sure the debtor is paying all of his/her disposable income into the Plan and is meeting, what is called, “chapter 7 reconciliation”. The reconciliation part is where you might go. For example, if the debtor transferred property without fair consideration, within the 2 years prior to filing, the value of that transfer must be paid to the creditors. Also, you have to be careful that you don't come off as a vindictive person. If you act like you are a "nut case" the trustee will not take anything you have to say seriously. This is where an attny comes in.
As to your phone consultation, I do not see how an attny can give you proper advice over the phone. To me, such would be nothing different than our communication - general in nature. I would want to see the documents. I would want a face to face so that I could evaluate the veracity of your statements and you. However, since $$ is a factor, your phone consultation may have to do. Too bad you are not in my state as I would have a great referral for you - actually have a trial this week with this barracuda. But, alas, I am not in your state and do not know of any attnys that can help. To find a good creditor attny you need to find a well seasoned debtor attny and ask for a referral. The way I look at it, I would refer you to the attorney I most do not want to litigate against.
Des.
Re: Reporting Bankruptcy Fraud, Filing Adversary Complaint, and Seeking Relief from S
Again, thank you Des...this information is very helpful.
I will send you a note after our interview this morning. I must admit, sometimes I feel like a "nut job" because of this, but I must maintain some degree of sanity in order to help my parent. What little money there was left after this has all been spent as well as a lot of my own, so there just isn't anymore money to hire another attorney. Bottom line - I just want this to be over...I'm tired of fighting uphill.
In the city I live in, there is a branch of the District Court that houses the "US Trustee Program". On their website is reporting guidelines, email and forms...is this something I should pursue or look into? Afterall fraud is fraud and it's not fair to those that really need bk that people like this get away with the $$ and a fresh start too.
Anyway, I will let you know what happens today.
Thanks again.