Recently in Bankruptcy Fraud Category

Nothing is "Senseless" in Los Angeles Bankruptcy, Says the Court in Morris v. Quigley

March 12, 2012,

The amount of paperwork involved in bankruptcy can be daunting, and it is so easy to make a mistake. The court in Morris v. Quigley shows us that it is extremely important to report all of your finances correctly in your bankruptcy documents.

Our experienced Los Angeles bankruptcy attorneys know the law and can help your prepare your bankruptcy paperwork the right way.
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Morris v. Quigley is a case arising out of a bankruptcy filing in West Virginia. The main issue in question was whether it is reasonable for the debtor to deduct monthly payments in the calculating of disposable income where she will not actually be making the future payments. Disposable income is defined as the amount of income available after taxes are deducted.

The facts of this case begin when Debtor filed for Chapter 13 bankruptcy. When deciding to file for bankruptcy in Los Angeles, the decision of what to file under can be very confusing. Chapter 13 is a type of bankruptcy that allows the individual to financially reorganize under the guidance and supervision of a trustee. This is only available to individuals who have regular income and have a certain fixed amount of unsecured and secured debts. Through the bankruptcy process the debtor is responsible for making a plan where the debtor agrees to pay the trustee a portion of their future earnings to be used in paying back their creditors.

A trustee is a bankruptcy court appointed representative responsible for administering to the estate that is involved in the bankruptcy proceeding. The trustee must distribute the future earnings received from the debtor proportionally to the debtor's creditors. Additionally, they are responsible for managing negotiations to ensure the compliance with the law and the bankruptcy court ruling. In this case, the trustee is suing the Debtor for misrepresenting her projected disposable income.

Morris ("Debtor") completed her bankruptcy paperwork and appropriately listed all of her personal property on her Schedule B form. She included her two all-terrain vehicles ("ATVs") and a vehicle she owned with her ex-boyfriend. She consequently listed these three vehicles in her Schedule D, where the debtor is responsible for listing all secured debts. Debtor listed the two ATV's and the vehicle as debts that she would be responsible for making future monthly payments on.

Through an appropriate investigation, the trustee found that the vehicle listed on the Debtor's Schedule B and D was in the possession of the Debtor's ex-boyfriend, and he was making payments on the vehicle. Furthermore, the ATV's Debtor owned were being surrendered as part of her bankruptcy. Because of this surrender, Debtor would not be required to continue payments on them. Therefore, Debtor misrepresented these facts when she indicated that she would be held responsible for making these monthly payments. This substantially lowered Debtor's projected future income that was represented in her bankruptcy filing.

Debtor argued that this was a minor mistake in reporting that would not lead to a "senseless result" yet this court disagreed. Conversely, the Trustee argued that the Debtor did not accurately portray her proposed disposable income.

The main question in this case was whether the projected disposable income must equal the debtor's disposable income or if it is acceptable for this projected disposable income to reflect any changes that will occur. This Fourth Circuit court held that the phrase "projected disposable income" takes into account the past events but allows for future adjustments in Debtor's income or expenses that will affect to the final outcome.

In this case, it was held that the Debtor is required to accurately report all payments she puts on her schedule B. Morris instructs that in the Fourth Circuit, a debtor cannot deduct monthly payments from her projected disposable income where she will not in fact be required to make the payments, regardless how minor the payments may seem.

Although every circuit analyzes and applies the law a little differently, this case shows the problems that can be created in your Los Angeles bankruptcy when you do not have an experienced and knowledgeable bankruptcy attorney fighting for your rights.

United States v. Persfull Shows Risks of Bankruptcy Fraud in Los Angeles

November 4, 2011,

A recent bankruptcy case in Illinois shows the importance of consulting with an attorney before heading into court alone. If you're thinking about filing for bankruptcy In our area, having a Los Angeles criminal defense lawyer on your side can make a world of difference.

In United States v. Persfull, the same day that debts were discharged in a bankruptcy case, the man's mother died and left him and his brother equal shares in her estate.
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After finding out, the bankruptcy trustee re-opened the bankruptcy case. Eventually the U.S. Attorney's Office filed charges and secured a conviction for bankruptcy fraud. Bankruptcy fraud in Los Angeles is a serious crime and can be avoided if there is open communication between the lawyer and client.

Bankruptcy fraud is defined as a person who intends to or devises a scheme to file a fraudulent bankruptcy petition, files a false document in bankruptcy or makes false representations in relation to a bankruptcy petition before or during the filing.

If convicted, a person can face up to five years in prison, a fine or both.

As the Los Angeles Bankruptcy Lawyer Blog reported in May, former baseball All-Star Lenny Dykstra was indicted on bankruptcy fraud charges.

According to prosecutors, he allegedly stole items from his $18 million estate in Ventura County and sold them without telling the bankruptcy court. He allegedly took fixtures, artwork, furniture and sports memorabilia and put it in storage in order to make money on the side and not tell the court or creditors.

Dykstra is currently battling those charges and faces up to 80 years in prison on the 13 counts, if he is convicted.

In Persfull, two brothers were charged with bankruptcy fraud because after one filed for bankruptcy, the bankruptcy trustee told him he had to report any inheritance he could receive if their mother, who was ill, died.

The day his debts were discharged, she died and left him and his brother equal shares in her estate. One brother signed a disclaimer of interest, but never told the trustee about the inheritance. It was more than a year later that the trustee realized the men had inherited property from their mother.

After a series of transactions between the brothers, investigators began snooping around and bankruptcy fraud charges were later filed. They argued that it was brotherly love and not a scheme to defraud that ended with the brother who filed for bankruptcy ending up with some of his mother's assets.

While he had offered his share of the estate to his brother, the man who filed bankruptcy later received two loans from his brother -- one for $28,000 and another that allowed him to retire the mortgage on his primary residence. A mortgage on the house was used to buy a car and put money into a stock portfolio account.

After the bankruptcy case was re-opened, the trustee couldn't get in touch with the man and eventually filed a lien against his mother's house. A jury found that the brothers lied when they said their mother had left them nothing.

It is a dangerous path to try to defraud the government because many records are open to the public and available for court officials to see. It is critical that someone filing bankruptcy be open and honest with his or her lawyer to avoid these serious legal charges.

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Loan Modification Scams Hit Los Angeles, Elsewhere in California

June 30, 2011,

Prosecutors in San Diego are looking for homeowners who paid an up-front fee to a company that promised to lower monthly mortgage payments and never delivered, The San Diego Union-Tribune reports.

Unfortunately, scams like these are far too common. And sadly, Los Angeles Bankruptcy Lawyers have seen clients come into the office after having been scammed by these swindlers in even more of a tough spot than they were before. While many desperate people believe these scams will help them save their home, they rarely work. But filing Chapter 13 Bankruptcy in Los Angeles will immediately stop the foreclosure process in its tracks. Creditors won't be allowed to call and bother you and you will be protected from those annoyances while the process goes on.
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The San Diego prosecutors are seeking victims of the now-defunct Nations Mortgage Solutions company, whose owner recently pleaded guilty to acting as an unlicensed real estate agent while collecting up-front fees for loan modifications, which is illegal in California.

The owner has been ordered to pay $6,500 in restitution, but may be subjected to pay restitution for others who come forward in the next two months.

These scams have been taking advantage of distressed homeowners for years. Typically, they send mail to homeowners telling them that for an upfront fee --usually between $2,000 and $3,000 -- they will work on their behalf to modify their home loan. But as is almost always the case, the company doesn't deliver on its promise and the homeowner is out the money with nothing to show.

And while they are probably piling up debt as it is, now they have lost money that could be used to make mortgage payments and save their home. In February, the Federal Trade Commission banned mortgage assistance companies from charging up-front fees.

This will likely cut back on the number of mortgage relief scams because without up-front fees, the companies won't get paid because they do no work. But while the FTC may have banned the practice, it doesn't mean companies will necessarily adhere to it, so homeowners should be sure to watch out for these scams.

A surefire way to avoid foreclosure is by filing Chapter 13 bankruptcy in Los Angeles. By filing notice, you will alert creditors and collection agencies not to contact you and they aren't allowed while the process is ongoing.

This is how Chapter 13 bankruptcy works: You work with the court to submit a payment plan that will satisfy your debts over a 3 to 5 year period. This means that you are able to keep your house and other large assets while agreeing to a set payment plan. You will wipe out other debts to be able to accomplish the payment plan.

Once the time period is up for your payment plan, all unpaid debt is completely eliminated. You can end up paying much less compared to the debt you may now have. The court will appoint a trustee to oversee your case and Los Angeles Bankruptcy Lawyers will be there every step of the way to make sure your case is handled smoothly and we answer any questions you may have.

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Lenny Dykstra Case Shows Los Angeles Bankruptcy Risks

May 12, 2011,

Former major league All-Star outfielder Lenny Dykstra was recently indicted on bankruptcy fraud charges, alleging that he sold items from his $18 million mansion in Ventura County, CNN reports.

Los Angeles Bankruptcy Attorneys work with people who are desperate to put an end to nagging creditor calls and get back on track. Successfully filing bankruptcy and following the laws in place can be highly beneficial to getting people out of debt. Indeed, it can be a new lease on life.
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But Bankruptcy fraud is a serious crime and in Dykstra's case, he faces 13 federal charges that could put him in prison for up to 80 years. Along with bankruptcy fraud, he is charged with obstruction of justice, concealing property from the bankruptcy estate, embezzlement and making false declarations to bankruptcy court.

Bankruptcy fraud most often occurs when someone is accused of trying to hide assets. When people file for bankruptcy in California, it means they have to be truthful about all of their assets. Trying to sell off assets outside of the proceedings can lead to criminal charges and serious prison time.

But the reverse is also a danger. If you don't list all of your debts, you could still be responsible for those debts and may not be able to seek bankruptcy protection for years after filing. In some cases, the failure to include assets is a simple oversight. Still, the government may come after you with criminal charges.

In Dykstra's case, the 48-year-old from Murrieta allegedly stripped his Thousand Oaks mansion and denied receiving money for having sold items that were owned by the bankruptcy estate. CNN reports that gold- and silver-plated door knobs, fixtures, furniture, artwork and sports memorabilia was taken and sold.

Californians have different options when considering bankruptcy. It's possible that Chapter 7 bankruptcy is better for you. It's also possible that Chapter 13 bankruptcy in California best suits your financial situation.

You should consult an experienced bankruptcy attorney in Encino, Glendale or Los Angeles to consider the options. Trust someone who has been helping people climb out of debt for more than a decade.

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