Basketball Bet: Bad Bankruptcy Barrister

Randy Harris won our NCAA pool this year and has selected me to write an article in response to this hypothetical, which I present here with minor editorial changes from what Randy sent me:

Audrey was an employee at Major Health Insurer (MHI), through which she had health insurance coverage. She was a single parent with a troubled teenaged son. She checked her son into Calming Meadows Psychiatric Hospital. When MHI processed the insurance claim, they sent a $35,000 benefit check directly to Audrey rather than the Calming Meadows. Instead of signing the check over to Calming Meadows, Audrey got the idea to keep the money herself. She called an attorney named Brian, whose response was, “cash the check, bring me $10,000, and I’ll tell you how to spend the rest.” Which she did, then subsequently filed for bankruptcy.

Audrey had no problem getting the debt owed Calming Meadows discharged in bankruptcy. No criminal investigation was conducted. MHI took no employment action against Audrey.

1. Did Brian act ethically?
2. Did Audrey get off easy?

Delicious! This looks more than a little bit like a law school exam or a bar exam question. I think the melding of bankruptcy and legal ethics is not something that would likely come up in either format, but for those of you thinking about law school, this is a reasonable facsimile of the sort of thing you’d be doing there to earn your grades.

The answers are “no” and “no,” but maybe not for the reasons that seem immediately obvious.

Because the first question focuses on legal ethics, we need to understand the legal issues raised by the services Brian renders to Audrey. That means I have to answer question two before I can answer question one. We should also do a bit of filtering through facts at the threshold.

 

1. Sifting Through The Facts, With Tangents

MHI is both Audrey’s employer and her insurer. As her employer, MHI took no adverse action against Audrey. That means that we are not really concerned with the fact that MHI is Audrey’s employer.

Now, had adverse employment action been taken against Audrey, that would raise some interesting and murky issues. Audrey has a right, under Federal statutory law and likely also under the Constitution (Bankruptcy Clause of Article I and Petition Clause of the First Amendment), to seek bankruptcy relief. Can a private employer take an adverse employment action against an employee for the exercise of her legal rights? The answer, I think, is “It stinks if they do, but yes.” For a deeper exploration of those issues, I reference a prior post by Will Truman (originally here).

So, as an insurer, MHI owes Audrey a duty to promptly and objectively process all claims made of coverage, and to extend coverage where it actually applies. Here, the nature of the policy is such that MHI recognizes and extends coverage for Audrey’s son’s inpatient psychological care at Calming Meadows. So its duties as an insurer are discharged upon writing the check for Calming Meadows’ services. Calming Meadows is not a party to the contract of insurance; MHI as insurer owes Audrey these duties with respect to coverage and benefits, but in most states, it does not owe those duties to Calming Meadows. In some states, Calming Meadows is considered a third party beneficiary of the contract of insurance, and has a claim as a third-party beneficiary to the money. But I’ll follow the majority rule here, which is that Calming Meadows is a stranger to that contract and not entitled to money from MHI. Calming Meadows is entitled to money from Audrey, though.

So, as phrased, question two asks, “Did Audrey get off easy?” I interpret this to mean “Did Audrey benefit from this series of events?” The answer to that question is a matter of perspective, to some extent.

 

2. The Fruits of Audrey’s Bankruptcy

One of the first questions lawyers (in the U.S., at least) ask when bankruptcy comes up is “which chapter?”

Briefly, a bankruptcy under Chapter 7 is one in which the debtor’s assets are consolidated into what is called a bankruptcy estate, administered by a third-party trustee who is appointed by the court. The trustee assesses all of the debtor’s debts, liquidates the assets, and then proportionally uses the proceeds of the liquidation to pay down the debts, and then the balance on the debts are discharged, meaning the creditors may take no further action to enforce the debts (with a few exceptions). Under Chapter 7, certain kinds of debts like student loans are non-dischargeable, and certain assets are exempt from inclusion in the estate.

Chapter 11 is a bankruptcy in which the structure of debt repayment schedules are rewritten. Sometimes the bottom line of the debts are written down, but more typically what gets written down are ongoing obligations, interest rates, and the length and frequency of payments. Creditors in Chapter 11 cases usually get at least the bulk of the principal back. The debtor, not the trustee, remains in possession and control of the assets of the bankruptcy estate, although the court exercises a lot of supervision over how the estate’s assets are used. These are expensive procedures and often do not result in discharges.

You may have heard a lot about Chapter 13 bankruptcies as “hybrids” between Chapter 7 and Chapter 11 filings. Chapter 13 bankruptcies only really work when the debtor has a reliable, steady source of income (that is, a regular job). The debtor, the creditors, and the court agree on a partial repayment schedule, usually between thirty to seventy cents on the dollar, and if the debtor completes the payment schedule, the remaining debts are discharged. As a matter of practical reality, a debtor who loses her job or other source of income will not be able to make payments under the plan, and something like two-thirds of all Chapter 13 filers never even submit a plan in the first place, with the result that over nineteen out of twenty Chapter 13 filings fail.

From the facts, it appears that Audrey got a discharge, meaning it’s not a Chapter 11, and she got it with no problem, which pretty much rules out a Chapter 13. So that means it was a liquidation bankruptcy, a Chapter 7. Chapter 7 cases can take one of two forms: assets and no-assets. In a debtor-with assets case, the total value of the bankruptcy estate exceeds the total debts, so there is money left over which (after the trustee’s fees) is returned to the debtor. As you might imagine, these are somewhat uncommon; if the debtor had sufficient assets to meet her debts, she wouldn’t be filing for bankruptcy in the first place. This sort of thing is useful if the debtor wants to retire her debts but her assets are locked up in some way that she can’t get at them easily, or a few other sorts of scenarios. A no-asset Chapter 7 bankruptcy is the much more typical scenario: the debtor owes more than she has or is likely to get. The creditors take pennies on the dollar and have to live with it.

Now, if this is an asseted bankruptcy, then all of Audrey’s non-exempt assets got thrown into the estate, liquidated, and the money was used to pay off all of her debts. The $35,000 insurance proceeds are, sure enough, an asset that would be difficult to exempt. The $35,000 owed to Calming Meadows is, sure enough, a debt that would be scheduled for payment out of the Chapter 7 estate.

If we’re in the world of an asseted bankruptcy, then there must have been more assets than the $35,000 in insurance proceeds that were liquidated. If it happened that after liquidation of all the assets and satisfaction of all the debts, there happened to be $25,000 left over, then good on for Audrey — she got $25,000 back out of her asseted Chapter 7 bankruptcy and everything is totally kosher. Such a scenario would not be particularly interesting from a legal, moral, or ethical perspective. Few people would argue in that circumstance that she ought to get the $25,000 back.

In order for the question to be interesting, and to meet the implied fact from the hypothetical that Calming Meadows wound up not getting its fee in exchange for its services, we’ve got to be in a no-asset situation. Audrey’s total assets, including the insurance proceeds, had to have been less than her total debts, including the bill from Calming Meadows. Note that in this situation, Calming Meadows gets more than nothing — possibly only pennies on the dollar, but it gets something.

Having not had its full bill satisfied, though, Calming Meadows almost certainly discontinues treatment of Audrey’s son. He will then be left without the mental health care that the hypo leads us to believe he actually needs. Add to the “debits” column of this transaction, then, Audrey having to either find and pay for an alternative source of mental health care for her son, or living with the fact that her son has an untreated mental health issue. That would be a big debit.

Also in the debit column would be the damage done to Audrey’s credit rating by the bankruptcy. Most credit bureaus stop reporting bankruptcies after seven years; at least one of the major bureaus has extended the reporting to ten years. Audrey is going to have a hard time getting a credit card with any substantial limits or interest rates below 20% for the next seven to ten years. She will have difficulty securing credit of any kind. It will not be impossible, though; some credit card companies like to issue cards to recent bankrupts because they can’t file again for seven years.

In the other column, we have $25,000. Remember, $10,000 of the $35,000 in insurance proceeds went to Brian. Presumably, that’s his fee for filing the bankruptcy (more about that below). The question to the floor becomes: “Does $25,000 in her pocket adequately compensate Audrey for allowing the mental health of her son to go untreated, and severely damaging her credit rating?”

Others might work the calculus differently and produce a different result.  But in my opinion, the answer is that this is a rather bad trade. I think that over the long haul, this is going to turn out to be rather expensive money for Audrey. Audrey should have known that going in to the transaction, and if she didn’t, her lawyer should have educated her. Which brings us to…

 

3. Brian’s Legal Ethics

 Turning our attention to the lawyer Brian, we must first distinguish between “ethics” and “morals.” As I define those terms, “ethics” are formal, described rules that govern the conduct of an attorney (or some other professional). “Morals,” by contrast address issues of right and wrong, good and evil, justifiable or unjustifiable behavior. Morals are calculated according to a calculus of utilitarianism, deontology, or as is becoming fashionable on these pages, a neo-Aristotelean sense of virtue ethics.

Ultimately, I will leave evaluating the morality of what is going on to the Reader. In my opinion, nearly all reasonable moral calculi effectively strike a balance between the intent-driven analysis of deontology and the outcome-driven analysis of utilitarianism, but reasonable people may disagree on this point.

I’ll point out, though, that at least in my community there are people who think that bankruptcy is inherently immoral — one should pay one’s debts, one should make good on one’s promises, and bankruptcy offers a legally-sanctioned means to avoid those obligations, and the attorneys who make bankruptcy happen are, in the view of those who value these sorts of obligation-dessert calculations, aiders and abettors of that immoral conduct. As I point out below, though, while there may be some moral question on the individual level when it comes to bankruptcy, I think that when one steps away from the micro-analysis of an individual action, a society has an obligation to provide a reasonable measure of bankruptcy relief from both an intent and outcome perspective — and it benefits from so doing.

The question on the floor is not whether what Brian has done is “moral,” it’s whether what he has done is “ethical.” For this, we have more objective ways to evaluate Brian’s conduct. Ethics, being formal rules, are described in formal language. Most states in the United States have adopted variants on the ABA Model Rules of Professional Conduct (formerly called the “Model Code of Ethics”), and nearly all states look to the Model Rules for at least guidance when their own legal ethical codes are ambiguous.

Brian’s conduct raises two threshold ethical issues for me. First, in the hypo, he is depicted as at least partially initiating the scheme to use the bankruptcy to enable Audrey to pocket the insurance money. Second, he demands $10,000 for himself, which I presume to be his attorney’s fee for rendering services as Audrey’s legal advisor and representative in the Chapter 7 bankruptcy. I assume that neither Audrey nor Brian is cheating — they are not concealing assets or inflating debts in the mandatory schedules filed along with the Chapter 7 petition.

If that is true, I do not see that Brian is advising or assisting in a violation of the law. Audrey has a legal right to file bankruptcy, and Brian is advising her about how to go about exercising that right. Presumably, Brian is experience and competent enough to arrange things so that what I’m assuming is Audrey’s no-asset Chapter 7 bankruptcy winds up with her putting $25,000 in her pocket. As I’m about to explain, this is likely going to be a long game if that’s the result, so Brian’s expertise is a significant factor. But the intent, plan, and result are all legal — they all pass muster under the overseeing and likely skeptical eyes of the trustee and the judge, so the result is legal. Brian has advised Audrey in how to use the legal system to her best advantage, something that is not only not prohibited by most rules of legal ethics, but indeed encouraged as a hallmark of competence.

In order to get this result, Brian needs to be cognizant of at least two things. First, under the Bankruptcy Code, all transactions that occurred within the six months leading up to the bankruptcy filing are subject to scrutiny and reversal by the trustee. If Audrey cashed the insurance check within six months of her filing, then the bankruptcy trustee is going to look at it and try to figure out what happened to the money. If the trustee thinks the use of the money was untoward or improper, he will reverse the transaction, taking the money from whoever it was paid to. If Audrey used the $25,000 to pay a debt, the trustee will probably leave it alone.

If the money sat, unused, in Audrey’s bank account (or in Brian’s trust account on Audrey’s behalf) for more than six months, then the cashing of the check won’t be looked at but the disposal of the money will be. If it’s still sitting there, then it’s a liquid asset and will be confiscated by the trustee as part of the estate. So I can only assume that Audrey used the $25,000 to pay down other debts. Nothing else makes sense.

This is particularly interesting when considering that some debts are dischargeable and some not. If Audrey used the money to pay down or pay off a student loan, or certain kinds of tort judgments, then that’s a legitimate use of the money. After all, a debtor is entitled to favor one creditor over another. Rationally, a creditor might favor a creditor who gets higher rates of interest than those who charge lower rates (among other reasons to favor one creditor over another with limited funds), but if bankruptcy is in the picture, it makes more sense to pay down debts that are not dischargeable. There is nothing unethical about Brian advising Audrey to favor one creditor over another. Audrey could pay $25,000 to her student loan company and nothing to her revolving account credit card, for instance, and that would be pretty much OK.

But the hypo suggests that Audrey pockets the money, rather than using it to pay off debts. That means that when creating the mandatory schedules of assets and debts, Brian is working the Chapter 7 exemptions aggressively on behalf of his client. Recall that above, I indicated that some assets go into the Chapter 7 estate and some do not. Some exemptions are standard nationwide, but the bulk of those exemptions vary from state to state, because they derive from the kinds of assets that the particular state’s law protects from enforcement of judgments. Now, the hypo does not indicate which state the filing occurs in, and I’m not aware of any state that allows a liquid asset exemption of $35,000, which is what would seem to be needed here.

So somehow, Brian has learned how to navigate and structure things such that $35,000 of liquid assets are either subject to an exemption and exclusion from the bankruptcy estate, or as permissible expenses from the estate. I guess he’s just that good. Hard for me to believe, but one of the rules of lawyers dealing with hypos is that you can’t change the given facts. And the given facts are that at the end of the bankruptcy, $10,000 goes to Brian and $25,000 goes to Audrey.

Even the relatively generous exemptions of states like California and New York would not seem to allow this result — but this is out of my area of expertise and maybe Brian is just that good. So is $10,000 a reasonable fee for an attorney who is that good? Because a $10,000 fee for filing a Chapter 7 seems like it’s way too much — by a factor of at least five. Most bankruptcy attorneys I know charge between $1,500 and $2,000 for a no-asset Chapter 7. They must declare their fee on the petition, and they are paid out of estate funds. A fee above the market rate for the area is almost certain to elicit close scrutiny by both the trustee and the judge. So if Brian declares a fee of $10,000 for filing a no-asset Chapter 7, he’s going to need to justify that fee, which raises the ethical issue that takes us to Model Rule 1.5.

That rule tells us that Brian may not charge an “unreasonable” fee. Factors to be considered in evaluating the reasonableness of Brian’s fee are, along with my analysis of each in italics:

(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly; (Chapter 7′s are so routine they are administered by paralegals, and the exemptions are very standardized. Brian may be very, very clever, though; but all the same, this suggests the fee is too high.)
(2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer (Again, the bulk of the work is done by paralegals and the most time-consuming thing Brian will have to do will likely consist of a single hearing before the trustee, so this fee seems too high to me.);
(3) the fee customarily charged in the locality for similar legal services (I’m not aware of attorneys anywhere charging more than a third of this fee for this service, although I suppose that it’s possible I’m ignorant of what’s going on in other parts of the country than Southern California.);
(4) the amount involved and the results obtained (Audrey walking away with $25,000 liquid in her pocket is an almost unimaginably fantastic result to a no-asset Chapter 7, meriting a higher fee than is otherwise indicated.);
(5) the time limitations imposed by the client or by the circumstances (None present in the hypo, so no factor suggesting a higher fee based on time pressure);
(6) the nature and length of the professional relationship with the client (Chapter 7 cases are ones involving little client contact and the hypo indicates that there was no previous professional relationship between Audrey and Brian, suggesting a lower fee is appropriate);
(7) the experience, reputation, and ability of the lawyer or lawyers performing the services (As indicated above, apparently Brian is a really, really good lawyer to work through the schedules and exemptions to produce this result, potentially justifying a higher-than-standard fee.); and
(8) whether the fee is fixed or contingent (Brian’s fee is fixed, and pre-negotiated, with both parties knowing the stakes; a contingent fee is variable and since the variability of a fee represents financial risk to the attorney, higher fees are justified in a contingent-fee situation).

The only fact suggesting a higher-than-usual fee is Brian’s unbelievably good result; this is relevant to two of the eight Rule 1.5 factors. With six factors suggesting adherence to the market rate of about $2,000 and two factors suggesting a higher rate, I doubt that if I were the judge I would approve a fee of more than about twice the regular rate. Brian would have to be very, very persuasive indeed in justifying his $10,000 fee to me.

I conclude that Brian has charged an unreasonably high fee in violation of Rule 1.5, notwithstanding the concededly fantastic result he’s obtained for his client.

I also question whether he’s provided complete enough advice to his client. As I noted above in analyzing whether Audrey “got off easy,” the lasting impact of a bankruptcy filing is significant and real, in this case she’s looking at leaving her son’s mental health issue (one serious enough to need inpatient care) without treatment. Model Rule 2.1 describes Brian’s duties in rendering advice to his client:

In representing a client, a lawyer shall exercise independent professional judgment and render candid advice. In rendering advice, a lawyer may refer not only to law but to other considerations such as moral, economic, social and political factors, that may be relevant to the client’s situation.

I should hope that it is beyond debate that the issue of discontinuing her son’s mental health treatment is a “moral, economic and social factor” that is relevant to Audrey’s situation. Now, the rule says that Brian “may” refer to this in rendering advice, not that he “must” do so. So a good argument exists that if Brian doesn’t say, “Audrey, you know this means that your son’s mental health issue is going to go without professional therapy from here on out,” then maybe he hasn’t behaved unethically. But mandatory language applies to the first sentence of the rule requires that he give Audrey “candid advice” about the lasting effects of bankruptcy, something that an attorney in his position could not help but at least be aware of. This is particularly true after the 2005 bankruptcy reform legislation, requiring that the attorney and the debtor both certify in their filing that the debtor has obtained counseling about credit, which must include a discussion of what bankruptcy does to one’s credit. Brian must also assess the situation and render advice “independently,” meaning from a point of view that is not self-interested (that is, aimed at maximizing his fee) and one that is not driven by Audrey’s subjective concerns (maybe one of her creditors is her ex-husband or some other enemy).

As I indicate above, in my opinion, filing a Chapter 7 bankruptcy for the purpose of pocketing $25,000 is not a very good idea for the typical client. I suppose someone whose credit is already totally shot, someone who is under a mountain of other debt, someone whose future financial prospects are dim without the bankruptcy, that might be someone for whom such a maneuver might be within the realm of reason. But we know that Audrey has a good job with MHI, so her financial prospects are at least fair-to-moderate. In the hypo, Brian advises the bankruptcy anyway, and seemingly for the purpose of charging a fee for his services which (as demonstrated above) is unconscionably high. This is not independent and candid advice.

Model Rule 7.3, which addresses when and under what circumstances an attorney may approach a prospective client regarding legal services, is not implicated here because Audrey initiated the contact with Brian, not the other way around. Having received an inquiry about his services, rather than solicited Audrey as a client, Brian is free to propose to Audrey such services as he believes he is competent to render. Competence is not Brian’s problem — indeed, it seems to me Brian is some kind of super-lawyer to get a result like this without cheating. His problem is that his fee is too high and it’s possible his client didn’t really understand what she was doing when she agreed to his plan — although it could be that she never really cared, having decided before calling Brian that she was going to try to pocket the insurance money.

 

4. Conclusion

I find it interesting in passing that we are concerned about the practical effect of this chain of events to the debtor Audrey (did she succeed?), but as to the attorney Brian, we are concerned about his ethics (did he do the right thing?).

In answering these questions, I have assumed that both Audrey and Brian have been truthful and complied with the black letter of the law. If either of them lied to the court, all bets are off — and if they get caught, they’ll be in all kinds of big trouble. Nothing in the hypo suggests that such a thing has happened and if it did, it wouldn’t be a very interesting hypo.

So did Brian the lawyer act unethically? No, because he charged Audrey an unconscionably high fee for his service and it appears that there is a serious possibility that he did not render Audrey complete enough advice to enable her to reach a good decision. The decision to file Chapter 7 and escape the debt owed to Calming Meadows is Audrey’s, not Brian’s, so Brian is not responsible for the either ethics or morals of that decision. Also, Brian giving Audrey advice enabling her to game the bankruptcy system and pocket the $25,000, if it actually works, is not unethical; I see no evidence that Brian has advised or facilitated committing a fraud upon the court (although if that did happen, we’re dealing with a very different sort of animal). Whether it is moral for either Audrey or Brian to do this is an open question.

Now, did Audrey get off easily? Well, she gets a short-term gain of whatever is left over from the $25,000 after taxes; let’s rough that out at about $20,000 net. But in exchange for this, she gets to see her troubled son kicked out of a mental health program that presumably was doing him some good, and shouldering seven to ten years of a Chapter 7 bankruptcy clouding her credit. I certainly wouldn’t make that trade for a net of $20K. It only makes sense for Audrey to file Chapter 7 if there is a lot of other unpayable, dischargeable debt that also goes away with the discharge — in which case, her primary motive for the bankruptcy is discharging the other debt.

Congratulations again, Randy; see you in the NCAA pool next year.

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52 thoughts on “Basketball Bet: Bad Bankruptcy Barrister

  1. 3. Should Brian change his name to something that rhymes with “Better call”?
    • If Brian can get $25,000 in his client’s pocket after filing after a no-asset Chapter 7, yeah, you’d better call him, because this guy’s a miracle worker. The hypo doesn’t seem realistic to me unless the $25,000 was used to pay down other, non-dischargeable debts. As I mentioned above, that would be a perfectly legal, ethical, and moral thing to do, absent facts I can’t imagine off the top of my head and which don’t seem apparent from the hypo. In that case, though, all eight Rule 1.5 factors suggest that Brian has charged an unreasonably high fee, because that advice is obvious enough that it would have been dispensed by a bankruptcy lawyer of even middling competence.
  2. Pingback: Basketball Bet: Bad Bankruptcy Barrister — The League of Ordinary … | Information About Bankruptcy

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  4. Wouldn’t Audrey have gotten off easy if she didn’t in fact care about her son’s psychological problems and only admitted him in order to obtain the insurance money and pocket it. (in fact wouldn’t this in itself be a good explanation for the son’s mental problems?)
  5. Pingback: Basketball Bet: Bad Bankruptcy Barrister — The League of Ordinary … – Information On Bankruptcy

  6. Pingback: Basketball Bet: Bad Bankruptcy Barrister — The League of Ordinary … | Credit Bankruptcy

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  9. I can tell you’re not a bankruptcy attorney, because there are a few errors in this. Before we get to that, let me say that that’s a good thing– very good, in fact– because bankruptcy attorneys tend to be the stupidest, bottom-of-the-barrel attorneys out there. Whatever it is that people might have against personal injury attorneys as “ambulance chasers,” bankruptcy attorneys are much, much worse.

    First, the fees are set by law. That may be in the Local Rules of the district, but they are set by law. Were Brian to charge above those rates, he could be sanctioned. (if the courts were to really take such matters seriously, but hypothetically)
    Secondly, it’s going to take at least two appearances; one at the 341 meeting, and another at the discharge.

    So, you’re not a bankruptcy attorney. That means that you’re probably a much better lawyer than those guys. You should feel good about yourself. (Yay, Burt!)

    A few legal notes:
    The lookback period can be extended in certain cases. I don’t remember if the extended lookback period is 12 months or 18.
    At any rate, once Audrey contemplates a matter under title 11, section 802 of SOX is in effect.
    Means testing: Audrey’s hypo Chapter 7 would have to survive the means test, which goes back 6 mos. (I believe that’s where the lookback period can be extended).
    Credit counseling services would have to be had 6 months before the petition to the court.
    In effect, Audrey has six months of party time to kick it up.

    I want to share an excerpt of a document I’m working on, but I’ll save that for later. I want to give others the opportunity to comment before going into other bankruptcy issues.

    • I’m not a bankruptcy attorney. Much of what I describe here is applied from a “bankruptcy law for non bankruptcy lawyers” CLE I attended a few years ago. The point of such a class is not to turn a business tort lawyer into a bankruptcy lawyer but rather to alert the business tort lawyer to issues that might come up and what a colleague from the bankruptcy bar might be able to do in certain kinds of situations.
      • I’m sure they didn’t tell you that bankruptcy lawyers are stupid at that seminar.
        They should have.
        Matter of fact, I’m thinking about using the online contact form for a certain firm to say rather explicitly how stupid one particularly bk attorney is.

        Really, it seems like you know your stuff as far as bk, but just a few things you left out.
        And I forgot to mention the tax aspect of it.
        There are two tax years in a bankruptcy; one of the estate which runs from the first of the year to the date of petition, and the other of the debtor which runs from the date of petition to the end of the year.
        All debt discharged is taxed as income.
        Audrey has to be making less than the median income (I believe they go by zip code) for the size of household in order to be eligible for Chapter 7. But likely less than $60k; more likely less than $50k.
        The debtor has the option of reaffirming any debt; so she can keep her car, though she carries a note, or a home.
        Through taxes is the only way that I see she could not come out ahead.

        SOX added a few new bk offenses; two concealment offenses (18 USC 152(8) and 152(9)) and an obstruction offense (18 USC 1519); and possibly others (I really don’t know what all SOX covers).
        What makes these offenses different is that they cover actions not taken in court.
        18 USC 152(8)–

        (A person who—)
        (8) after the filing of a case under title 11 or in contemplation thereof, knowingly and fraudulently conceals, destroys, mutilates, falsifies, or makes a false entry in any recorded information (including books, documents, records, and papers) relating to the property or financial affairs of a debtor;

        Submitting a document to the court is not an element of the offense.
        Section 1519 asserts the federal character of all bk investigations (federal courts have original but not exclusive jurisdiction in all bankruptcy matters). It’s the juxtaposition of the “in relation to” clause that makes 1519 a heavy.

        On a practical level, however, bankruptcy courts exist for the purpose of official authorization of fraud. There is practically nothing that can be done in a bankruptcy court that would constitute fraud.

        That said, again Internal Revenue are the heavies here. They have an anti-fraud unit, and their anti-fraud unit has the highest conviction rate of any law enforcement. It’s just that they are a small unit and take very few cases.

  10. Pingback: Basketball Bet: Bad Bankruptcy Barrister — The League of Ordinary … – How Do You File Bankruptcy

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  12. Bankruptcy is a function of mercy, of charity, not justice.  Ethics is irrelevant here, as the premise is distorted, that declaring bankruptcy is some sort of right.

    Ethics via justice demands the debt be paid back as soon as one is able.

    Our Mr. Isquith, an interesting gentleperson of the left, as named his sub-blog “Jubilee,” after the Jewish notion of debt forgiveness.  Whether Mr. Isquith is making a religious argument, I do not know.

    Legal bankruptcy finally appears in Christendom quite late: we all recall the stories of debtor’s prisons.  America did quite well,  all things considered, abolishing debtors’ prisons circa 1830.

    http://en.wikipedia.org/wiki/Debtors'_prison

    In the other Abrahamic religion, Sura 2:280, directs (liberally translated) “If [he, the debtor] is in a difficult situation, let there be a postponement until easier times [and he is able to repay,] and if you were to remit [forgive] the debt [as charity,] it would be better for you, if you only knew.”

    That mercy is contrary to justice is a disturbing dilemma, of course.  We tend to muck it all together, hence our moral incoherence.

     

    • Legal ethics still apply in the sense that attorneys are held to certain standards of conduct and behavior. If WillH’s information about determinate fees ins more accurate than mine then the attorney here has broken the rules, which is a problem separate from the moral justifiability, justice, or mercy evidenced by the law allowing Audrey to file in the first place.
      • What I find interesting about Randy’s scenario is the surprising degree it acts a a Rorschach test. It tells us almost nothing about the causes/motivations of anyone, with the reader filling in the blanks in order to come to a judgement.

        It’s hard not to bring your own experience into the equation. My experience with bankruptcy (usually where a client is a debtor) says that the bankruptcy court should not either not have allowed the bankruptcy, or had it allowed it not included the $35,000 debt to the provider. The attorney would have presumably known this, and so taking $10K in a scheme he would have known would probably leave her owing that $10k seems unbelievably unethical, and immoral as well.

        As for whether or not there is “justice” in bankruptcy, I’m not sure it’s a relative word. An insurance company takes risks by its very nature, and part of the reason it takes risks is that its shareholders know that should those risks go very, very bad their personal assets (outside of what they have chosen to invest in the insurer) are not at risk. And they have huge numbers of clients that generate revenue because those business owners do not have to put their personal assets at risk (beyond a certain point of their own planning). Why then, would a debtor to an insurance company not being allowed the same “out” be justice? When the entire system is set up to be predicated on everyone having equal access to a financial mechanism, I don’t understand how the concept of justice is relevant.

      • Well, if justice is based on desert, then our main man TVD is absolutely right: bankruptcy is the opposite of justice. That does not mean we ought not to have it, of course, as described in the McArdle article I linked to in the OP. There may well be situations in which utility is served by deviating from everyone getting what they deserve.
      • I’m not sure I agree.  If we allow a man to get out of his debts because, say, he is politically powerful, or he is pathetic and we feel sorry for him, then I see how bankruptcy is the opposite of justice.  If we all agree before we even start that this is an equal rule that everyone gets to fall back on, and the costs for it are universally built into the system and the people who are debtors profit from the risk that is allowed by that system, then I’m not seeing how this is the opposite of justice.

        It’s like saying hitting 0 or 00 on the roulette wheel is the opposite of justice because it isn’t black or red; if we set a system up so that it asks everyone to take risks, and everyone knows the rules and they apply equally, it isn’t the opposite of justice to lose $100 because the ball hit green.

      • It could still be unjust if the system with this rule in it creates enough moral hazard that the worst off suffer over the long term. Of course whether that happens is another matter entirely. But it is plausible that current Bankruptcy law in the US harms the worst off.
      • Interesting counterarguments.  Shylock would answer one way; Jesus another.

        Once we depersonalize justice [or charity!] via “the system,” then we must be consistent.  Shylock is not wrong in his view of depersonalized justice, his demand for a pound of flesh. That’s what makes it a great play, of course.  The quality of mercy is quite a strain.

      • It’s astonishing how human Shakespeare made Shylock, given that he had probably never met a Jew in real life  (Jews had been expelled from England in 1290 by an edict that was not overturned until 1656), and so only had the stereotype of “evil usurer” to  work with.
      • There were still Jews in England after the expulsion, though, and the fact was reasonably well known. They even petitioned Cromwell for the relaxation of the law, which, you know, gives the game way a bit. Not that English Jews then or now bore much resemblance to Shylock. Shakespeare was probably working from literary sources about Italy when he wrote “The Merchant of Venice” (having never travelled abroad either, as far as we know). They probably would have contained descriptions of Jewish moneylenders, since they were a critical aspect of Venetian society.
      • Hath not a Jew eyes? Hath not a Jew hands, organs, dimensions, senses, affections, passions; fed with the same food, hurt with the same weapons, subject to the same diseases, heal’d by the same means, warm’d and cool’d by the same winter and summer as a Christian is? If you prick us, do we not bleed? If you tickle us, do we not laugh? If you poison us, do we not die? And if you wrong us, shall we not revenge? If we are like you in the rest, we will resemble you in that. If a Jew wrong a Christian, what is his humility? Revenge. If a Christian wrong a Jew, what should his sufferance be by Christian example? Why, revenge. The villainy you teach me, I will execute, and it shall go hard but I will better the instruction.

         

        The Wiki essay on Shylock isn’t bad.  There’s much much more there than caricature.  As for its relevance to the OP, the difference between justice and mercy—and indeed the quality of mercy as contained in Portia’s speech—are the jokers in the deck here.

        For Shylock is not unjust.  The question is how much justice we really want.

         

      • Not unjust as to the letter of the law, but does the spirit of the law encourage us to kill our debtors?  Shylock insists on the pound of flesh for personal, not legal, reasons: hatred and revenge.  If not unjust, he is certainly immoral — however human his portrayal.
      • By what morality, Karl? Christian morality, you mean?  I guess that was my sub rosa.  According to the Twelve Tables of Roman law, killing the debtor is fine.*    And Antonio urged harsh terms on the loan to Shylock, making it easier to reserve the right to keep cursing and spitting on him.  Would it be unjust or immoral for Shylock to finally achieve peace from the houndings of this SOB?

        _________________________

        *Interesting piece here, viewing Merchant of Venice through Roman eyes, not Judeo v. Christian ones.  Afterall, Portia’s “Christian” speech sounds nice but there’s nothing admirable about the Christians in the play either.

        http://www.alan-shapiro.com/radical-skepticism-and-the-logic-of-shakespeare%E2%80%99s-artistry-by-robert-schneider/

        “Let’s take this approach one step further to ask:  what does the play mean in the context of ancient Roman comedy’s festive inversion of ancient Roman law?  This approach turns the meaning of the play upside down, mirroring the way festive comedy turns normative morality upside down.

        From the Christian perspective, Shylock is a cruel villain to demand a pound of flesh.  But from the ancient Roman perspective, cutting flesh was legal, moral and just. It’s not a cruel trick of a vengeful devil. It’s just a simple matter of law for an honorable, law-abiding citizen.

        “Christianity may condemn revenge, and preach that it is better to turn the other cheek.  But the Romans favored revenge.  For example, when the Romans crushed Spartacus’ slave revolt, they crucified some six thousand rebels along the Appian way. That was a spectacular display of Roman revenge, Roman cruelty and Roman justice.

        From the Christian perspective, usury was immoral.  But the ancient Romans didn’t have moral qualms about lending money at interest, and as we have seen, they weren’t particularly soft-hearted about enforcing the terms of a debt.

        From the Christian perspective, Portia represents Christian love and mercy.  But in the context of Roman comedy, Portia represents the lawless immorality of a pagan festival day.

        It’s true that Bassanio is a frivolous character who goes into debt due to numerous failed romances.  He doesn’t keep his promises.  But from the perspective of Roman comedy, that’s okay.  The heroes of Roman comedy aren’t thrifty; they’re spendthrifts.  They’re not noble; they lie, they trick, they deceive.

        When Bassanio says he wishes that his wife were dead, that type of disrespect for his wife has no meaning in the context of noble Christians versus the cruel Jew.  But it is a traditional joke in the context of Roman comedy, which is greatly disrespectful of wives – because remember, on the festival day, immorality is taken to be humorous.

        If you interpret the play in terms of ancient Roman honor, the moral value that is turned upside down in the festive manner of Roman comedy is the importance of keeping a promise or a commitment.  The comic inversion of legal and moral bonds is the theme that integrates all the play’s subplots into a coherent unity.”

         

      • Yes, Tom, Christian morality (in Elizabethan England, at any rate).  As for Roman perspectives, this play isn’t adapted from an ancient comedy — so I don’t quite see the point.

        On the other hand, I’m not sure if I quite see the point of The Merchant of Venice, either.  Extrapolate from that what you will.

         

      • Is mercy unjust, Karl?  That’s the larger point.

        [As for the Robert Schneider essay on debtors in Roman law, it does bring to question what morality and justice even are: functions only of cultural subjectivity?  Plus it's just kind of lucid and interesting.]

        BTW, Trivia #66:

        Donald Trump, financier
        Michael Jackson, singer 
        Wolfgang Amadeus Mozart, composer 
        Elton John, singer/composer 
        Kim Bassinger, actress 
        Mike Tyson, boxer 
        Mark Twain, humorist 
        Burt Reynolds, actor 
        Thomas Jefferson, patriot and president 
        Gary Coleman, child actor 
        MC Hammer, rap singer 
        Willie Nelson, country singer 
        Lorraine Bracco, “The Soprano’s” actress 
        Charles Goodyear, inventor of vulcanized rubber 
        PT Barnum, circus promoter 
        L. Frank Baum, author of “The Wonderful Wizard of Oz” 
        Mathew Brady, Civil War photographer 
        Oscar Wilde, playwright 
        Jerry Lee Lewis, rock singer 
        Rembrandt, painter 
        Henry Heinz, ketchup magnate 
        Milton Hershey, chocolate magnate 
        Henry Ford, auto magnate 
        Johnny Unitas, football player 
        Wayne Newton, entertainer 
        Mickey Rooney, actor 
        Debbie Reynolds, actress 
        John Connally, former Texas governor 
        Walt Disney, creator of Mickey Mouse 
        Mick Fleetwood, rock singer 
        Merle Haggard, country singer 
        Ulysses S. Grant, president and Civil War general 
        Dorothy Hamill, figure skater 
        Larry King, talk show host 
        Bowie Kuhn, former baseball commissioner 
        Stan Lee, comic book creator of “Spider Man”

      • I’m one of those “of course they’re functions only of cultural subjectivity” types — but some cultural subjectivities are more functional than others.  In other words, I’d rather be alive now in the West than at any other time and place — we are truly blessed (but in a, y’ know, secular way).

        Bookmarked your linked essay for later and god how I hate those trivia quizzes!  I’ll take “people outstanding in their fields” for a thousand , Alex.

      • Karl, what I’ve just learned about you from this is that you’re a good sport and a fun guy.  Socratic dialogues, symposiums—leagues of gentlemen, if you will—are impossible without dudes like yrself.

        LoOG is peppered w/persons like yrself who keep it worthy.  And keep an eye on that Likko fellow—he doesn’t know it yet, but he’s going to sue somebody for me next week and turn a tidy profit from it.

        Plus he and his henchperson Trumwill compose the most devillish of trivia questions at their LoOG sub-blog, Not a Potted Plant.  #66 here was just an homage.

        You & Likko are gonna get on well.

      • Gee, thanks.  We rarely agree on most things, but calling me  “a good sport and a fun guy” is irrefutable in the extreme.

        And don’t forget what Oscar Wilde said about lawsuits.

      • My question about The Merchant of Venice always is, what if Shylock had demanded the authorities seize his payment instead of falling for the legal maneuvering at the end?

         

      • No one would agree to cut Antonio’s flesh and Shylock would still forfeit his bond.  Those Christians get you coming and going.
      • Shylock should have just said “okay, fine” and plunged the dagger into the guy’s chest.

        HOW SMART DO YOU FEEL NOW, PORTIA??? HOW SMART DO YOU FEEL NOW?

      • One of the things that bugs me about Portia’s aargument is that blood is a tissue and therefore should also count as flesh. Asking shylock to take a hunk of flesh without spilling blood doesnt make sense.

        In fact, Portia could just have gotten Antonio to donate a pint of blood to Shylock. That’s about 1 pound. (1.1 most likely)

      • It’s a good thing Jews aren’t very smart about figuring the angles on business deals.
    • Bankruptcy is baked into the definition of a corporation: “Limited liability” means precisely that a corporation which can’t meet its obligations has no call on the further assets of its shareholders and will go into bankruptcy, and the only business ethics that apply are those that restrict taking advantage of the situation (e.g. awarding bonuses immediately before filing for bankruptcy).  No one is foolish enough to suggest that there’s an ethical obligation to fully repay the creditors.
      • Straightly and well told, Mr. Schilling, & as Tod, etc. have noted—if you do business with such an entity, your eyes are wide open.

        Or they should be.  Don’t come whining to the American public.  Me, I flushed $5K of my retirement fund on Enron.  Thought they were into natural gas or something and that enviro-Gore would dig it or Texas Dubya would dig it, whichever one got elected.  Serves me right for not even finding out what business they were in, which was not creating energy or wealth, just manipulating their margins.

        To rephrase Robin Williams about cocaine, Enron was God’s way of telling me I had too much money.  On much of this earth, Mike, that 5 thousand dollars could have done almost unimaginable good, if only I’d known I was flushing it away not on the creation of wealth, but the manipulation of it.

        And the real fault was mine, not Enron’s—they were just trying to do what people like me were paying them to do.  And if you look at all the people who worked at Enron but ended up getting dicked on their promised back end…

        Somehow, they were not surprised.  Can you hear me on this one?  Because I wasn’t the least bit surprised.  I only wish I’d have ordered some Enron stock certificates so I could ceremonially wipe my tushy with them as I write you this.

      • Serves me right for not even finding out what business they were in

        Once you figured it out, you could have explained it to them.

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  15. Gee, you think this has triggered any SEO terms for firms that have outsourced their marketing and therefore their reputation, as the folks at Popehat might say?
    • Yeah. I doubt a real human being marketing a bankruptcy firm would want to include this post — questioning the morality of filing, exposing the limits of what bankruptcy can do for the debtor, and alerting the reader to the possibility of unethical and possibly harmful conduct by the lawyer — as part of its advertising strategy. So not only have these lawyers outsourced their morality to a marketer, they’ve also delegated their intelligence to an algorithm.
      • So not only have these lawyers outsourced their morality to a marketer, they’ve also delegated their intelligence to an algorithm.

        “Outsourcing morality.”  Indeed Likko, indeed.  And in delegating our intelligence to the algorithms, we become moral imbeciles.

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  17. Actually, I did just go to the website of Hoagland, Fitzgerald, and Pranaitis and left them a nice message. I’ll get to that in a minute.

    First, I would like to include this line from the case overview that I refer to:

    It’s actually easier to get a member of Congress involved than to get the local law enforcement to enforce the applicable statutes.

    That refers to the Office of Senator Roy Blunt (R-Mo.). It was their request to submit a complete report with supporting documentation that got me to writing everything down. In the process, I’ve learned a lot about the law. At first, I considered a qui tam action, but the amounts in question are far below the threshold for a law firm to take that kind of case.

    Here’s my nice message to Hoagland, Fitzgerald, and Pranaitis, redacted:

    I have to wonder if all bankruptcy attorneys are as stupid as those at your firm.
    In a rush to refuse to read the case overview, some idiot was anxious to avoid the details of the case.
    Didn’t even wait to hear about the multi-million dollar structured settlement to tell me that there are no assets on hand to seize in a suit pursuant to a bankruptcy.
    Don’t bankruptcy attorneys realize what ‘concealment’ is? That there might be assets in instances involving concealment?

    From the case overview:

    Persons to be held in liability:
    ***** Salois (debtor), ***** Straussner (fiancé of debtor), ***** Howard (brother of debtor), ***** Hopper (mother of debtor), ***** Hopper (step-father of debtor), ***** Pendleton (associate of Salois), Legal Advocate for Abused Women (LAAW) (NGO illegally aligned with debtor), Katherine Wessling (managing attorney for LAAW), ***** Bealmear (special prosecutor through LAAW), and various governmental entities, including the County of St. Louis County, and the Board of Police Commissioners for St. Louis County, the Sheriff of Platte County, Mo., acting in his official capacity, the County of Platte County, the Sheriff of Jackson County, Mo., acting in his official capacity, the County of Jackson County, the County of Milwaukee County, Wisc., and the Board of Police Commissioners of Oak Creek, Wisc.; as well as any others which might legally be held in liability.

    Recovery of award:
    All have wages except the Hoppers and LAAW. ***** Hopper has a multi-million dollar structured settlement. He’s really the deep pockets here. LAAW has assets on hand of $202,000. It is unknown what assets Wessling & Bealmear might have.
    If any governmental entities might be held in liability, that would increase the recovery of award.

    Status of NGO:
    The arguments against Wessling, Bealmear, and LAAW would be that services provided were not “lawful, bona fide, legal representation” as per section 1515 (c) of Title 18, nor could they be, as per the $430,000/yr in government grants and their fund-raising literature would indicate. The case to be made against LAAW would be that the only legal representation that they could provide that was lawful or bona fide was that (1) in keeping with their charter, (2) in keeping with their grant requests, and (3) in keeping with their fund-raising literature. Even without that, attorneys can do unlawful things in the course of representation.

    FWIW, there is a US Senator that sits on the Senate Appropriations Committee that believes that the activities of LAAW were not authorized by their grant funding.

    Now, the Senator was the person that got me to writing the report anyway. As it states in the case overview:

    I spoke with the Senator’s office on the 4th of January, and was directed to submit a full report with supporting documentation. The letter to Senator Blunt can be found as the last two pages of the Complaint correspondence document.

    This is from the pro se complaint that I’ve been working on. I’m still looking for an attorney, but I don’t want to be caught short next year when the statute of limitations would preclude suit:

    This action arises under the First and Fourteenth Amendments to the United States Constitution; under federal law, specifically, 18 U.S.C. § 1964 and 42 U.S.C. §§ 1983, 1985, and 1988; under the Missouri governmental tort liability statutes and the governmental tort liability statutes of Wisconsin; and under the common law of the States of Missouri and Wisconsin for assault, battery, abuse of process, malicious prosecution, civil conspiracy, and intentional infliction of emotional distress; and under common law of the States of New Mexico and Utah for assault, battery, and intentional infliction of emotional distress.

    General Allegations

    50. From May 28, 2007 through November 11, 2008 Plaintiff made a series of loans to Defendant Salois in the form of cash, checks, and account transfers in total of or around $10,462.
    51. Plaintiff had written check no. 1376 for the amount of $600 on November 11, 2008 payable to Defendant Salois.
    52. Plaintiff directed check no. 1376 of November 11, 2008 to Defendant Salois by US postal mail on or about November 12, 2008.
    53. Upon information and belief, Defendant Salois received check no. 1376 from Plaintiff by US postal mail shortly after November 12, 2008.
    54. Upon information and belief, the DomainKeys verified account of nvisiblewmn@*****.com is the property of Defendant Salois.
    55. Plaintiff received 332 electronic messages from the DomainKeys verified account of nvisiblewmn@*****.com from February 10, 2007 through July 12, 2009.
    56. Upon information and belief, the DomainKeys verified account of nvisiblewmn@*****.com remained the sole property of Defendant Salois from February 10, 2007 through July 12, 2009.
    57. On or about May 29, 2007 Defendant Salois directed to Plaintiff by electronic mail from Defendant Salois’ DomainKeys verified e-mail address of nvisiblewmn@*****.com originating from the IP address of 76.213.***.** a promissory note that Defendant Salois had written acknowledging that the monies obtained by loan from Plaintiff were to be secured by lien on the residence located at (redacted), St. Louis, Missouri, 63129.
    58. Plaintiff was a resident of Milwaukee County, Wisconsin in April of 2009.
    59. On or about April 15, 2009 Plaintiff sent notice by registered mail service of US postal mail to Defendant Salois that Plaintiff would proceed with a claim in a court of law for payment of debt were arrangements not made within 30 days of that notice.
    60. Upon information and belief, that notice was received by Defendant Salois on April 17, 2009.
    61. On or about May 6, 2009 Defendant Salois petitioned the United States Bankruptcy Court of Eastern Missouri for discharge of debt under Chapter 7 of title 11, U.S.C in case no. 09-bk-44199.
    62. Upon information and belief, Defendant Salois named Plaintiff as a creditor holding unsecured non-priority debt in Schedule F of case no. 09-bk-44199 in a matter under title 11 before the United States Bankruptcy Court of Eastern Missouri.
    63. Upon information and belief, Defendant Salois had completed the credit counseling requirement, being six months prior to the time of filing, for discharge under Chapter 7 of title 11, U.S.C. in relation to and in contemplation of case no. 09-bk-44199 in the United States Bankruptcy Court of Eastern Missouri.
    64. Upon information and belief, from on or about November 6, 2008 and thereafter Defendant Salois had engaged in activities in relation to or in contemplation of a matter under title 11, U.S.C., including but not limited to completion of the credit counseling required for eligibility for discharge under Chapter 7 of title 11, U.S.C.
    65. Upon information and belief, Defendant Salois gave explicit consent to investigation of all assets pursuant to title 11, U.S.C. as a condition of discharge of debt in case no. 09-bk-44199.
    66. In effort to demonstrate due diligence, Plaintiff’s review of the documents submitted by Defendant Salois to the United States Bankruptcy Court of Eastern Missouri in case no. 09-bk-44199, Plaintiff had noted figures which indicated discrepancies in the declarations; in that, upon information and belief, in Schedule I (Current Income of Individual Debtor) Defendant Salois declared $1485.56 in average monthly income, while in Schedule J (Current Expenditures of Individual Debtor) Defendant Salois declared $2376.16 in average monthly expenses and a monthly net income of a loss of $886.30.
    67. Upon information and belief, Defendant Salois declared income of roughly 90% of the median income for the means test for discharge under chapter 7 of title 11, in that the income of $52,333 for a household of three as to the median of $58,473.
    68. Upon information and belief, failure to declare all available assets in a bankruptcy petition is, in fact, unlawful, regardless of whether current title is held, or whether the assets are subject to distribution among the creditors United States v. Moody 923 F.2d 341, 348 (5th Cir.), US v. Cardall 885 F.2d 656, 677 (reh’g denied)(10th Cir. 1989), US v. Cherek 734 F.2d 1248, 1254 (7th Cir. 1984), US v. Weinstein 834 F.2d 1454, 1461 (9th Cir. 1987), US v. Moynagh 566 F.2d 799, 803 (1st Cir. 1977), US v. Schireson 116 F.2d 881, 883 (3d Cir. 1941), that “[e]ven property which is ultimately determined not to be the property of a bankruptcy estate can be considered concealed for purposes of prosecution.” United States v. Martin 408 F.2d 949, 953 (7th Cir.)
    69. Upon information and belief, the declaration by Defendant Salois in chapter 7 bankruptcy filing, case no. 09-bk-44199, of funds secured by property as an unsecured non-priority claim as evidenced in the promissory note directed to Plaintiff on or about May 29, 2007 was a misrepresentation of material nature adversely affecting Plaintiff’s claim.
    70. Upon information and belief, the omission of Defendant Salois to properly declare in the in the means test for the chapter 7 bankruptcy filing, case no. 09-bk-44199, of the receipt of the check from Plaintiff on November 11, 2008 was a misrepresentation of material nature adversely affecting Plaintiff’s claim.
    71. Upon information and belief, the estate of Defendant [Mr.] Hopper, as one of the first orders of business upon Defendant [Mr.] Hopper’s marriage to Defendant [Mrs.] Hopper in 2008, the natural children of Defendant [Mrs.] Hopper, Defendant Salois and Defendant Howard, were to be granted a full inheritance from the estate of Defendant [Mr.] Hopper, including but not limited to the multi-million dollar structured settlement in connection with a workplace accident that happened years ago, which left Defendant [Mr.] Hopper badly burned.
    72. Upon information and belief, over the objections of the natural children of Defendant [Mr.] Hopper, the last will and testament of Defendant [Mr.] Hopper was duly altered within a month of Defendant [Mr.] Hopper’s marriage to Defendant [Mrs.] Hopper for the express purpose of granting the natural children of Defendant [Mrs.] Hopper, Defendant Salois and Defendant Howard, a full inheritance from the estate of Defendant [Mr.] Hopper, including but not limited to the previously mentioned multi-million dollar structured settlement held by the estate of Defendant [Mr.] Hopper.
    73. Upon information and belief, Defendant Salois maintained pecuniary interest in the estate of Defendant [Mr.] Hopper in relation to and in contemplation of the federal judicial proceedings of the chapter 7 bankruptcy filing, case no. 09-bk-44199.
    74. Upon information and belief, Defendant Salois maintained pecuniary interest in the estate of Defendant [Mr.] Hopper throughout the federal judicial proceedings of the chapter 7 bankruptcy filing, case no. 09-bk-44199.
    75. Upon information and belief, the omission of Defendant Salois to properly disclose financial interest of future inheritance from Defendant [Mr.] Hopper for the chapter 7 bankruptcy filing, case no. 09-bk-44199, was a misrepresentation of material nature adversely affecting Plaintiff’s claim.
    76. Upon information and belief, Defendant Salois’ divorce from a former student in an English class that Defendant Salois taught at Southeast Missouri State University, ***** Salois, was finalized on or about December 14, 2007 in the 21st Circuit of the State of Missouri, St. Louis County, in Cause no. 2107FC-03787.
    77. In effort to demonstrate due diligence, Plaintiff obtained copies of certain records from the case file of Defendant Salois’ divorce from her former student in Cause no. 2107FC-03787 for the purpose of comparing statements of income and expenses in relation to information entered by Defendant Salois in various schedules of the Chapter 7 filing in the United States Bankruptcy Court of Eastern Missouri of case no. 09-bk-44199.
    78. On or about August 3, 2007 Defendant Salois executed a Statement of Income and Expenses pursuant to Defendant Salois’ divorce from the former student in Cause no. 2107FC-03787 in the 21st Circuit of the State of Missouri.
    79. Upon information and belief, Plaintiff found the adjusted expenses from Statement of Income and Expenses executed pursuant to Defendant Salois’ divorce from the former student in Cause no. 2107FC-03787 in the 21st Circuit of the State of Missouri and Schedules I (Current Income of Individual Debtor) and J (Current Expenditures of Individual Debtor) executed in relation to and in contemplation of a matter under title 11, U.S.C. with the United States Bankruptcy Court of Eastern Missouri to be within 3.5% of each other.
    80. Upon information and belief, Table 1, Marital Property to Be Awarded to Wife, executed pursuant to Defendant Salois’ divorce from her former student in Cause no. 2107FC-03787 in the 21st Circuit of the State of Missouri declared $1900 in appliances, not including a TV valued at $400 or the desktop computer low-balled at $200, and $850 in items of furnishings, which was by no means exhaustive, for a total of $3350.
    81. Upon information and belief, Defendant Salois’ Schedule B, Personal Property executed in relation to and in contemplation of a matter under title 11, U.S.C. with the United States Bankruptcy Court of Eastern Missouri declared the unenumerated value of “Household goods and furnishings, including audio, video, and computer equipment” as $2500.
    82. Upon information and belief, the debt which Defendant Salois incurred as a result of the decree of the 21st Circuit of the State of Missouri on December 14, 2007 in Cause no. 2107FC-03787 was not subject to discharge, as per section 803 of the Sarbanes-Oxley Act of 2002 as codified in section 523(a)(19)(B) of title 11, U.S.C.
    83. Upon information and belief, only the debt which Defendant Salois incurred from the time of December 14, 2007 through May 6, 2009 was subject to discharge under title 11, U.S.C.
    84. Upon information and belief, the Statement of Income and Expenses executed by Defendant Salois on or about August 3, 2007 in the 21st Circuit of the State of Missouri in Cause no. 2107FC-03787, styled Salois v. Salois, declared $46,919 in student loan debt.
    85. Upon information and belief, the Statistical Summary of Certain Liabilities executed by Defendant Salois on or about May 6, of 2009 in the United States Bankruptcy Court of Eastern Missouri in case no. 09-bk-44199 declared $73,477.18 in student loan debt.
    86. Upon information and belief, the period of time from the Statement of Income and Expenses executed by Defendant Salois on or about August 3, 2007 in the 21st Circuit of the State of Missouri in Cause no. 2107FC-03787 unto the Statistical Summary of Certain Liabilities executed by Defendant Salois on or about May 6, of 2009 in the United States Bankruptcy Court of Eastern Missouri in case no. 09-bk-44199 comprises roughly a 17-month span.

    You think I’ve got a case?

    I can tell you now that I don’t if I end up with an attorney that is completely stupid, or one that is too preoccupied to be bothered to review the facts of the case.

    You have a bad apple over there, and you need to get rid of the guy.

    (redacted)

    Wessling was the President of the Board of Education for the St. Louis Public Schools, so I didn’t redact her proper name. You can read about that here.

    I would like to include an excerpt from the report to the Senator to show exactly how I knew that there was fraud going on in this case.

    I don’t expect any of the attorneys to be able to comment on the specifics of the matter (there are an awful lot of attorneys who are, in fact, ethical). I want people to be aware that abuse is the norm in the present system.

  18. Pingback: A Capitalist’s Love Ballad to Bankruptcy — The League of Ordinary Gentlemen

  19. Back to Audrey, I note that no one has discussed preferential payments. The irony is that, if she did the morally right thing and paid the mental health people, then filed BK, they could probably keep the money as a simultaneous exchange. If she instead used the dough to pay down other debts, those would be pre-existing, and the trustee could demand that the creditors repay them into the BK estate (after which the greedy BK lawyers would vacuum up the money, excuse me). But why would she pay other debts, unless she owed money to her sister-in-law or some such. What good does that do her?

    The thing for her to do would be to buy a car, cash on the barrel head. For 25K you can’t get a Mercedes, but you can get a nice, operable, new car that will probably run fine for the seven years until you can file another BK. As the BK process doesn’t take your car, she would get to keep it.

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