Debtor's Rarely Use Bankruptcy To Steal Money From Creditors

Most people who file bankruptcy are good people who do not abuse the bankruptcy system. In fact, almost all of my bankruptcy clients feel bad about wiping out debts they believe they are morally obligated to pay. Then, once in a while, I encounter the sleazy debtor who tries to use Chapter 7 bankruptcy to steal as much money he can from his creditors.

I received a phone call last week from a prospective bankruptcy debtor who asked me about the following pre-bankruptcy planning scenario. One of his good friends was planning do a home repair with a cost of about $25,000. The friend agreed to pay this caller $25,000 in cash which the caller would then hide under the mattress. The caller would pay for his friend’s home repair on his personal credit cards. He would make minimum payments for a few months. Then he would file Chapter 7 bankruptcy and discharge the debt for his friend’s $25,000 repair bill as well as all his previous credit card debt. He wasn’t asking me to take him as a client, but he wanted to consult with me to see if his plan would work.

This is bank robbery under the disguise of bankruptcy. I suspect these types of scams usually slip through the bankruptcy system. This guy will probably get away with it because he’ll not disclose the arrangement to his bankruptcy attorney. It bothers me because, as I said above, the overwhelming majority of bankruptcy debtors are honest people who lost income and are without adequate savings, or are people who bought things they could not afford in order to live above their means. In either case, most bankruptcy debtors do not intentionally borrow money with no intent of trying to pay back the money.

Comments

[bankruptcy]

I work for a bankruptcy firm in Australia. This situation is rare. I had a propsective client who withdrew large somes of money on his credit cards then left for afganistan came back with nothing 1 week later, then wanted to file for bankruptcy, we referred the case to the Federal Police