You never want to give the bankruptcy trustee cause to doubt your honesty, because they can and will dig into your life to see what you’re hiding. That’s the lesson a former Minnesota jeweler is learning the hard way, as he’s sitting in jail waiting on the judge to sentence him to up to two and a half years in jail and $50,000 in fines for concealing assets in a bankruptcy he filed four years earlier. A local Minneapolis criminal defense attorney explains what lessons you can take from this particular case.
What could cause the bankruptcy trustee to suspect you’re being dishonest?
Bankruptcy trustees understand that anybody can fall on hard times and end up in bankruptcy court. However, generally speaking, the more sophisticated or savvy the debtor, the more carefully the trustee is going to examine his or her filings. There’s probably also a greater expectation that someone with extensive business experience understands the rules he or she is expected to follow more than someone who has relatively little experience in the world of finance.
There are a number of things that you want to avoid doing in order to stay out of trouble with the bankruptcy trustee:
- don’t attempt to hide assets in someone else’s name
- don’t transfer, sell, liquidate, or destroy valuable property or inventory in the year prior to filing for bankruptcy
- don’t come into bankruptcy court without a clear and plausible explanation for you have missing property or inventory
- don’t claim that records were lost or destroyed (unless they really were and you can offer some evidence of that fact)
Any of these things could lead the trustee to suspect that you’re hiding assets that could be sold to pay off your creditors. Once the trustee has that suspicion, he or she may pull out all the stops to find out whether or not you’re trying to deceive the court.
The Minneapolis jewelry store owner, Daniel Rohricht, probably set off the trustee’s radar when he alleged that all the jewelry in his two stores had been sold off, dismantled, or melted down prior to filing for bankruptcy. He probably thought he was safe from fraud charges when his bankruptcy closed and he moved to another state—but he hadn’t counted on the relentlessness of the trustee that had been appointed to represent his creditors. Through a series of investigations, she eventually caught him with jewelry that had supposedly been long destroyed.
Jail and fines won’t be the only problems you’ll face.
If you’re convicted of bankruptcy fraud, your entire bankruptcy can be revoked. In addition to the potential jail term and fine, your current assets can be seized and liquidated in order to pay off your creditors. If that’s not enough to satisfy the debt, your creditors are once again free to pursue you for payment through whatever means necessary—including property liens and wage garnishments.
Anyone can make financial mistakes or run into circumstances beyond their control—just don’t add to your problems by trying to hide your assets from the bankruptcy court. Total transparency is your best defense against any suspicion of fraud.
If you do make a mistake, contact a criminal defense attorney as soon as possible. The right approach to the situation may help you mitigate your penalties and avoid the most serious consequences.