Federal Court Begins Crackdown on Bankruptcy Fraud!

Sacramento residents who have recently considered or filed Chapter 7 or Chapter 13 bankruptcy should beware the stiff penalties associated with Bankruptcy fraud. A report from the Des Moines Register shows just how serious the federal government takes people who are abusing the bankruptcy code.

A Federal Judge sentenced Gerald Schurer to more than four years in prison after he and his wife were convicted for their part in a scam to take advantage of the revised bankruptcy code. Schurer’s wife received a two year sentence for her role in the plot.

Prosecutors claim the Schuerers made false sales of assets to “insiders” with the understanding that the friends or relatives would return the personal property to the Schuerers after they had received their discharge in bankruptcy. The Schuerers disposed of jewelry, stock, vehicles, and a boat in this manner before they filed their petition in order to avoid those items becoming a part of their bankruptcy estate. In all, the total value of hidden assets totaled approximately $380,000.

After disposing of their property to family members, the Schurers allegedly moved to Florida where they would receive higher limits on their bankruptcy exemptions, filed for bankruptcy, and then returned to Iowa to retrieve their possessions from the family members. The Schuerers were tried and convicted in Florida since they filed their bankruptcy petition in that jurisdiction.

The U.S. Trustee, a division of the Justice Department and the Federal Courts take bankruptcy fraud very seriously. Because the law rests on self-disclosure of the debtors individual assets, the debtor must testify under penalty of perjury that the assets they have included on their bankruptcy schedules are accurate and represent the individuals actual financial situation.

Since the distinction between having a non-asset case or a case where the trustee can foreclose and sell a debtors property in order to pay creditors can be razor thin. When the case exists that a debtor’s assets exceed the specified exemptions then the temptation arises for the debtor to fail to disclose or accurately value the property listed in the bankruptcy schedules.

Oftentimes individual debtors are unfamiliar with the exemptions that may apply to them and the proper manner in which to claim them to protect their property from the trustee. This is why I always suggest a person considering Chapter 7 or Chapter 13 bankruptcy should hire an attorney who is familiar with the law and can appropriately classify and claim property in order to avoid them being miscategorized or unclaimed which then exposes the debtor to criminal liability.

As a Sacramento Bankruptcy Attorney I am familiar with the law and the exemptions that are available to individual debtors when filing their bankruptcy petition. I always take a vigorous inventory of my debtors personal property and financial situation in order to ensure that the property is listed properly in order to avoid this situation that the Schuerers found themselves.