Sunday, September 19th, 2010
If you have been reading your local newspapers, you may be aware that Nathan Deal, the Republican candidate for Governor of Georgia, is facing scrutiny about his personal finances and about the bankruptcy filings of his daughter and son-in-law.
According to the Atlanta Journal-Constitution, Mr. Deal personally guaranteed bank loans totaling over $2 million that was used to build and finance a sporting goods store owned by his daughter and son-in-law called Wilder Outdoors, located on Highway 365 near Gainesville. Unfortunately for the Wilders, the sporting goods business failed, leaving about $2.5 million due. Mr. and Mrs. Wilder filed Chapter 7 bankruptcy in 2009, discharging their obligations on the outstanding bank loans, leaving Mr. Deal exposed as the guarantor.
Mr. Deal and the Wilders were able to refinance the business loan several years ago prior to the closing of the business but now, a $2.5 million debt will come due in February, which would be about a month after he takes office if he wins.
Mr. Deal asserts that his financial quandary is no different from that faced by many parents who offered financial support to the entrepreneurial dreams of their children. He has put his primary residence and other property on the market and no doubt hopes to generate enough cash to satisfy the bank's demands. You can read more about the Wilder bankruptcy issues on my Bankruptcy Law Network post about this situation.
Democrats are pointing to Mr. Deal's financial troubles as proof of his questionable judgment, especially since it turns out that Mr. Deal's son-in-law, Clint Wilder, appears to have been ineligible to file Chapter 7 in July, 2009. Mr. Wilder had filed an individual Chapter 7 case in Atlanta back in December, 2001. Section 727(a)(8) of the Bankruptcy Code provides that a debtor must wait at least eight (8) years from the time a Chapter 7 case is filed before filing a second Chapter 7 – here the time period between the two filings was about 7 1/2 years.
Although the Wilders' case was closed in December, 2009, the United States trustee has the right to reopen this case and petition the judge to revoke the discharge. From what I am hearing, this is what is happening now.
Candidate Deal correctly points out that issues relating to his son-in-law's bankruptcy are not his doings and should not be attributed to him. On the other hand, the Deal campaign has to be concerned about the prospect of a candidate who could very well be insolvent the month after he takes office and who could face the prospect of filing a voluntary petition or having an involuntary bankruptcy file against him shortly after he takes office. You may recall that former State school superintendent Kathy Cox chose not to run for re-election after she and her husband filed Chapter 7 following her husband's failed business deals.
I think that the main lesson to glean from this situation has to do with the inherent problems associated with co-signing a loan for anybody, especially when the money put at risk is more than you can afford to lose.
What do you think? Will Mr. Deal's looming financial problems cost him your vote? Or do his financial problems give him insight into the economic plight of struggling Georgians?
Posted in 2, 2009 , Business, Chapter 7 issues, Finance, Georgia Bankruptcy, Involuntary Bankruptcy, Loans, Nathan Deal, Revocation of Discharge-Section 727, a, and, bank, build, called, chose, correctly, cox, daughter, deal, failed, goods, guaranteed, guarantor mr, happening, hearing, ineligible to file Chapter 7, july, kathy, mr, now candidate, outdoors, owned, personally, points, recall, revocation of Chapter 7 discharge, school, son in law, sporting, state, store, superintendent, the, totaling, wilder, wilders | Comments Off
Sunday, June 6th, 2010
Because the bankruptcy system operates efficiently and quickly and it serves hundreds of people every day, I sense that many bankruptcy debtors forget that everything they submit to the bankruptcy court is done so under penalty of perjury. I recently ran across an article from a Texas newspaper about a Chapter 7 debtor who ended up in federal prison, convicted of bankruptcy fraud, because he failed to disclose an $84,000 insurance payment, proceeds from the sale of a vehicle and several bank accounts. This particular debtor used Chapter 7 to discharge over $1 million in liabilities.
I bring this case to your attention for several reasons. First, you should recognize that Chapter 7 trustees are very conscious of the likelihood that a certain percentage of debtors will fail to disclose assets. While it may seem that your Chapter 7 trustee is not paying much attention to any particular case, I suspect that trustee training programs provide trustees with profiles of the types of debtors likely to omit important information as well as resources to search for evidence of hidden assets.
In the Texas debtor's case I wonder how he thought that a vehicle sale would be missed by the trustee, given that vehicle liens are public record, as are vehicle registrations.
These days almost any sale of real estate or motor vehicles will generate a paper trail of tax forms, insurance records and title documents. Further I have personally seen situations where an unhappy ex-wife or a former friend will draft a "poison pen" letter to the trustee will allegations about improper activities by a bankruptcy debtor.
Second, be aware that Chapter 7 trustees and the U.S. trustee like to pursue fraud cases periodically to send a message to debtors and debtors' lawyers that the trustees are paying attention. Bankruptcy lawyers may be tempted to say "don't worry about it," to avoid extra expense and complication but playing fast and loose with disclosure rules can create major problems for both debtors and their lawyers.
Occasionally I meet with a client who may say something like "between you and me, no one knows this but…." This type of statement is the last thing that any bankruptcy lawyer wants to hear. From my perspective that client is really saying "I am thinking about committing a federal crime and I want you to help me." My license to practice law is not worth the fee for any one case and I have and will continue to decline representation for any client who wants to use my office to file inaccurate schedules.
Nobody likes to surrender assets, especially in a bankruptcy case that may have come about because of factors beyond one's control (such as a layoff, unfair treatment by a lender, a lawsuit judgment that you did not know about). In most bankruptcy cases you will not lose in assets. However, losing a few hundred or thousands of dollars is a far better fate than federal prison.
Posted in 84, Chapter 13 issues, Chapter 7 issues, Debtor, Discharge issues, Fraud, Fraudulent Transfers, General consumer bankruptcy info, Insurance, Trustee, a, an, and, assets in, assets nbsp, bankruptcy crime, bankruptcy fraud, cases, committing, crime, disclose, documents nbsp, ended, evidence, failed, failure to disclose assets in bankruptcy, federal, hidden, periodically, prison, programs, provide, pursue, records, texas, the, title, training, trustees | Comments Off
