Fraudulent debtors who have been sued for credit card abuse will often defend
their need to file bankruptcy. While some are honest, and can demonstrate good
justification for filing bankruptcy, many will resort to desperate, convoluted
and/or fabricated defenses in order to avoid paying their debts. Becket & Lee
has heard "reasons" for non-payment ranging from the mundane and probable (loss
of a job, adverse financial downturn, illness, divorce), to the incredible
(threats from organized crime families, cultural and/or family traditions that
include gifting of luxury goods, intention of repaying charges through gambling
or lottery winnings). A recent case prosecuted by Becket & Lee on behalf of a
Creditor had all the makings of a TV movie of the week.
The Debtor had three credit card accounts with the Creditor when he filed his
Chapter 7 case. Becket & Lee reviewed the activity on the accounts along with
his court documents for possible fraud. On the first account, in the span of
only a few days, the Debtor charged over $18,000, including $10,000 at a
limousine company and almost $9,000 for "electronics." On the second and third
accounts, he incurred another $10,000 and $11,000 respectively for
"electronics". The Debtor then failed to remit payment on the accounts.
The Debtor's bankruptcy documents painted a gloomy financial picture that
demonstrated there was no way the Debtor could have intended to repay the
charges. He owned no real property, and had spartan personal property; that is,
except for a brand new $40,000 automobile he bought just before his bankruptcy
filing. Further, in addition to the Creditor's accounts, the Debtor owed over
$430,000 in other credit/charge card debt. The Debtor had little to no monthly
income, and hadn't been meaningfully employed in the years immediately
preceding his bankruptcy, earning only $8,000 in each of the three preceding
years. The Debtor's bankruptcy documents showed a connection to a limousine
business, which, the Debtor claimed, ceased operations four years prior to the
B&L Associate Attorney Ken Kleppinger sent a letter to the Debtor's attorney
offering the Debtor an opportunity to explain how he intended to repay the huge
purchases made on the Creditor's accounts, and asking that the Debtor disclose
any mitigating circumstances for what appeared to be a clear case of fraud.
Receiving no response, Mr. Kleppinger filed a Complaint to Determine
Dischargeability of Debt, arguing that the Debtor ran up his accounts,
incurring the charges fraudulently and without the intention of repaying the
debts. Only once litigation was commenced did the Debtor's attorney reply to
Becket & Lee with a long, sorry tale of woe.
The Debtor claimed that all of these charges were made in an attempt to save
his marriage, which, apparently, was in considerable trouble at the time the
charges were made. While the Debtor's wife was characterized as "smart" by the
attorney, the Debtor was considered meek and having "little self-esteem or
will." The attorney claimed that the wife manipulated the Debtor into running
up his credit cards for her own benefit. The Debtor admitted that he made all
the charges, but qualified this admission with the statement that he did so
simply to appease her and to restore some semblance of a normal life. It was
this "abusive relationship" and "lack of self-assuredness" that caused the
Debtor's spending spree, according to the attorney.
As to what was purchased, the Debtor claimed not to be able to remember. He
thought some of the charges were for the wife's limousine business which, he
now admitted, was still a going concern, while others were for household usage.
The Debtor alleged to have made the charges in a vain attempt to save his
fledgling marriage, but, despite all of the purchases, his wife divorced him
anyway. The ex-wife kept the marital assets, including the items from the
Debtor's shopping spree, while the Debtor ended up receiving a small amount of
Mr. Kleppinger explained to the Debtor's attorney that, even if the Debtor's
story were true, the fact remained that the Debtor made the charges and could
not have realistically intended to repay the Creditor, because he simply did
not have the means to do so. The Debtor's attorney was convinced of the
strength of the Creditor's case, and negotiated a large lump sum settlement. In
order to pay the settlement amount, the Debtor apparently borrowed the money
from a family member - most likely not his ex-wife.
In re Vainshtein, Bankruptcy No. 03-49787 (Bankr. N.D. Il. 2003).
Bankruptcy Report is produced by Becket & Lee LLP, Attorneys at Law,
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