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Deceptive practices only create more problems for filers

Making sure that a bankruptcy is done right is more important, and more complicated, than people think. In every bankruptcy, whether a person files for Chapter 13 or Chapter 7, there are certain allowable federal and state exemptions. Bankruptcy exemptions are items that are excluded from the bankruptcy estate. But if the filer improperly uses bankruptcy exemptions, it can look like the filer is trying to defraud the court. Tennessee residents might be familiar with the following case.

In a previous post, this blog covered the story about Razorbacks Coach John Smith's recent bankruptcy woes. Unfortunately, it seems that the coach's problems are just getting worse. In a recent story it was reported that Smith's creditors are requesting the court to take a closer look at Smith's finances. It appears some creditors feel Smith may have cooked the books in an attempt to take advantage of certain bankruptcy exemptions. In particular, the focus of the court and creditors is on Coach Smith's $850,000 salary.

Under federal law, salary earned prior to filing for bankruptcy is part of the bankruptcy estate and is therefore eligible for division among creditors. Any salary earned after a filing for bankruptcy, however, is included within the federal exemptions. In Smith's case, creditors are accusing the coach of deferring much of his salary so that he would receive it after filing for bankruptcy. If this is true, and the coach did attempt to deceive the court, he may be in serious trouble.

The consequences of defrauding the court are too severe to take chances. That is why it is so important to work with an experienced and ethical attorney. Working This will not only guarantee that the filer gets the most out of their bankruptcy filing, but it will also guarantee that the filing is done right. Doing it right not only provides peace of mind, but it will also save money and time in the long run.

Source: 5 News, "Razorback Coach's Salary Under Investigation," Shain Bergan, Nov. 14, 2012

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Mark T. Young & Associates
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