Teresa and Joe Giudice may have served the time, but their bankruptcy fraud case is still far from being over now that a new motion has been filed by their bankruptcy trustee John Sywilok.
Giudice’s Bankruptcy Not Over
“Real Housewives of New Jersey” stars Teresa and Joe Giudice filed for bankruptcy in 2010, but eventually abandoned their bankruptcy discharge on allegations that they had left out a number of assets and sources of income on their filing papers.
The Giudice’s filed for Chapter 7 bankruptcy. Chapter 7 (also known an straight bankruptcy) is the most common form of bankruptcy and is available to consumers and businesses.
Under Chapter 7, assets are sold off so that the proceeds can go to paying debt. All proceeds from the sales of those assets are handed over to a trustee, who then pays down any and all creditors. After all creditors have been paid off they are no longer able to collect funds directly from you and your debts are cancelled, meaning you are no longer responsible for them.
You are not able to discharge the following debts under Chapter 7:
- Alimony and child support
- Drunk driving judgments, criminal fines, restitution
- Debts incurred as the result of fraud or intentional wrongdoing
- Back taxes under 3 years old
- Student loans
- Recent purchases made for substantial amounts
- Contracts involving titles or liens such as land or automobiles
In all forms of bankruptcy, a bankruptcy trustee typically oversees the bankruptcy filing. Below we discuss what a bankruptcy trustee oversees specifically in a Chapter 7 bankruptcy filing. It’s always advised that when you file for Chapter 7 bankruptcy that you work with a bankruptcy attorney like a phoenix chapter 7 bankruptcy lawyer.
Role of the Bankruptcy Trustee in Chapter 7
During a Chapter 7 bankruptcy, an impartial bankruptcy trustee is appointed in order to administer and oversee the bankruptcy case. The trustee reviews the Chapter 7 bankruptcy petition to verify the information included. A trustee will review financial documents and other independent sources to ensure all information is accurate. Often times this means comparing what is listed in the filing to numerous financial documents, including: bank statements, tax statements, and pay stubs.
After the initial review, debtors are asked to attend a hearing in front of the bankruptcy trustee called the 341(a) meeting of creditors. During this hearing, creditors are allowed to come and ask questions. Typically, creditors do not attend these hearings, unless they feel you are hiding assets. The trustee conducts the hearing and asks you questions under oath regarding the information contained in the bankruptcy documents.
Sale of Assets
The largest role of the Chapter 7 bankruptcy trustee is selling any nonexempt assets of the debtor. The trustee will determine the value of any nonexempt property and then liquidate and sell that property. The profits made from the sale of nonexempt assets is then used to satisfy creditors.
If nonexempt assets are not available, the trustee files a report stating there will be no distribution to creditors.
Additional Aspects of a Trustee
In addition to the above, a trustee also oversees if there have been any preferential transfers or improperly executed security interests. This means that if a debtor pays back one creditor before paying back others, the trustee is able to pursue motions to get the money back for it to then be distributed among all creditors equally. This often happens when debtors try to pay back family members they owe money to instead of credit card companies. In this case, the family member is still considered as part of the group of creditors. Additionally, if a creditor has not properly created a lien or security interest in a debtor’s property, then the trustee can avoid that, and thus sell the property free and clear.
Giudice’s Bankruptcy Trustee Allegations
The Giudice’s ran into issues and allegations of bankruptcy fraud when the trustee appointed to their bankruptcy case, John Sywilok, field claims against the couple. In those claims, he alleged the couple had left out a number of assets as well as additional sources of income such as the salary that Teresa had received from filming “Real Housewives of New Jersey,” in addition to rental income and a Maserati.
Leaving out assets and sources of income such as this is considered a form of bankruptcy fraud.
Debtors will often go to the extreme in order to clear their names of debt. This often means committing bankruptcy fraud in an attempt to clear debt, or make money. Bankruptcy fraud is considered a white-collar crime that carries very serious consequences and federal prosecution. If you are desperately trying to get out from under extreme debt, contact a phoenix chapter 7 bankruptcy lawyer that can help you explore your options.
Forms of Bankruptcy Fraud
There are four standard forms of bankruptcy fraud:
- Debtors conceal assets to avoid having to forfeit them,
- Individuals intentionally file false or incomplete forms,
- Individuals file multiple times using either false information or real information in several states, and
- Bribery of a court-appointed trustee.
Typically, bankruptcy fraud will not fall within just one form, but will combine one or more of the above with identity theft, mortgage fraud, money laundering, or public corruption.
Charges for Bankruptcy Fraud
Bankruptcy crimes are not actually prosecuted in the bankruptcy court, but rather are prosecuted by the United States Attorney in the Federal Courts.
If a bankruptcy trustee suspects bankruptcy fraud is occurring, the trustee will make a criminal referral to the Office of the United States Trustee. The case and investigation is then passed along to the United States Attorney, the Federal Bureau of Investigation, or other appropriate federal agency.
Federal prosecutors are able to bring charges for suspected bankruptcy fraud under 18 U.S.C. § 151. To prove that fraud has occurred, prosecutors must show that the defendant knowingly and fraudulently made a misrepresentation of material fact. Bankruptcy fraud carries a sentence of up to five years in prison, or a fine of up to $250,000, or both.
Giudice Bankruptcy Fraud
When the couple’s bankruptcy trustee closed out the bankruptcy case in 2014, he reported that the couple had only satisfied $7,500 of their debts and still owed creditors $13.4 million.
In addition to the Giudice’s bankruptcy fraud, federal prosecutors also accused them of conspiracy to commit wire and mail fraud.
The couple received jail time as a result of these charges. Teresa just recently finished up her year-long sentence and Joe is currently serving a 41-month sentence at the Federal Correctional Institution in Fort Dix.
While it seems that this would be the end of this saga for the couple, it seems that the bankruptcy proceedings might be re-opened.
Last year Teresa filed a legal malpractice lawsuit against the bankruptcy attorney that represented her in court, James Kridel on allegations that he made mistakes that led the couple to federal prosecution. Should she win this pending trial, the lawyers who represented the couple’s creditors would like to re-open the bankruptcy proceeding in an attempt to get a cut of any “meaningful” dividends that the Giudices might earn.
A hearing on the new motion to re-open the bankruptcy proceedings is set for May 24.
Additionally, it’s still unknown if the Giudice’s have repaid any of their creditors since their bankruptcy filing was closed in 2014. It appears that Teresa may have since earned significant paychecks from a Bravo TV special focused on her, called “Teresa Checks In,” as well as book proceeds from her prison memoir that was briefly on the New York Times bestsellers list.
Should You Declare Bankruptcy?
The idea of filing bankruptcy can be overwhelming, especially when you consider cases like the Giudice’s. Is it easy to make a mistake, and how would you possibly know where to begin? Or even what mistakes to avoid. Are you even ready to file bankruptcy? Are you a good candidate?
It can feel impossible to decide on declaring bankruptcy. Sure, the bills are piling up, credit card companies are calling, and you have no idea when it comes to figuring out how you’re going to pay your debt. But is it really time to declare bankruptcy?
There are some options that you might want to consider, if you haven’t already yet, and a few questions to ask yourself.
Number one, are you able to reduce your debt or work out a favorable payment plan with your creditors? Many times creditors will work with people that are delinquent on their payments to help negotiate terms so that a debtor can pay their debt. Before you throw bankruptcy into the mix as a potential option, explore alternatives such as credit or financial counseling, negotiating with creditors, credit card consolidation, loan modification, and loan refinancing.
The following indicate a good time for when to seriously consider declaring bankruptcy:
- You’ve been out of work for an extended period of time and you have no unemployment income or savings
- You are delinquent on your taxes
- Your home is nearing foreclosure
- Your wages are being garnished
- You are facing lawsuits for delinquent bills
The decision to declare bankruptcy is different for everyone. Speaking with a professional about your particular situation can help you evaluate your options.
Types of Bankruptcy for Individuals
If you do decide to declare bankruptcy, you should be familiar with the most common types of bankruptcy for individuals: chapter 7 and chapter 13:
- A chapter 7 bankruptcy liquidates all non-exempt assets to pay off the debt you owe to creditors. This is typically considered the best option when you have little income and a large amount of unsecured debt. Unsecured debt includes: medical bills and credit cards.
- A chapter 13 bankruptcy reorganizes debt and establishes a repayment plan to pay debt owed to creditors. This is considered the best option for debtors that have income, but are needing some breathing room to be able to catch up on outstanding debts.
Working with a Bankruptcy Attorney
Bankruptcy can be an overwhelming process. That’s why we advise that you work with a phoenix chapter 7 bankruptcy lawyer that is familiar with various debt repayment options. We are committed to helping our clients understand their rights and options under the bankruptcy law and developing the debt relief solution that makes the most sense for each individual. We invite you to call (602) 648-3274 or contact our Arizona office to schedule a free initial consultation.
668 N. 44th St., Ste 320, Phoenix, AZ 85008