Avoid Unusual Financial Transactions Before Bankruptcy

In the late 90’s the syndicated television show America’s Dumbest Criminals entertained audiences with surveillance footage, news reports, and dramatic reenactments of particularly foolish criminal behavior. The viewer was treated to video of bad criminal plans that had no chance of success, as well as great plans that just gone awry, like forgetting to put gas in the get away car.

Hiding or shuffling around assets during bankruptcy is not for the novice. Take, for example, the recent case of Sara Jones Ricks who filed a pro se Chapter 7 bankruptcy in Georgia. Ms. Ricks claimed that she was broke, and even requested, and received, a waiver of the court filing fees. The trouble was that Ms. Ricks was not broke, and she left a nice paper trail for the trustee and bankruptcy court to follow.

In her paperwork that she initially filed with the bankruptcy court (made under the threat of perjury, of course), Ms. Ricks failed to disclose her ownership of a savings account, her receipt of an income tax refund in the amount of $6,500, a $1,000 gift to her mother, and regular payments of several hundred dollars to an Atlanta law firm made within 90 days of the bankruptcy filing. At her 341 meeting Ms. Ricks told the trustee about receiving the refund. The trustee then pieced together bank statements and cancelled checks to discover that in the weeks before her filing Ricks withdrew over $8,000 from her accounts via ATM withdrawals and checks written to cash.

Ricks told the court that the $9,931.48 she had in her checking account “at some time prior to the filing of the petition” was comprised of proceeds from a student loan and her income tax refund. She testified that she spent the money “on school related expenses” and on “the daily maintenance of [herself] and her children.” The bankruptcy court did not believe that Ricks did not have any money of the day she filed the bankruptcy case, and stated:

The weight of the Trustee’s evidence and Ricks’s demeanor on the witness stand convince me that not only did Ricks have $9,095.57 on the date of the filing of this case but also that she is currently holding at least some, if not all, of the nonexempt $8,795.57 as cash.

The court then ordered Ricks to turn over $8,795.57 to the bankruptcy trustee. A copy of the bankruptcy court’s order can be read here.

There are two really important lessons to learn from In re Ricks case. Lesson one is: bankruptcy is not a game of hide and seek. Lesson two is: get professional help. Any bankruptcy attorney worth his salt would have instructed Ricks on the proper way to protect her cash. By getting help from an experienced bankruptcy attorney, you never need to worry whether you have enough gas in your get-away car.