There are times in which a trustee’s doggedness in hunting down evidence of bankruptcy fraud should serve as a warning to debtors of the consequences of such actions. A particularly tenacious trustee in a Minnesota bankruptcy provides a striking example, as reported by the Star Tribune.
Daniel Rohricht operated two jewelry stores until 2011 when he filed chapter 7 bankruptcy. He owed $253,000 to creditors but ultimately settled with his creditors for only $17,500 with a stipulation that if it turned out he had been hiding assets the deal would be rescinded and he would be subject to criminal prosecution. The bankruptcy judge was not happy with the small settlement.
Jewelry might not be very fungible, but it is awfully easy to hide and transport. As a result, the trustee in the case pursued Rohricht for another year, after he’d opened a new jewelry store in northern Wisconsin. The trustee stationed a process server outside the store, followed Rohricht’s truck, and had an undercover shopper walk in and photograph his inventory.
The real break occurred when the store’s previous owner reported that Rohricht brought in plastic bins full of jewelry, and he later identified some of the items. Apparently Rohricht had duped the previous owner out of $2.5 million in real estate transactions as well.
Because Rohricht breached his settlement with his creditors, his $253,000 debts were reinstated by a bankruptcy court, and he was penalized with a $50,000 federal fine. U.S. government lawyers are prosecuting him for concealing bankruptcy assets. Rohricht plead guilty and might be sentenced to up to two and a half years in prison. His lawyer explained that he will ask for leniency due to medical problems.
The Star Tribune article can be found here.
The vast majority of bankruptcy debtors don’t deliberately conceal assets from their creditors, especially consumers who often have few assets to begin with. Moreover, New Yorkers should recognize that they have a $1,000 exemption for jewelry, art, and wedding rings. The federal exemptions offer up to $1,450 for jewelry, and it’s indexed to inflation, so it might be more appropriate for debtors who really need it. The federal exemptions also include a $1,225 wild card exemption plus up to $11,500 for debtors who choose not to take the homestead exemption. Debtors opting for the New York exemptions can similarly apply a portion of an unused homestead exemption to personal belongings.
If you have valuable personal property or business assets, then it’s worthwhile to consult with an experienced New York bankruptcy lawyer to strategize how to handle your case and ensure that no assets are accidentally excluded from the bankruptcy.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced bankruptcy trustee actions Bruce Weiner for a free initial consultation.
