Filing bankruptcy can help many people recover from very tough financial situations. In many cases, people can become financially stable after bankruptcy, with time of course. As we’ve often mentioned, bankruptcy is designed to help an honest person get out of debt.
Unfortunately, there are situations where bankruptcy is abused.
A recent CBS Sports article about former Arkansas Razorbacks coach John L. Smith demonstrates how being honest up front can save you from headaches later.
Smith originally filed for bankruptcy last summer but in February 2013 was accused of fraud in complaints filed in federal bankruptcy court. Creditors claimed Smith had concealed hundreds of thousands of dollars in assets in an attempt to avoid paying debts.
Apparently, the complaint also alleged that Smith arranged for the University of Arkansas to pay him thousands following his bankruptcy claim.
In May, the coach came to an agreement with bankruptcy trustee John Lee that will see him give $165,000 in cash and $600,000 in property to settle the fraudulent transfer claims.
Lee is currently the head coach of NCAA Division II Fort Lewis College in Durango, Colorado. He eventually asked for relief of more than $40 million in debt in his bankruptcy file. Smith denied any intent to fraud with any financial transfers or the structure of his contract with the University of Arkansas.
This case, although extreme, is a prime example of how important it is to be fully honest with your bankruptcy trustee. Bankruptcy fraud can result in serious legal consequences that far outweigh just filing for bankruptcy. Be sure to disclose all of your assets and debts to the trustee of the bankruptcy court. If you don’t, you run the risk of being charged with bankruptcy fraud.
Of course, an experienced bankruptcy attorney can help you get through the process and get you on the right path financially.
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