Expert: Michael T. Hertz - 1/29/2012

Question
QUESTION: I am a creditor to a non-profit that filed for bankruptcy. They made up phony employees and made illegal traansfers to insiders prior to the filing. What documentation can I request that will prove this fraud? Being that there is so much fraud, is there a cheap way for me to fight this? Please give me suggestions and ideas.

thanks

ANSWER: You didn't tell me whether this is a Chapter 7 or 11. If it's a 7, get whatever information you have and tell the trustee.  Make a copy and also tell the U.S. Trustee so that the latter may (no guarantee) will put pressure on the trustee.

If it's a Chapter 11 without a trustee, tell the U.S. Trustee and (if there is one active) the creditors committee.

There's no guarantee that anyone will do anything, unfortunately.  Do remember to file your personal claim thugh, just in case there is money at the end.



---------- FOLLOW-UP ----------

QUESTION: It is a chapter 11. How do I capture the trustee's interest in the case?

Also, isn't the debtor's attorney required to ammend the plan once he has knowledge of the fraud?

ANSWER: You need to write out maybe a one page synopsis in the form of a letter and dig out copies of any evidence you have.  The U.S. trustee is supposed to provide oversight on Chapter 11 cases, particularly if there is no active creditors committee.  If you have nothing concrete, though, it will be hard to get the trustee to move.  But if you have solid evidence, the trustee will probably listen.

---------- FOLLOW-UP ----------

QUESTION: There is no trustee, and no creditors committee. I have three deeds that were transferred to the officers of the debtor just before they were insolvent. In one of the deeds the president signed a property to himself for less than 10 percent of it's value!
1)Do you think that is concrete?
2)What will the trustee do?
3) How do I get the trustee's address?

thanks

Answer
If you told me where the bankruptcy was filed I could easily look up where the US Trustee office is.  You could look up the bankruptcy schedules and see if they disclosed these transfers in the filing.  If the deeds were to properties owned by the debtor (the company) and the transfers weren't disclosed, the  US Trustee will probably act quickly.  That would be very concrete proof of falsely filed schedules.  All that the US Trustee can do is move for appointment of a trustee or conversion of the case to Chapter 7 (as can you, as a creditor).  You could certainly get the US Trustee's contact information by calling the court, if no other way.