Bankruptcy Fraud and Tween Dancing


Abbey Lee Miller, star of Lifetime show “Dance Moms” was recently indicted on charges of bankruptcy fraud.

Based on the show description- I’m not surprised that I’ve never heard of it:

According to Wikipedia, ‘Dance Moms’ ” follows the Abby Lee Dance Company’s Junior Elite Competition Team of mostly preteen girls as they travel week-to-week to various dance competitions, winning awards and preparing for Nationals…while at the same time being prepared by Miller to be ‘professional, employable working dancers.’ The series depicts the doting mothers as rivals of each other on behalf of their own daughters, sometimes closing ranks against rival teams.”

Anyhow- back to the point:

The team at the Wall Street Journal Bankruptcy Beat are reporting that “Ms. Miller has been indicted on bankruptcy-fraud charges that she concealed income she earned from the show. Ms. Miller said her show wouldn’t bring in separate revenue—only publicity. A Pittsburgh jury has now accused her of concealing more than $750,000, according to the indictment. Ms. Miller filed for bankruptcy in December 2010 with about $356,000 in debt.” TMZ (who apparently broke the story, in addition to showing great tips on “Guess The Bunny Tail See Whose Hare-Raising Rear!”) also reports that “The indictment, which includes 20 counts related to the alleged scheme, also says Abby lied on monthly financial reports for her dance studio and did NOT report some of her income.”

All of the federal bankruptcy crimes are found in Title 18, Chapter 9 of the Bankruptcy Code. These include:

18 U.S.C. § 157 prohibits devising or intending to devise a scheme or artifice to defraud and, for purposes of executing or concealing the scheme either (1) filing a bankruptcy petition; (2) filing a document in a bankruptcy proceeding; or (3) making a false statement, claim, or promise (a) in relationship to a bankruptcy proceeding either before or after the filing of the petition; or (b) in relation to a proceeding falsely asserted to be pending under the Bankruptcy Code.

So- it appears that Ms. Miller has been accused of not disclosing $750,000 of her income to the Bankruptcy Court. The maximum punishment for this crime is up to five years in federal prison.

It should be noted that Ms. Miller has only been accused of this. While the Wall Street Journal team states that a “jury” has accused her- this is a “grand jury.” She has not bee convicted yet. I can think of a number of defenses for Ms. Miller (namely- her statements on her future income appear to be purely speculative).

It is absolutely critical to be completely honest in your bankruptcy papers. The worse thing you can do is undertake to conceal assets from the lawyer and the court. It is also crucial to accurately disclose all sources of income in your bankruptcy papers. Trying to keep (and hide) your 2008 Ford F-350 is not worth spending 5 years in prison away from your family.

Bankruptcy provides for the honest, yet unfortunate debtor, a new opportunity in life.

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“…You can’t get a dolla outta me!” 50 Cent


My favorite early 2000’s rapper 50 Cent is all over the news with his bankruptcy filing.

Here’s the short of it:

50 Cent, born Curtis Jackson III, posted a 13-minute sex tape of a woman named Lastonia Leviston in an attempt to taunt a rival rapper, Rick Ross. Read more here.

Not surprisingly, Leviston sued 50 Cent, alleging, among other things, a breach of her privacy. A NYC jury ordered 50 Cent to pay $7 Million to Leviston. 50’s response? File for bankruptcy.

50 Cent filed for Chapter 11 protection, which allows him to get his finances in order while he continues to operate his various business ventures.

CNBC analyzed 50’s bankruptcy filing and found a number of interesting disclosures:

Documents filed in Connecticut Bankruptcy Court showed Jackson claims total assets of $24.8 million and liabilities of more than $32.5 million, constituting a nearly $8 million shortfall for the rapper who was recently ordered to pay $7 million in damages to a woman who sued over a sex tape that was posted without her permission.

The filing also reveals a more detailed snapshot of Jackson’s finances, including the $5,000 the rapper spends monthly on gardening and his net monthly income of $76,000.

Jackson also revealed costs of over $12,000 a month in child support, and an average of $1,000 per month in personal grooming.

The rapper, who survived being shot point-blank nine times, also lists $9,000 a month in security and protection spending.

Jackson listed automobile assets of over $500,000, including a 1966 Chevrolet Coupe and a 2013 Suzuki Kizashi Sport. A previous filing revealed he leased a Bentley Mulsanne for more than $135,000.

Jackson’s brokerage accounts with Credit Suisse, Merrill Lynch, and Goldman Sachs totaled more than $7 million.

50 Cent has another bankruptcy hearing set toward the end of August.

The main problem I see with 50’s case, is that the unsecured class of creditors will have to sign off on his plan. If the entire unsecured creditors committee rejects his plan of reorganization, then its possible his case could be converted to a case under Chapter 7 and 50 could end up losing millions of dollars of assets.

Maybe Biggie Smalls was right. The more money you got- the more problems you get.

Stay tuned.

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Medical Bills


What is it that leads someone into filing bankruptcy? Bad spending habits? Recklessness? Credit cards? Wrong.

In 2013 the foundation NerdWallet published a report stating that medical bills were the primary cause of bankruptcy filings. The report estimates that 3 out of 5 bankruptcies are precipitated by collection from unpaid medical bills. After analyzing data from the U.S. Census it found the following conclusions:

  • 56M Americans under age 65 will have trouble paying medical bills
    – Over 35M American adults (ages 19-64) will be contacted by collections agencies for unpaid medical bills
    – Nearly 17M American adults (ages 19-64) will receive a lower credit rating on account of their high medical bills
    – Over 15M American adults (ages 19-64) will use up all their savings to pay medical bills
    – Over 11M American adults (ages 19-64) will take on credit card debt to pay off their hospital bills
    – Nearly 10M American adults (ages 19-64) will be unable to pay for basic necessities like rent, food, and heat due to their medical bills
  • Over 16M children live in households struggling with medical bills
  • Despite having year-round insurance coverage, 10M insured Americans ages 19-64 will face bills they are unable to pay
  • 1.7M Americans live in households that will declare bankruptcy due to their inability to pay their medical bills
    – Three states will account for over one-quarter of those living in medical-related bankruptcy: California (248,002), Illinois (113,524), and Florida (99,780)
  • To save costs, over 25M adults (ages 19-64) will not take their prescription drugs as indicated, including skipping doses, taking less medicine than prescribed or delaying a refill

Christina LaMontagne, VP of Health at NerdWallet states that “In 2013 over 20% of American adults are struggling to pay their medical bills, and three in five bankruptcies will be due to medical bills. While we are quick to blame debt on poor savings and bad spending habits, our study emphasizes the burden of health costs causing widespread indebtedness. Medical bills can completely overwhelm a family when illness strikes,”

Some Americans even skip doses of medication to make their prescriptions last longer to save money.

Americans are quick to stigmatize those that file bankruptcy as deadbeats or as people who are not living within their means. I deal with people are facing financial catastrophe on a daily basis. Very rarely do I see someone who was completely reckless in their spending and only wants to file bankruptcy to screw over their creditors.  Most of the time- people have faced extreme medical hardship- which has then led to a loss of a job or income. I’m not sure anyone would be able to make it financially if the medical problem was large enough.

If you, or someone you know, is facing bill collectors from medical bills, call today for a free consultation to see if bankruptcy is the right choice for you. (801) 781-2026.

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Loan Sharks


According to a study commissioned by the Utah Department of Financial Institutions, Utah pay day loan companies charged an average of 473.52 percent interest. “At least one Utah payday-loan company charged an astronomical 1,564 percent annual interest last year — meaning it collected $30 in interest each week per $100 loaned.” The Salt Lake Tribune reports. Pay day lenders have made a lot of hay in recent years, partly because they have had the implicit support of the Utah Attorney General’s Office.

This was no surprise to me. I see it everyday. In any given month, at least a half dozen or so new clients of mine have pay day loans that they are fighting with. In my opinion, these lenders count on their customers to default on their loans so they can run to small claims court, get a judgment, and start to garnish.

I’ve seen these lenders create false ‘security’ documents and threaten to take away client’s property if loans are not repaid (when they have no legal right to do so). I’ve seen them send private investigators to client’s homes and threaten to arrest them if payment is not made.

Bankruptcy is the best weapon to use against these lenders. If you are trapped in the vicious cycle of pay day loans, call today for a free consultation.

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Transferring Assets

Tips-to-Sell-CarsOne of the most hot button topics in the bankruptcy world is the disposal of assets by people who are going to be filing for bankruptcy.

Every so often I am asked by folks who are considering bankruptcy as a financial option if they are allowed to transfer the title to their vehicle or home to a family member so as to avoid losing it in a Chapter  7 liquidation bankruptcy case. The answer is almost always a resounding no. There are some situations where asset protection planning can be utilized- but never directly before a bankruptcy filing.

For example here is the tragic tale of former AIB (Anglo Irish Bank) executive David Drumm. According to a Forbes article, Drumm owed AIB over $11 million from a personal loan made to him during his employment with the bank. Drumm filed for Chapter 7 bankruptcy protection in Massachusetts to wipe out the debt. The Trustee assigned to Drumm’s case filed an adversary proceeding within Drumm’s bankruptcy case to revoke his bankruptcy discharge. A bankruptcy discharge releases the debtor from personal liability for certain specified types of debts. In other words, the debtor is no longer legally required to pay any debts that are discharged.

Forbes reports that the Trustee filed the revocation action because “the combined adversary actions resulted in no less than 52 different counts against Drumm, but they can mostly be distilled down to the common theme that Drumm intentionally hid his assets prior to filing for bankruptcy, and failed to disclose assets in his bankruptcy filings.” Intentionally hiding assets or not disclosing the transfer of assets will land you in hot water in bankruptcy court.

Drumm purportedly transferred millions of dollars worth of cash and property to his wife before before filing for bankruptcy. The Trustee not only can revoke the debtor’s discharge for such actions- but she/he can also sue the person it was transferred to in order to recover the property through the trustee’s avoidance powers. The American Bankruptcy Institute journal discussed this (here) over ten years ago, and it is still something I look to today.

The fact is- most people who are facing financial distress sell property in order to scale back their expenses or just simply to survive. The main thing a bankruptcy trustee will look for is 1. did you sell the property for fair market value and 2. who did you sell it to? Bankruptcy is designed to give people a fresh start. The U.S. Supreme Court was right when it stated that the purpose of bankruptcy is to give “the honest, but unfortunate debtor a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of pre-existing debt.” Local Loan Co. v Hunt, 292 US 234 (1934).

Bankruptcy may be a tool for you to get your finances on track for a brighter future. Call me today for a free consultation. (801) 781-2026 or

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What are you afraid of?


The Wall Street Journal is reporting that David Cassidy, famous from The Partridge Family is filing for bankruptcy. In his bankruptcy filing, Mr. Cassidy reported assets and debts each between $1 million and $10 million. Among his largest unsecured creditors are Wells Fargo, owed nearly $300,000, and a South Florida law firm owed $103,000.

In a note on his website, Mr. Cassidy said that bankruptcy is “necessary for practical reasons to reorganize my life as I go through divorce and to restructure my finances.”

I previously wrote about David Adkins’ (aka- Sinbad) bankruptcy filing. I was irritated by Sinbad’s filing, because he was proceeding under Chapter 7 because of a specific carveout (found in 11 U.S.C. 707(b)) in Chapter 7 for people with “non-consumer debt” or “business debt”. This carveout allows Chapter 7 bankruptcy debtors, whose debts are primarily related to ‘business debt’, regardless of their income, to discharge most of their debts without repaying anything. A discharge releases individual debtors from personal liability for most debts and prevents the creditors owed those debts from taking any collection actions against the debtor. My irritation regarding Sinbad was that, according to Sinbad’s bankruptcy schedules originally filed in his case, he grossed over $1 million in the six months leading up to his bankruptcy filling. After all of his business expenses (which includes around $14,000 in monthly legal fees, $14,000 in travel expenses, and $6,800 in ‘personal expenses’) Sinbad claims to make, on average, $16,000 per month. After all of his expenses, Sinbad clams to have no money left over to pay his bills. According to the U.S. Census, the median income for a family of two (presumably Sinbad and his wife) in California is roughly $64,000. Sinbad received a standard chapter 7 discharge and lost no property.

Don’t get me wrong- I do not fault Sinbad. I’ve helped dozens of small business owners file under Chapter 7. I fault the 2005 U.S. Congress for creating a completely unfair bankruptcy system for the majority of American facing financial difficulty.

Neverthless- its important to note that Mr. Cassidy filed a petition under chapter 11 of the bankruptcy code. Chapter 11 allows businesses or individuals to restructure their debt in a way that makes it possible for them to continue to financially function. Typically, individuals utilize Chapter 13 to restructure their debt. However, most likely due to the maximum debt requirements of chapter 13 debtors, chapter 11 was probably the only option other than a chapter 7 liquidation proceeding.

This isn’t Mr. Cassidy’s only recent struggle. Last year, he was sentenced to rehab and filed for divorce from his wife Sue.

Filing for bankruptcy protection is not an easy thing to do. It seems to me that one of the biggest obstacles to people finally filing for bankruptcy is the social stigma attached to it. Many people think that they are dead-beats or just irresponsible for filing for bankruptcy. Or that as soon as they file, that everyone in their church or neighborhood will suddenly know about it. As if bankruptcy filings were included in the church announcements every sunday. This could not be any further from the truth. Often times, it is the economy and the decisions of other people (divorce or separation) that lead us in the filing for bankruptcy. It is IMPERATIVE for everyone thinking of filing for bankruptcy that they understand that bankruptcy is a FINANCIAL decision- not a MORAL one. The founders of our country understood the role of bankruptcy and provided for the creation of courts to administer bankruptcy cases in the  U.S. Constitution.

Call today for a free consultation and get prepared for the future. The future can offer a lot of hope if you get moving.

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Cram down that Clunker


A few years ago the U.S. government established a program called ‘cash for clunkers.’ Essentially, the idea was to provide economic incentives to U.S. residents to purchase a new, more fuel-efficient vehicle when trading in a less fuel-efficient vehicle.  The program was moderately successful.

Chapter 13 provides a huge benefit for people with older car loans. Through Chapter 13, you can ‘cram down’ the total car loan to match the current market value of the car. For example, if you own a car worth $5,000 but your loan balance is $10,000, then you can cram down your loan to $5,000 (the value of the car) through your Chapter 13 repayment plan.  The remaining $5,000 of the balance will be lumped in with your other unsecured debts (like credit cards). This means you’ll likely pay only a percentage of that unsecured debt, and the remainder will be wiped out at the completion of your plan. This means you will end up owning the car free and clear at the end of the bankruptcy.

The only catch with this is that your loan has to be over 910 days old (about 2 1/2 years). So- if your car is older and you are facing financing difficulty- then Chapter 13 may be a good option for you. Call today for a free consultation to consider your options.

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