Liar, Liar, Debtor on Fire!

I hate hearing about Welfare abuse—people taking advantage of the system that is designed to benefit those who are truly in need. Recently I learned of another such abuse—it's called filing for bankruptcy so you don't have to pay your bills.

Here's how it works. You rack up a bunch of bills like student loans and credit card debt. You sign a lease to rent a much larger, newer, luxury home to replace your cheesy apartment. You trade in your Kia SUV for a new 2008 Lincoln. You're living the high life as a single person making about $90,000 a year. As soon as you have everything you need, and you've racked up about $60,000 in debt and court judgments, you pay a lawyer half of his $3,000 fee and declare bankruptcy. Even if you are ineligible, you still get to do that. It's the law. And as soon as it happens, your creditors aren't allowed to collect a dime from you.

The system works for people who have lost their jobs and their homes, or for the seriously ill who have depleted their savings on medical care. It probably also works for people who lost their life savings to scum like Bernie Madoff. But it should not work for people like my ex-tenant who signed a lease but never payed me one dime in rent. And yet it does.

On Friday I lost another day's pay (plus the cost of a ZipCar rental) to drive an hour and 45 minutes to Baltimore to attend something called a "341 Creditors Meeting." My debtor was there, with her very young attorney. There is no judge at this meeting, just a Trustee, his assistant, and a very small audience of other indigents and their attorneys. I was the only creditor.

The first few cases I sat through went very quickly. There were no anomalies. When time came for my debtor's case to be called, the Trustee whispered something to his assistant and then brought in other people from the waiting room (who were scheduled for a later meeting). He knew that my debtor's case was a doozie, so he deliberately let others go first.

This might be because I'd sent him a 5-page report outlining fourteen false or otherwise inconsistent statements or claims that my debtor had made in her bankruptcy petition. The facts were all backed up based on information I obtained through my own investigation. (I spent a lot of time on this!)

When my debtor's case was called, I was invited to the table by the Trustee (whom I could tell was a man who does not take crap from people). Sitting directly next to the Trustee, I saw him silently read through my 5-page letter. The other parties at the table were unaware of what he was looking at. I was inwardly pleased that he cared. He then hid the letter beneath other paperwork in the thick file for my ex-tenant (let's call her G.S., but believe me, she's no girl scout).

After her identity was established and she was sworn in, G.S. was asked if everything in her paperwork was correct. That was Lie #1 (otherwise known as perjury). The Trustee first told her that she hadn't submitted her tax returns by the deadline and then called her to the mat on several other items in her paperwork.

This turned out to be the longest bankruptcy case of the morning. At one point the attorney claimed that he "thought" they'd filed an amended petition correcting one of the falsities that the Trustee nailed them on. This peeved the Trustee, who asked the attorney just when exactly such amendment was filed. Neither G.S. nor her lawyer could answer. The Trustee looked at his computer and said with the slightest aggravation, "It's not in the system" before continuing his questions.

Aside from other paperwork issues, G.S. actually failed to list two of her four previous bankruptcy filings, which she claimed that she didn't think she had to list because they were dismissed. The Trustee corrected her, indicating that the question clearly asks for all previous filings, not discharges, and that she'd failed to list a 2003 and a 2004 bankruptcy. Her statement of financial affairs failed to list her 2007 income. She failed to list any law suits within the past year, of which the Trustee knew there were two. Several amendments would have to be made to the petition.

The Trustee also asked her why I was not listed as a creditor, as I'd indicated in my letter to him. Instead, G.S. had listed the court (and the wrong amount for the judgement awarded to me). That too would have to be corrected in the petition.

The trustee questioned her $732/month charitable contribution claim on her list of monthly expenses. (Just like I later questioned how she could spend $250/month in gas.) She claimed the donations were for her church, and the Trustee asked if she could provide proof.

He brought up other inconsistencies that I'd outlined in my report, like the disclosure of compensation (to her attorney) showing three different amounts across the paperwork. He asked her if she'd had other bank accounts in the past year. On her paperwork she'd listed "none," but now, caught in another lie, she was forced to disclose three accounts she'd closed so I couldn't garnish them. When asked why she hadn't included it on her petition, she mumbled she must've forgotten.

He asked her if the Comptroller of Maryland was still garnishing her wages$mdash;a $2,458/month expense she claimed on her paperwork. That, too, was a lie, and I knew it. When he asked her if she'd sold or given away any property valued at over $200 in the past two years, I made a note on my legal pad.

Finally it came time for me to ask questions. First thing I said to her was, "Ms. S., you stated earlier that you hadn't sold or given away anything valued at $200 or more in the past two years, correct?" She reluctantly answered "Yes," not knowing what I knew. I looked directly at her and said, "What happened to your Kia Sorento?" I knew she'd traded it in on a new Lincoln just six weeks prior to her bankruptcy filing.

The look on her face. She stammered. "Uh... uh..." She started to answer but wasn't sure what to say. It's horrible being caught in a lie. She looked at her attorney, asking if she had to answer. He told her yes. She finally admitted, "I traded it in."

I questioned why she put $2566/month as her rent, when I knew it was $2200/month. She claimed she'd spread the security deposit out over six months (which is not rent). I caught her lying about her income, asking her which was the truth, "the time you said under oath on November 20, 2008, that your gross income is $10,000 a month, or the time you said under oath it is $7,500 a month?" She stammered again. "Uh... I was talking about gross income."

"So was I."

"Uh. . . it's closer to $7,500. . . I guess."

I asked her why she got a car loan for $37,885 for a car she claims is only worth $22,400 on her paperwork. She got defensive and said "It wasn't for that much" (a lie). This went on a little while longer before the Trustee nicely said I could have one more question since there were so many people waiting. I did. In the end, there were over a dozen "amendments" that she needed to make to her petition and her Ch. 13 plan. Of all the other cases in the room that day, not one change was needed. G.S. needed enough changes for several days' worth of cases.

If I was a judge, I'd dismiss the case now.

This is what I don't get. She still gets her confirmation hearing in July. She's guilty of perjury (many times over—in both this case and in mine against her last year), and yet she still gets relief from paying any of her debts. The honest, trustworthy creditors are the losers. What's wrong with this picture?

The whole thing sucks. Believe me, I've learned my lesson about giving the poor person with bad credit a "chance" because she's truly trying to clean up her credit so that she can buy my home from me. Get this - she used the same exact ruse on her new landlord in her new luxury town house that she moved into just six weeks before declaring bankruptcy.

She's a scam artist. Well, I guess you gotta be good at something. It's too bad that the courts give these thieves the benefit of the doubt as well.