November 24th, 2012, 4:28 pm
It seems that some people who file for personal bankruptcy simply don’t get it. The idea is not to charge up a whole lot of debt on your credit cards with the intent to walk away from your financial obligations a few weeks or months later. Rather, bankruptcy offers a fresh start to people who are looking to get out from under insurmountable debts stemming from financial hardships, loss of a job, divorce, illness, or other situations in ones life that makes paying back the debt difficult if not impossible over any reasonable period of time.Most clients who walk into bankruptcy law office understand this and are simply looking for a way to get back on their feet. And then there is the couple who decided they would try to game the system by taking a luxury vacation and use the money not disclosed in their schedules to pay for it. They then made an even bigger mistake; they posted their pictures on Facebook. So what happened next, the Trustee in their case prior to the 341 Meeting, reviewed their public facebook account and determined that these Debtors filed their case in bad-faith and tried to hide assets.
At the Meeting of Creditors, the Trustee simply asked this question, “You took a vacation last month on the Canadian Railway from Vancouver, British Columbia, to Banff in Alberta, ending in Calgary, didn’t you?” The pictures on your Facebook page show you at Lake Louise. Who paid for that hotel?” “And you paid for this vacation didn’t you?”
The Debtors had no choice, as they were not about to commit perjury so they of course had to answer in the affirmative. As a result of this conduct, the Debtors were forced to increase their Chapter 13 plan payment by the amount of the trip.
Now, this is not to say that the mistake the Debtors made here was posting pictures on Facebook. Although, that was stupid. The Trustee has an obligation to determine the veracity of the Debtors representations on their schedules and statements and finding these photos, simply made the Trustee’s job easier. The real mistake was failing to disclose income that could be used to pay creditors, and instead use it for a luxury vacation.
There are two lessons Debtors should take from this story. First, when filing for bankruptcy, you have a duty to cure your creditors to the best of your ability pursuant to 11. U.S.C. 1325, and you must disclose all of your assets and not hold back you’re your own use. Secondly, you need to tell a consistent story. It could have been possible that a family member took the Debtors on this vacation, and none of their own money was used, but even the appearance on a social media site like facebook or YouTube of this extravagant purchase needs to be considered. The Trustee is going to go by the old saying, if it looks like a duck, and it smells like a duck, it probably is a duck.