Bankruptcy Fraud and the Hot Dog Vendor

Written by Greenville/Spartanburg Bankruptcy Lawyer Däna Wilkinson

Last week a North Myrtle Beach hot dog vendor pled guilty to bankruptcy fraud. He hasn’t been sentenced yet, but he could spend time in a federal penitentiary.  That would be a bad end to what started out as a pretty simple case Chapter 13 bankruptcy case.

I don’t have any special insider knowledge of Anthony Simmons’ bankruptcy case, but after reading the news release about his guilty plea, I read the court file.  It appears as if the case started because Simmons was behind on mortgage payments.  He filed a Chapter 13 bankruptcy and proposed a payment plan which would catch up his mortgage, pay his secured debt, and pay only a nominal amount to unsecured creditors.  But there weren’t many of those–less than $10,000 in unsecured debt is scheduled.  It appears to be a very simple case.

Among the assets listed in the bankruptcy was Simmons’ hot dog cart and some hot dog inventory.  Simmons valued the hot dog cart at $1500.  He listed his occupation as a hot dog vendor, and showed gross income of about $3,000 a month, noting that his income was seasonal.   The Chapter 13 bankruptcy plan was confirmed, and the case continued on a very normal track for a while.  Then, the trustee moved to dismiss the case because he had discovered that the debtor had sold the hot dog cart and business (without bankruptcy court approval) for $95,000.  That’s the same business that the debtor said had a value of $1500 when he filed his case.

I’d imagine that Simmons did what a lot of people are inclined to do when they file bankruptcy.  People don’t want to “lose” anything, and so they minimize their assets.  A debtor doesn’t want to lose that hand-made antique hunting rifle, so it’s described as a “gun” and valued at $100.  A debtor doesn’t want to lose the Stickley sideboard she inherited, so it becomes “dining room furniture” and is valued at $500.  Since Simmons pled guilty, he has essentially admitted that he knew that the value of his business was more than the stated value of the hot dog cart and the inventory.   The ironic thing is that since Simmons was filing a Chapter 13 bankruptcy, he wouldn’t have “lost” anything by correctly stating the value of his business.  Sure, he would have had to pay his creditors a bit more, because Chapter 13 requires that plan pay at least as much to unsecured creditors as they would receive if assets were liquidated.  And I don’t mean to suggest that it would be okay to lie on your bankruptcy schedules if the benefit were greater.  But in this particular case, the consequences of playing it straight would have been minor, and the consequences of gaming the system turned out to be quite significant.

Simmons had one more chance to play it straight.  When he got the offer to buy the business for $95,000, he could have dismissed his bankruptcy case and used those funds to pay his creditors–remember, he owed less than $10,000.  Or, he could have modified his Chapter 13 bankruptcy pan in order to pay his creditors in full.  But he did neither.  He retained the benefit of the sale, while his Chapter 13 plan proposed to pay only a nominal amount to his unsecured creditors.   In fact, that’s probably what sealed the case against him.  It is certainly p0ssible that, at the time the case was filed, he really didn’t know what the business was worth.  But, when someone made that big whopping offer to purchase, he knew.  And did nothing to correct the record and treat creditors fairly.

I personally believe that everything I need to know I learned in kindergarten.  Treat people the way you want to be treated, wait your turn, say please and thank you, share, don’t tell lies–that kind of thing.  I don’t think grown-ups ought to need the threat of arrest and conviction to act right.  But, if you went to a different kindergarten, or were raised by wolves or something, note this.  The U.S. Attorney’s office jumped right in and prosecuted this case, against a hot dog vendor.  It wasn’t high profile–in fact, I can find no mention of it until the guilty plea was entered.  It didn’t involve millions of dollars or defrauded grannies or any of the other stuff that gets white collar crime in the news.  There wasn’t any reason to prosecute the case other than the fact that someone had tried to get away with a crime.  And I’ve seen them prosecute smaller cases of bankruptcy fraud, too.  So if you’re tempted to think that you’ll fly under the radar, think again.

If you are considering bankruptcy, learn from Mr. Simmons.   Tell your bankruptcy lawyer about everything you own–even the things you aren’t sure have a bearing on your case.   Tell your attorney about all the debts that you owe, and all the property you own, even the things that you think have no value, or that you just don’t know about.  An experienced bankruptcy attorney can tell you whether it matters, and what your options are for dealing with all your assets.  Sometimes the answer may be that bankruptcy is not a good option.  But that is certainly preferable to risking an unpaid vacation as a guest of the federal government.

About

Däna Wilkinson (pronounced "Donna") is a bankruptcy lawyer practicing in Spartanburg, South Carolina and serving South Carolina's upstate region, including Greenville, Spartanburg, Gaffney, Union, Anderson, Easley and Pickens. She has been in practice for more years than she cares to count, but it’s more than 20 years. Däna has been a bankruptcy lawyer from the very beginning of her career as a lawyer.

Däna went to law school at the University of South Carolina, where she was Student Works Editor on the South Carolina Law Review and a member of the Order of Coif. She started doing bankruptcy work while still a student, working for a bankruptcy boutique firm whose members included a Chapter 7 panel trustee, and recognized experts in Chapter 11 reorganizations. She enjoyed the work from the beginning, and upon graduation took a job as a law clerk to the Honorable Rodney Bernard, bankruptcy judge for the Western District of Louisiana. Judge Bernard had spent a number of years on the bankruptcy bench, and was an excellent teacher and mentor. Upon Judge Bernard’s retirement, Däna stayed on for a time as clerk to the Honorable Donald W. Boe, until homesickness for South Carolina struck, and she returned to private practice in Charleston. Four years later, she received an offer to return to Columbia, where she practiced until 1997.

In 1997, planning to start a family, Däna decided to return home to the Upstate, and opened her own practice in Spartanburg in 1998. Over the years, Däna represented all sorts of parties in bankruptcy: business debtors in reorganization, individual debtors, creditors and creditors’ committees, and trustees. In establishing her own practice Däna decided to focus on consumer debtors, ordinary people who find themselves overwhelmed by debt. Her focus is on the individual needs of clients, and on crafting a solution to their unique financial needs. She is committed to helping clients make a fresh start, and preserving their dignity in the process.

Däna is the proud mother of a beautiful, talented and very active daughter, who is, as her mother says, “practically perfect.” She is also active in both church and community activities, all of which means that there is a fair chance that any given blog post was written while in the car pool line or while waiting for a hearing or a meeting to start.

Däna is also certified as a bankruptcy specialist by the South Carolina Supreme Court, which means that she has taken and passed a proficiency examination on bankruptcy law, devoted her practice to bankruptcy for a number of years, and continues to take classes on bankruptcy law and related issues.

Contact information for Däna Wilkinson:

Law Office of Däna Wilkinson
365-C East Blackstock Road
Spartanburg, SC 29301
(864) 574-7944
[email protected]
www.danawilkinsonlaw.com

Däna also blogs at www.bankruptcylawnetwork.com.


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