Desperate People in Troubled Times February
9, 2009 By: Steven J. Lodge, Esq.
Nash & Lodge, PLLP A disturbing byproduct of these difficult times is
the length to which desperate people will go to escape a bad situation. If a fight becomes desperate the Marquis of
Queensbury rules seem sometimes to be forgotten. On the “paper” side we’ve seen an increase in forgeries,
including leases, liens and lien waivers, and even court-pleadings. On the practical side, we’ve seen an increase
in dissipated assets, including fraudulent conveyances of property, to keep assets out of reach of creditors – usually
in anticipation of bankruptcy. Read more to learn about different fraud scenario's and the consequences
if you are caught. You have no choice but to fight hard and be wily
– sometimes testing a rule or two. Bending rules is often how they develop and grow into better rules. But
breaking rules is counter-productive and even self-destructive. Nothing
causes more excitement or accelerates a case faster than discovering evidence that the other side has lied or engaged in criminal
or unethical conduct to better their position. Nothing sinks a case faster than if an opponent finds such evidence to
use against you. Although technology makes forgery easier all
the time, the same technology tends to make it easier to discover forgery. As a practical matter it takes some
degree of intelligence, expertise and practice to be a successful malfeasor. Cut-rate criminals and amateurs get caught,
and they pay the price. Once discovered to have engaged in forgery or
other dishonesty in a contested matter, credibility is gone and character-rehabilitation only goes so far. A documented
affirmative lie or forged signature is malevolent and reflects moral turpitude – two qualities that are very difficult
to compensate for when credibility counts. A fraudulent conveyance (basically
any transfer made to evade creditor claims, without receiving equivalent value in exchange) can lead to a separate lawsuit
to void the transfer, and it can implicate not only the transferor but also the transferee and any professionals involved
in the transaction. Certainly not all those involved may have liability, but the inconvenience and awkwardness of the
process won’t make anyone more sympathetic. Keep in mind
that debt arising from fraud is not dischargeable in bankruptcy. A practical example is found in credit card debt.
A typical defaulted account can be discharged. However under the revised Bankruptcy Code if the account was acquired
by fraudulent means (e.g., false income information) or for fraudulent purposes (e.g., without intent to repay charges) then
it is not dischargeable. Dissipation of assets and preferential
transfers (transfers to place them beyond reach of creditors or to favor one creditor over another) and fraud in a court setting
has other ramifications. Perjury is a crime. Fraud upon the court can give rise to severe sanctions. Fraud
in the bankruptcy setting can result in denial of discharge – even though your assets may still be collected, liquidated
and the proceeds distributed to your creditors. There are no
good answers in troubled times like these; there is no panacea and everyone should be prepared to make hard choices.
One choice that is routinely bad, however, is the one that involves fraud and dishonesty – even if you are being advised
to do it by someone who should know better. If you think things can’t get worse or you have nothing to lose, acting
surreptitiously might just prove you wrong.
NOTICE
The foregoing is not intended to constitute legal advice for any specific
circumstance, but is intended to reflect broadly applicable principles, under Minnesota law, relevant to a typical situation.
Each set of facts and each contract are, or can be unique; the unique facts and specific language of the contract may require
a different legal analysis and may result in a different outcome. Before proceeding in reliance upon this or any other general
description of law, consult with an attorney competent in the field of practice relevant to your situation.
Copyright 2009 Nash & Lodge, PLLP
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