Bankruptcy Lawyer Bryan W. Stone answers the question: “What is Chapter 7 Bankruptcy?”
While earning a salary of over $90,000 as chairman of the Illinois parole board four years ago, Adam Monreal signed numerous sworn documents in his personal bankruptcy proceeding reporting his annual salary as $38, 676.
Because his reported salary fell below the $72,240 annual income guideline for a family of five (5) in Chapter 7 bankruptcy proceedings, Monreal and his wife Nora qualified for Chapter 7 protection. Their debts were forgiven and they were allowed to keep their car and $315,000 home under the exemptions provided in Chapter 7 bankruptcy.
He almost got away with it. However, in 2015 the Illinois-based Belleville News-Democrat ran a report about the discrepancies in Monreal’s bankruptcy filings, prompting an investigation by the governor’s office. Monreal was forced to resign from his position of meting out parole decisions to the state’s incarcerated population.
Now, the trustee in the reopened bankruptcy case is ordering Monreal to turn over a $330,000 inheritance from his mother after also failing to report that sum.
Monreal, who is also a former assistant district attorney, filed an amended bankruptcy petition last December. Besides the discrepancies in Adam Monreal’s income, a comparison of the original Chapter 7 filing and the most recent one show the following:
- Nora Monreal now reports that she makes $1,524 per month, or $18,288 per year. She reported no income whatsoever in the couple’s initial filing.
- The Monreals now list their total assets at $808,698. They listed them at only $361,262 initially.
- Their total liabilities remained at $438,000 in the new filing, but is not clear yet how much of the couple’s total assets will be exempt from being liquidated to repay creditors.
According to a former bankruptcy judge interviewed by the News-Democrat, the fact that the Monreals did not originally pay a cent to their creditors in the original Chapter 7 filing is not at all unusual. Approximately 92 percent of Chapter 7 cases do not result in any payments or distribution to creditors; Chapter 7 liquidation bankruptcy proceedings are usually only available to individuals who fall below a certain debt-asset ratio. Only debtors that satisfy the “means test” are eligible.
It is unclear whether or not the Monreals will still be eligible for Chapter 7 now that their true incomes are on the table. If the judge rules that they are not, the couple would be forced to convert their filing to a Chapter 13, which typically requires monthly repayments to creditors.
The judge will also rule whether the entirety of the inheritance Monreal’s mother left him is entirely exempt from payment to creditors. Normally, inheritances received more than 180 days after a bankruptcy filing are exempt from creditors because they are not being considered property of the bankruptcy estate.
In filing for bankruptcy, mistakes made in good faith happen when reporting income and assets. Bankruptcy fraud is a crime under federal law, but is not usually prosecuted except in the most egregious cases. While potentially plausible that the Monreals genuinely forgot to report the family inheritance when they initially filed, this non-disclosure coupled with the vast differences in their actual and reported incomes raise questions of bankruptcy fraud.
In addition to being a former prosecutor, Monreal also used to work as supervisor of the Worker’s Compensation Fraud Unit for the Illinois Department of Insurance. Prosecutors have not announced whether they plan on pursuing fraud charges against the disgraced former public servant.
If you are contemplating bankruptcy in the Charlotte area, please call the skilled lawyers at Arnold & Smith, PLLC find additional resources here. As professionals who are experienced at handling all kinds of bankruptcy matters, our attorneys will provide you with legally sound advice for your particular situation.
About the Author
Kyle Frost joined Arnold & Smith, PLLC in 2013 where he focuses his practice on all aspects of civil litigation and bankruptcy, including: Chapter 7, Chapter 11, Chapter 13, home loan modifications and landlord-tenant issues.
Born and raised in upstate New York, Mr. Frost attended the University at Albany on a Presidential Scholarship, graduating magna cum laude with a double major in Political Science and Sociology. He went on to attended Wake Forest University School of Law in Winston Salem, North Carolina.
Following college, Mr. Frost spent over a year teaching English in South Korea. He worked in a private school in Seoul developing curriculum, English programs, and educating both children and adults that were interested in learning a new language.
In his spare time, Mr. Frost enjoys homebrewing, fishing, and travelling.
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