Bankruptcy Lawyer Bryan W. Stone answers the question: “What are North Carolina’s exemptions?”
In the various stories we discuss on this blog, we frequently include warnings against hiding assets when filing for bankruptcy. One particular case this summer provides an illustration of precisely why doing so can land you in hot water—and prison.
The case comes out of Topeka, KS, where real estate developer Kent Lindemuth has been indicted on 103 counts of bankruptcy fraud. Lindemuth filed for two reorganization bankruptcies back in November of 2012, one corporate and one personal. He reported debts of more than $3.5 million, and the bankruptcies were carried out and administratively closed at the end of 2015.
The indictment against him alleges that in the time span between filing and closing his bankruptcy cases, Lindemuth purchased more than $80,000 worth of handguns without disclosing the purchases—or the money he used for them—to his bankruptcy trustee or creditors.
Federal law dictates that any property acquired after a bankruptcy filing, but before the bankruptcy is complete, belongs to the bankruptcy estate. This makes the property eligible for liquidation, the proceeds of which can then be used towards the debt and at least partially reimburse the creditors to whom the debtor owes money.
If convicted, Lindemuth could face up to five (5) years imprisonment on each count under federal law (which could easily add up to the equivalence of a life sentence for the 64-year-old developer) and fined up to $250,000 on each count (a total of over $25 million).
Lindemuth pleaded “not guilty” to all 103 counts, after which his attorney asked the court to designate the case as “complex,” which would provide the defense more time to respond to the charges.
A case can be classified as “complex” litigation under state and federal law if it meets certain requirements. If a case involves multiple jurisdictions, multiple plaintiffs, novel legal issues for the court’s jurisdiction, or unique fact scenarios, it can work to qualify a case as complex.
Although it may seem like a simple and obvious concept that the allegations against Lindemuth would be fraudulent, the judge in his case did agree that the case qualified as complex litigation and granted his attorney’s request for extension.
In his granting of complex status, the judge noted that the bankruptcies from which the charges arise involve a bankruptcy estate of more than $40 million, more than 20 creditors, 13 businesses, volumes of evidence, and charges that span more than a year in time. The fraud case will have many witnesses and both sides are expected to use expert witnesses in large asset accounting and bankruptcy proceedings. Investigation necessary for Lindemuth’s defense is also expected to take longer than is normally permitted by the Speedy Trial Act.
A trial date has not yet been scheduled, so we’ll have to wait and see if Lindemuth has sufficient time to mount a credible defense to the charges against him.
It is worth pointing out that although Lindemuth’s actions, if as alleged, seem like no-brainers of what not to do in a bankruptcy proceeding, far less obvious actions have alerted the bankruptcy courts and trustees to fraudulent activity in bankruptcy in the past. Bankruptcy provides federally administered relief for the “honest” debtor, and the government utilizes the full weight of its considerable resources to ensure that parties do not attempt to take advantage of the system. This is to say, if you move assets around in bad faith in a bankruptcy case, don’t expect to slip under the U.S. Bankruptcy Trustee’s radar just because your actions don’t amount to buying a medium-sized arsenal of weapons after filing and hoping to go unnoticed.
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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