Bankruptcy Indiana

Some big business headlines in the Indianapolis Star are focused on big creditors who are suing debtors.  Wells Fargo Bank has sued eight executives of Carmel, Indiana real estate developer Lauth Group and four of their wives.

My work as an Indiana bankruptcy attorney involves individual consumers and businesses much smaller than Lauth, but the case brings to mind some blog posts I've written about the importance of full and honest disclosure of assets in the bankruptcy process.

The Lauth case is still in progress, and of course I have no knowledge of whether the allegations of concealment of assets will prove valid.  However, I do want to review the principles at stake here.  About a year ago, in comment on boy band producer Lou Pearlman's bankruptcy, I reported to my bankruptcy blog readers that Pearlman had been accused of omitting details about assets he owned in his report to the bankruptcy court.  I explained that the bankruptcy system is designed to protect the rights of both debtors and creditors, and that, when debtors don't fully disclose their assets, they are cheating creditors out of their rights.

One crucial aspect of my work as a bankruptcy lawyer involves helping clients prepare Official Bankruptcy Forms. What I find is that even clients who have every intention of reporting their assets honestly need expert legal help in properly completing those forms.  The consequences of omitting important facts are dire - debts might be deemed forever non-dischargeable through bankruptcy, and there could be fines for failing to correctly provide the information.

The forms, which include Schedules of Assets, Schedules of Debt, and a Statement of Financial Affairs, are usually filed together with the Petition of Bankruptcy, but they could be filed at any time within the 15 days following the filing.  If the deadline is missed, the bankruptcy itself will be dismissed.

Back to the Wells Fargo vs. Lauth case, the bank is saying that Lauth executives transferred personal assets (which had been used to guarantee the bank loans) to their wives or to family trusts specifically to avoid having to use those assets to repay the loans. 

Whatever the final outcome of the case, the lawsuit serves as a reminder than lying in bankruptcy court is a very, very bad idea!