03 / 26 / 2014

Bankruptcy is no escape for fraudster as Vethan Law Firm, PC (“VLF”) obtains verdict excepting debt from discharge.

Oftentimes con men and bad actors abuse the bankruptcy process in an effort to continue taking advantage of the people from whom they have stolen.  While a fraudster may run, he cannot hide even in bankruptcy.  Someone who tries to use bankruptcy to escape fraud may soon find the long arm of the bankruptcy Court to be swift and harsh.  The Vethan Law Firm recently handled just such a case in the Southern District of Texas, and on December 6, 2013 obtained a verdict for our client despite the Defendant’s two bankruptcy filings in which he tried to escape judgment.

The Defendant had fraudulently obtained Plaintiff’s funds while in a Chapter 13 (a reorganization chapter) bankruptcy (having never told the Plaintiff he was in bankruptcy), then, without informing the Plaintiff, converted his bankruptcy case to a Chapter 7 (the liquidation chapter) bankruptcy.  Defendant maintained at trial that despite having taken the Plaintiff’s money by fraudulent misrepresentations and not having noticed him properly, that the money Defendant owed to Plaintiff was discharged by the bankruptcy.
VLF successfully navigated through two motions to dismiss and took the case to trial.  While the Court had previously precluded VLF from presenting certain witnesses at trial to show Defendant’s fraud (through other individuals whom the Defendant had also defrauded), VLF pressed forward and the Judge despite her previous ruling permitted VLF to present those witnesses at trial.
As an added bonus to the judgment against the Defendant, the Court made several fact findings including that the Defendant was not credible.  The resulting combination was the Court found “the creditor was not given the opportunity to timely file a proof of claim and timely request a determination of dischargeability.” Therefore, the Court held, the debt was not discharged and he remains fully liable for the money he defrauded from our client.

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