Abusing the Bankruptcy Laws
Here’s a very interesting twist. Did you know that you don’t have to go bankrupt to
take advantage of the bankruptcy laws? Several famous people have used the following
technique. It may sound attractive but I know the bankruptcy reform people are looking
into this particular tactic so this whole approach may soon be illegal.
One politician ran up his debts and when the bills arrived he filed for bankruptcy
protection. He then notified his creditors about his filing. This stopped them from
pestering him. But rather than going forward with the bankruptcy, he dragged his feet for
as long as possible.
After some time had passed, the judge finally gave the politician a deadline by which he had to submit the required personal bankruptcy financial disclosure forms.
When he received the court’s notification, he quickly started negotiating settlements
with his creditors. He offered them a dime on the dollar which they immediately accepted.
(They knew that they stood very little chance of recovering any funds at all if the
bankruptcy filing went through)
Pretty slick eh? He used the automatic stay to halt any collection activity and then used
the threat of a chapter 7 bankruptcy to pressure his creditors into settling for a dime on
the dollar. And the kicker here is that because he never actually completed the bankruptcy
process, he can pull this stunt over and over as often as he likes. The six year
limitation doesn’t apply!
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