The news today reports that ex-baseball star Lenny Dykstra pled guilty to several counts of bankruptcy fraud in federal criminal court. The court's docket says:
The Defendant Lenny Kyle Dykstra (1) pleads GUILTY to Count 1s,10s,12s.
The plea is accepted. The Court ORDERS the preparation of a Presentence
Report. Sentencing set for 9/3/2012 01:30 PM
Mr. Dykstra filed bankruptcy in California back in 2009, after playing professional baseball for the New York Mets. There was a lot of activity in the case -- there are 528 entries on the docket -- and I have not slogged through them. The news reports are that he hid $200,000 worth of baseball memorabilia and other items from his bankruptcy trustee. Obviously the trustee found out about the hidden items and "turned him in" to the federal prosecutors.
Much like Denny Hecker here in Minnesota, this is an extreme case, likely prosecuted to send a message to other Americans who want to file bankruptcy.
Court cases abound with statements to the effect that "bankruptcy is for the poor but honest debtor". Most of the time the items that bankruptcy filers try to hide are far, far less than the amount of the debt they would have gotten rid of had they played straight with the bankruptcy system.
After all, the bankruptcy trustee cannot keep the items for himself or herself; the trustee has to liquidate the assets and turn them into cash. The obvious target audience is the person who filed the bankruptcy case. My experience is that bankruptcy trustees will gladly set up a payment plan for you to use to "buy back" your excess assets. And, remember, the assets the trustee can take are those which are above the exemptions the law allows. Minnesota law allows a person to keep a home with equity of more than $300,000; federal bankruptcy law allows a person to keep a home with equity of $10,100.00 and another $11,975.00 of any property. In both cases, this in addition to a modest car, retirement accounts worth up to $1,000,000.00, and about $10,000.00 worth of household goods.
The moral of this post: Level with your attorney and with your trustee about what you own. You can probably keep much more than you expect, and you can buy back the rest over time. The cost of doing so is surely much, much less than the penalty of getting your bills back, even though you filed bankruptcy, not to mention the possible criminal penalties.
