24 Nov Your Bankruptcy Trustee Surfs Social Media Too — Or, How to Pay Twice for Your Luxury Vacation
A well-dressed, young couple was sworn in at their bankruptcy meeting of creditors (341 hearing). The trustee asked the usual questions.
“Your plan proposes to pay your attorney, the filing fee, pay off your car and some taxes, and nothing for the unsecured creditors,” the trustee summarized. “Yes,”the debtors and their attorney nodded.
What happened next was far from typical:
- Trustee: “You took a vacation last month on the Canadian Railway from Vancouver, British Columbia,to Banff in Alberta, ending in Calgary, didn’t you?“
- Husband: “Well, uh, yeah.“
- Trustee: “Who paid for that vacation?“
- <Long silence>
- Trustee: “And you flew to Vancouver and fly back from Calgary?“
- Wife: “Yes.“
- Trustee: “Who paid for the plane tickets?“
- Husband: “We did.“
- Trustee: “You stayed at some really nice hotels along the way.“
- Trustee: “The pictures on your Facebook page show you at Lake Louise. Who paid for that hotel?”
WHAT IS WRONG WITH THIS PICTURE?
The trustee is suspicious. He thinks these debtors ran up their debts for an extravagant vacation at the same time they are asking for help with their bills.
“This plan is filed in BAD FAITH,” the trustee says. He insists this couple pay for their vacation twice by upping the distribution to unsecured creditors in their chapter 13 bankruptcy by the amount they spent on the luxury vacation.
This spending does not pass the smell test. It looks really bad. The trip was right after the bankruptcy was filed before the meeting of creditors. The timing is horrible. This wasn’t a car trip to the next state to visit a sick grandma. The amount spent was extravagant.
It is possible there is a reasonable explanation, butâ€¦
A chapter 13 bankruptcy plan must be proposed in good faith to gain approval. Good faith is defined by the totality of the circumstances.
We’ll see what happens in this case. Ultimately, if the debtors and trustee disagree, the bankruptcy judge will decide if these facts add up to bad faith.
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