A Texas pastor and his wife who had been convicted of hurricane fraud in August of 2017 filed for Chapter 13 bankruptcy just a few months later in an effort to alleviate the stress of the debts they are facing. The couple stated that their debt liabilities are between $500,000 and $1 million and that their assets are worth about the same as their debt.
Bankruptcy is a tool that individuals and companies can use to reduce their debt loads and repay their creditors. Like any other tool, bankruptcy can be used in ethically questionable ways, such as filing for protection in an attempt to avoid making certain payments.
What is Hurricane Fraud?
In short, the couple was convicted of using money they collected through a nonprofit organization meant to benefit victims of hurricanes Rita, Dolly, Katrina, and Ike for their own personal use. Walter Diggles, one half of the convicted couple, served as a pastor at the Lighthouse Church in Jasper, Texas. While serving as pastor, he also served as executive director of the Deep East Texas Council of Governments (DETCOG) and operated a nonprofit known as the Deep East Texas Foundation. Federal money meant to aid victims moved through DETCOG, then to the nonprofit, then through the church’s accounts before withdrawing it for his family’s personal use. He was convicted of wire fraud, money laundering, and theft. His wife was convicted of wire fraud and money laundering and their adult daughter was found guilty of conspiracy to commit wire fraud. The family has not yet been sentenced.
Can Bankruptcy Protect the Couple from Forfeiture?
In December 2017, an assistant US Attorney asked the judge handling the case to order that the couple forfeit $971,143.57 of money and assets purchased with money that the couple obtained through their illegal actions. Requiring an individual charged or convicted with a crime to forfeit any assets obtained directly or indirectly through his or her criminal activity is known as civil forfeiture. The defendants requested and received extensions to file objections to this order, giving them until January 22, 2018.
When an individual or company files for bankruptcy, the automatic stay goes into effect. This is a required stop to all collection attempts from the bankrupt party’s creditors. In certain cases, civil forfeiture orders may be halted by the automatic stay. In others, they continue despite the stay. What happens depends on the specific circumstances of the case and the court handling it.
Work with an Experienced Chicago Bankruptcy Lawyer
Using bankruptcy to avoid paying restitution, fines, or compensation to victims can be a tricky foray into a legal gray area. If you are considering using bankruptcy this way, first consult with an experienced bankruptcy attorney to determine whether you can legally do so and what you should expect from the court if you choose to move forward with the bankruptcy. Contact our team at Newland & Newland, LLP today to set up your initial consultation in our office. We serve clients in the Arlington Heights, Palatine, Rolling Meadows, Libertyville, Mundelein, Buffalo Grove, Schaumburg, Elk Grove, and Itasca areas.
(image courtesy of Daniel Tseng)