Question

(TCO G) Looking into the future, Jared worries that he will lose his life savings and his company. Over the past 40 years, Jared has worked hard to earn his money. Being involved with a partnership heading towards bankruptcy, Jared realizes that he can lose everything he owned. After speaking with several close relatives, Jared realized he could give the money to relatives for a short time. Jared considered it a long-term loan that he really wouldn't report to the bankruptcy trustee in the future. After loaning the money, Jared only had $20,000 that the creditors could take. Smiling secretly to himself, Jared signed the bankruptcy petition that would free him for the rest of his life. Required: (10 points each) 1. What are some of the issues that the bankruptcy trustee needs to examine? 2. What could the fraud investigators do to find the money Jared transferred? 3. What kind of punishment could Jared receive for the above act?

Answer 1

Issues that Bankruptcy trustee to examine:

1. Trustee should examine complete debtors property.

2.Also should examine the creditors claim.

3.Trustee should examine the basic petition of bankruptcy before taking up and objecting it with strong justifications.

4.Also should review his loan lending to relatives which is inconsistent with the law.

5.The trustee has to examine the complete books of accouts (assets, liabilities, income and expenses)

6.The trustee should examine the assets his company held which are not exempt.

7.The trustee to examine all the payments made by debtor to all the related parties last 1 year

8. Trustee can examine if the business can be continued with the courts approval for the benefit of the creditors.

9.Review and ask for credit counselling form from an approved agency

Fraud Investigators:

1. The non disclosure of loan transfer to Jaders relatives results in inappropriate action under bankruptacy laws.

2. Such transactions should be disclosed before the truste before filing petition.

Punishment to Jared:

1. Non disclosure or non compliance will attrach strict punishment may attract imprisonment or fine or both.

2. Sometime imprisonment may go upto 20 years.

3. Fine can go upto 2,50,000 dollars.

4. Partnership will be terminated once the petition is filed by any one of the partners.