Monday, January 26, 2015

Debtor's Pre-Petition Transfers Result In Denial Of Discharge In Drumm

Many persons involved in trying to protect their assets choose to file for bankruptcy protection.  Bankruptcy protection is and should be a last resort.  It often creates more problems than it solves by getting a federal bankruptcy judge and bankruptcy trustee involved in determing one's fate.

Often a better plan is to institute a timely pre-claim arising asset protection plan and then: (i) attempting to negotiate delays and forebearance agreements directly with creditors; and (ii) if that fails fighting creditors trying to collect in state court rather than federal bankruptcy court.  I have helped several clients over the years renegotiate millions of dollars in secured loans rather than the creditor attempt to foreclose on the secured property, and kept these clients out of bankruptcy court and out from under the scrutiny of a federal judge and bankruptcy trustee.

Here is a recent case of showing bad untimely planning combined with filing for bankruptcy equals disaster for debtor.

David Drumm was the CEO of Anglo Irish Bank (popularly known as “AIB”) from 2005 to 2008. Along with so many other banks worldwide, the 2007-2008 crash carried AIB down, and in 2009 the Irish authorities placed AIB into liquidation, renaming it Irish Bank Resolution Corporation Limited (“IRBC”) in the process.

Drumm was gone by his time, having resigned in December of 2008. Unfortunately for all involved, Drumm when he left owed AIB/IRBC approximately $11 million from a personal loan made by the bank to him — apparently his only significant creditor.

To wash out the loan, Drumm filed a Chapter 7 bankruptcy petition in the District of Massachusetts. That Court appointed a Trustee, and soon thereafter both she and IRBC filed adversary complaints objecting to Drumm’s discharge. The Court consolidated the two adversary cases together, and held a trial over six days, the results of which were recording in the 75-page opinion of which I am about to relate.

The combined adversary actions resulted in no less than 52 different counts against Drumm, but they can mostly be distilled down to the common theme that Drumm intentionally hid his assets prior to filing for bankruptcy, and failed to disclose assets in his bankruptcy filings.

In a sense, this was a “Golden BB” strategy by the Trustee and IRBC, since if they could prove up only a single count, Drumm would lose his discharge. That’s how the trial shook out, as Drumm won on some counts, but lost on others — and lost his discharge.

Full Article: at http://www.forbes.com/sites/jayadkisson/2015/01/16/debtors-pre-petition-transfers-result-in-denial-of-discharge-in-drumm/?utm_source=followingweekly&utm_medium=email&utm_campaign=20150119

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