A former Mets baseball player, Lenny Dykstra, has plead guilty to bankruptcy fraud, concealment of assets, and money laundering all stemming from a bankruptcy case he filed to get out from under over $31 million in debt. As punishment for these crimes, Mr. Dykstra was facing up 20 years in federal prison but received only 6 ½ months after pleading guilty to his crimes. What many people do not realize is that filing for bankruptcy is a very serious decision and can ultimately have very dire consequences if not done properly.
It seems that the former outfielder was trying to game the system, so to speak. As part of a bankruptcy petition you must file schedules that list all of your assets. That means you must list everything you own. Once you file a bankruptcy an estate is created, and the property you owned at the time of filing, with certain exceptions, is no longer yours. It instead becomes property of the bankruptcy estate for a period of time. This is because of bankruptcy code section 541 which states that the commencement of a case . . . creates an estate. This estate is comprised of everything you own at the time of filing and certain future interests you may have in property after filing. To protect these assets from creditors you must use bankruptcy exemptions. These exemptions allow you to protect your assets up to a certain dollar limit. If your asset value exceeds the exemption amount, you may have to liquidate the asset in order to pay your creditors.
Once you have filed bankruptcy, you are no longer allowed to sell or give away any of your property without permission from the bankruptcy court. Apparently Mr. Dykstra did not think this rule applied to him. In his guilty plea, Dykstra admitted that he had taken and sold property from his $18 million mansion, and then lied about it. This led to damages to at least 10 of his creditors, with each creditor losing between $200,000.00 – $400,000.00 each as the result of his crimes.
In a strange twist, Mr. Dykstra once touted himself as a self-taught financial guru. He formerly wrote a financial advice column targeted at picking stocks and also published the Players Club, a financial advice magazine specifically aimed at helping pro athletes manage their wealth.
Most people filing for bankruptcy do not have assets and debts in proportion to Mr. Dykstra. However, the same rules apply to everyone, whether you are a millionaire or someone who has been struggling to make ends meet for a long time. In either case, it is very important to hire experienced bankruptcy counsel who can advise you on your specific situation. However, it is also very important that you listen and follow your bankruptcy attorney’s advice. Your attorney’s job is to achieve for you the best possible outcome given your specific situation. But your attorney cannot do that unless you are being completely honest with them. Your attorney cannot protect you unless they know all the facts.
Mr. Dykstra’s case is an example of how serious a consideration filing for bankruptcy is. In order to do it right, you need to have an expert on your side that knows the law and that you can trust.
The Law Offices of Melanie Tavare is a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code
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