With the lawsuit ending in a large money judgment in favor of the Judgment Creditor, the Debtor filed for bankruptcy in order to protect his personal assets. To collect on its judgment against the Debtor, the Judgment Creditor then filed a proof of claim as an unsecured creditor in the bankruptcy. The Judgment Creditor thought that it would eventually receive the proceeds of the bankruptcy estate with the Debtor’s assets, upon its liquidation by the bankruptcy court.
An investigation however, suggested that in order to cheat the Judgment Creditor out of its fair share of these proceeds, the Debtor had earlier mortgaged and given liens on all his property in favor of an offshore lender, Sham Creditor. The Debtor had agreed to these mortgages and liens in consideration of phony loans which he had defaulted on. Because of these phony loans and mortgages, Sham Creditor filed a secured proof of claim for millions in the Debtor’s bankruptcy.
Nobody knew at the time Sham Creditor filed its secured proof of claim that, (in anticipation of his bankruptcy), the Debtor had transferred millions prepetition to Sham Creditor through offshore bank accounts and a nominee. Nor did anyone initially know that Sham Creditor was just a shell corporation controlled by the Debtor through bearer shares, like the attached sanitized copy.
In fact, the Debtor pretended throughout his bankruptcy that his phony loans, mortgages and liens were all legitimate and that Sham Creditor was an ordinary arm’s-length lender. The Judgment Creditor soon realized that it would not be able to successfully compete with Sham Creditor for the limited assets in the bankruptcy estate. This was true because Sham Creditor had filed a secured proof of claim, (unlike the Judgment Creditor), and therefore had priority over the Debtor’s assets in the bankruptcy estate.
The Judgment Creditor finally accepted a settlement offer from the Debtor, who had agreed to pay just a small amount of the large money judgment / unsecured proof of claim. The Judgment Creditor had thrown in the towel because it lacked legally sufficient evidence that the Debtor had essentially filed Sham Creditor’s proof of claim by using: bearer shares, phony loans, a shell corporation and a nominee.
Copyright 2007-2008 Fred L. Abrams