Buying And Selling Bankruptcy Proofs Of Claim: Understanding The Risks

Overland Park Business Bankruptcy Attorney

Attorneys who deal with Chapter 13 and Chapter 11 cases will often see, in the claims registers listing the filed proofs of claim, corporate entities that have “bought up” proofs of claim from smaller creditors.  There are many companies, businesses, distressed debt investors, and hedge funds that specialize in purchasing bankruptcy debt.  There are also situations where larger creditors in Chapter 11 cases will make offers to buy the claims of smaller creditors, in an attempt to control the voting and direction of the Chapter 11 case.  Small creditors in bankruptcy cases may find themselves in confusion about what to do if they are contacted by a large organization asking to buy their claim.

What issues should be considered?  What are the advantages and disadvantages of selling a proof of claim?

Claims buyers can scrutinize bankruptcy court records and comb cases to see if it makes economic sense for them to purchase claims.  Claims buyers will prefer to purchase claims that are listed as “undisputed” rather than “contingent” or “disputed”, since undisputed debts are less likely to subject to litigation in a bankruptcy case.  They are seen as less of a risk.

Claims buyers will frequently sent out documents called “claim assignment agreements” or “confirmation” documents.  These documents should be reviewed carefully with an attorney with bankruptcy experience, before the claim is sold.  Things are not often what they appear.  Claims buyers have as their goal the maximization of their profit with a minimization of their risk.  With this in mind, let us examine the pros and cons of selling a bankruptcy proof of claim.

Pros

One of the most attractive reasons for selling a claim is the prospect of cash now, rather than the uncertainty of knowing when (if ever) the creditor will recover any funds in the bankruptcy estate.  Cash now has a real attraction to many small creditors who may not want to participate in the bankruptcy process.  Small creditors are enticed with the prospect of immediate liquidity, rather than dealing with the possibility of drawn-out legal proceedings.  Selling a claim now carries with it the perception of cutting one’s losses and eliminating future risk.  This “immediacy” value is the primary attraction of selling a claim.

Cons

But this immediate liquidity can be deceptive.  For one thing, it is important to remember that claims buys always want to buy at a steep discount.  It is a numbers game to them, and they buy claims in volume.  The amount you may be offered for your claim will be a fraction of what it may be worth.  Bankruptcy cases can be unpredictable.  Many cases that initially appear to offer nothing to unsecured creditors can generate significant funds down the road.  You never know when assets can and will be recovered.  To sell your claim too early can be a mistake.

  • Claims buyers often put crafty language into their “claim assignment agreements” that shift their risks back on to you, the seller.  Some of these provisions are buried in the fine print of the agreements.  Sometimes, language will be inserted that give the buyer the option of dumping the claim back on you (the seller) if an objection is filed to the proof of claim, even if the objection is later defeated.  Basically, the claims buyer can often use the fact of a claim challenge (by a bankruptcy debtor) to get its money back from a claims seller.  Objections to claims, preference actions, and other things that create work for a claims buyer can be used as a way of bailing out of their agreement with a claims seller.  Remember, the claims buyer is interested in making money with as little effort as possible.  Their goal is not to litigate claims in bankruptcy court.  Faced with a challenge, they will move on.
  • Another tactic used by claims buyers is to insert language in their agreements to require you (the seller) to defend the claim against possible objections at your own expense, and to pay the claims buyer back for any portion of the claim that might be disallowed.  The bottom line is this:  even after selling your claim, there is a possibility that you could incur costs in a bankruptcy case.
  • Your setoff rights may also be limited in a claim assignment agreement.  Some provisions of these agreements contain provisions limiting your rights to assert a setoff or recoupment against the bankruptcy debtor, or requiring you to pay back some (or all) of the purchase price if you do assert a setoff .
  • Unsecured creditors who may be serving on a creditors’ committee in a Chapter 11 case may have limitations on their rights to sell claims.  In some circumstances, there are confidentiality or other issues that will prevent such sales.  It is important to get legal advice in this type of situation.  Bankruptcy courts also sometimes restrict the rights of creditors from selling their claims.  Such rules are intended to prevent large institutional creditors from buying up claims and controlling the voting dynamics in Chapter 11 cases.  Another reason is to preserve the tax benefits of a debtor’s net operating losses (NOL), which can be lost if ownership of large amounts of claims changes.
  • When a claim is sold, a document called a “evidence of transfer of claim” is produced which is filed with the bankruptcy court.  As a safeguard against fraud, when such a document is filed, the seller is given an short opportunity to object to the transfer,  just in case the transfer was fraudulent.

Buying debt in bankruptcy cases, for large claims buyers, is all about making a profit.  Their goal will be to maximize their profit potential, while minimizing their risk.  Small creditors in bankruptcy cases should be aware of this.  The enticement of immediate money may be an illusion.  A small creditor who ignores the risks may find that he got more than he bargained for.  It is critical to consult with a bankruptcy attorney before selling your claim, so that you are aware of all the risks involved.

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Identity Theft And Identity Fraud Crimes In Kansas And Missouri

Identity Theft Attorney In Overland Park

Identity theft has been a growing problem for years.  Factors driving the increased prosecution of these types of cases is greater awareness of protecting personal information, the increasing use of identity theft in furtherance of undocumented labor, and the improved electronic security systems that are being implemented in the public and private sectors.  Both Kansas and Missouri have a specific set of statutes that are used to prosecute identity theft crimes, which are similar in some ways but different in others.  There are also federal criminal penalties for identity theft.

Missouri

Under Missouri’s laws, a person commits the crime of identity theft by possessing, using, or transferring (or attempting to possess, use, or transfer) the means of identification belonging to another with the intent to deceive or defraud (obtain something of value by deception).  RSMo. Section 570.223.

“Means of identification” is another way of saying “personal identifying information” and includes such things as social security numbers, drivers licenses, passports, birth certificates, bank accounts, credit cards, and any other information used to gain access to financial accounts.  Simply taking the information, with the intent to deceive or defraud, is enough to complete the crime, even if the information is never used.

Missouri also has a law which forbids the obtaining of a credit device by fraud.  Under RSMo. Section 570.135, it is a crime to (1) make a false statement regarding another person to procure a credit or debit card, or (2) to use another person’s personal identifying information (name, address, telephone number, driver’s license number, social security number, place of employment, mother’s maiden name, bank account number, or credit card number) to buy or try to buy goods or services or obtain credit in the victim’s name without the victim’s consent.  This law was primarily designed to target people who use others’ information to open false accounts or gain access to services.

In Missouri, it is a crime to use or possess means of identification in order to manufacture or sell false identification to people under the age of 21 for the purpose of purchasing alcohol. A teenager who possesses a fake identification card in order to visit bars has not committed identity fraud, but the person who made and sold the card may have committed a crime.  RSMo. Section 570.223.

A person who manufactures, transfers, buys, sells, or possesses with intent to sell means of identification in order to commit identity fraud commits the crime of trafficking in stolen identities. Possession of five or more means of identification for one person or the means of identification for five or more people without the victims’ consent and other than the defendant’s own means of identification is considered evidence of intent to commit identity theft.   RSMo. Section 570.224.)

The punishment for identity theft in Missouri depends on the amount of the resulting loss. For example, identity theft that results in theft of more than $50,000 is a class A felony, punishable by a minimum of 10 years in prison and a maximum of 30 years’ or life imprisonment. Identity theft that does not result in any losses is a class B misdemeanor, punishable by up to six months in jail and a fine of up to $500. For second and subsequent convictions, the penalties can be enhanced.  Trafficking in stolen identities is a class B felony.  It is a Class A misdemeanor to (1) make a false statement in order to obtain a credit or debit card; or (2) use a person’s personal identifying information to buy things or obtain credit without the person’s consent, or (3) use or possess means of identification in order to make false identification cards for minors.  See RSMo. Section 570.135, 570.223, and 570.224.  Class A misdemeanors are punishable by up to one year in jail, a fine of up to $1,000, or both.

Kansas

The relevant statutes are:

Making false information (K.S.A. 21-3711), forgery (21-3710), false impersonation (21-3824), and dealing in false documents (21-3830).

In Kansas, “identity theft” is defined as obtaining, possessing, transferring, using, selling, or buying another individual’s personal identifying information in order to (1) defraud anyone for the defendant’s benefit, or (2) impersonate or misrepresent the individual, causing economic or bodily harm.  See K.S.A. 21-6107.

In Kansas, however, “identity fraud” is distinguished from “identity theft.”  Identity fraud is defined as (1) using false information in order to obtain a document that contains personal identifying information, or (2) altering, counterfeiting, copying, or manufacturing a document that contains personal identifying information with the intent to deceive.  See K.S.A. 21-6107.

In Kansas, it is also a crime to (1) supply false information to obtain a copy of a vital record, or (2) manufacture, counterfeit, or alter any vital record, or (3) possess, obtain, or sell a vital record, intending to use it to deceive, or (4) copy, manufacture, or sell identification documents (including driver’s licenses, bank or credit cards, vital records, and social security cards) that contain fictitious names or false information.  “Vital records” include birth, death, marriage, and divorce certificates.  The primary intent here was to stop the trafficking in false records and documents.

Identity theft that results in monetary loss of more than $100,000 is a severity level 5 felony. Otherwise, identity theft, as well as identity fraud, dealing in false identification documents, and vital records fraud, is a severity level 8 felony.  But Kansas’s sentencing guidelines mean that possible punishments can differ from case to case, depending on a large number of factors.

Federal Level

The Department of Justice prosecutes cases of identity theft and fraud under a variety of federal statutes. In the fall of 1998, for example, Congress passed the Identity Theft and Assumption Deterrence Act. This legislation created a new offense of identity theft, which prohibits “knowingly transfer[ring] or us[ing], without lawful authority, a means of identification of another person with the intent to commit, or to aid or abet, any unlawful activity that constitutes a violation of Federal law, or that constitutes a felony under any applicable State or local law.”

18 U.S.C. § 1028(a)(7). This offense, in most situations, carries a maximum term of 15 years’ imprisonment, a fine, and criminal forfeiture of any personal property used or intended to be used to commit the offense.

Schemes to commit identity theft or fraud may also involve violations of other statutes such as identification fraud (18 U.S.C. § 1028), credit card fraud (18 U.S.C. § 1029), computer fraud (18 U.S.C. § 1030), mail fraud (18 U.S.C. § 1341), wire fraud (18 U.S.C. § 1343), or financial institution fraud (18 U.S.C. § 1344). Each of these federal offenses are felonies that carry substantial penalties ­ in some cases, as high as 30 years’ imprisonment, fines, and criminal forfeiture.

If you have been accused of an identity-related crime at the state or federal level, or are the victim of such a crime, it is important to consult with an attorney experienced in handling these cases.  Call us for a free consultation.

Read More:  White Collar And Financial Crimes

Recent Decision Sheds Light On Bankruptcy Courts’ Ability To Render Final Judgments On Fraudulent Transfer Claims

Overland Park Bankruptcy Lawyer

The Supreme Court’s recent (June 2011) opinion in Stern v. Marshall left open questions regarding the scope of a bankruptcy court’s jurisdiction to enter final judgments in adversary proceedings. Another recent case from the Ninth Circuit Court of Appeals, Executive Benefits Insurance Agency v. Arkison, shed additional light on the issue. The Ninth Circuit interpreted Stern itself. It held that a bankruptcy court cannot enter final judgment on a claim to avoid a fraudulent conveyance against a non-creditor to a bankruptcy estate.

Many fraudulent conveyance claims involve similar sets of circumstances. In Executive Benefits Agency v. Arkison, a debtor transferred assets (insurance commissions) to a recently formed company. The debtor then filed for bankruptcy. The Chapter 7 Trustee then sought recovery from the recently formed company (which was a non-creditor) by filing an adversary proceeding, to try to recover the insurance commissions for the benefit of the estate. During the litigation in bankruptcy court, the court granted the Trustee’s motion for summary judgment in the amount of $373,291 against the transferee (the company). The transferee appealed to the Ninth Circuit, disputing the authority of the bankruptcy court to enter a final judgment under Stern.

The issues were complex, but basically the Ninth Circuit held that fraudulent transfers do not fall within the “public right” exception laid out in Stern. There was an issue regarding the ability of bankruptcy courts to render final judgments on fraudulent transfers under the Bankruptcy Code as opposed to final judgments on transfers arising under state law. The Ninth Circuit held that there should not be a blanket “public right” classification for any claim based on federal law.

The Court went on to say that, although federal law authorizes bankruptcy judges to “hear and determine all cases under Title 11 and all core proceedings arising under Title 11,” the Constitution prohibits bankruptcy judges from entering a final judgment in core proceedings when the primary cause of action is not against a creditor to the estate.

The Ninth Circuit, having found an absence of authority for a bankruptcy court to enter a final judgment against a non-creditor on a fraudulent transfer claim, also held that another section of the Bankruptcy Code (§157) permits bankruptcy courts to submit reports and recommendations to the district courts in core proceedings. The Court was aware that this holding created some conflict and confusion among the other circuits, most notably the Sixth Circuit.

Although the Ninth Circuit found that a bankruptcy court lacked the authority to enter a final judgment in such a case, it nevertheless affirmed the district court’s opinion. It held that the defendant waived its right to an Article III hearing by litigating in the bankruptcy court without having raised any objection to that court’s jurisdiction to hear the fraudulent transfer claim. Since the Supreme Court issued its opinion in Stern in June 2011, there has been much dispute and discusson on the ultimate impact of the Stern opinion. Many voices have weighed in on this issue. With the Ninth Circuit’s recent ruling, it is now clear that litigants must be aware of how their circuit is interpreting Stern so that no rights or benefits are accidentally waived.

In the Ninth Circuit, following the Executive Benefits decision, a bankruptcy court’s constitutional authority may not extend to entering judgment on fraudulent transfer claims against a noncreditor. It seems advisable now that plaintiffs asserting fraudulent transfer claims in bankruptcy should either (1) bring their claims in the first instance before the district court or (2) request that the bankruptcy court propose findings of fact and conclusions of law, rather than enter a final judgment. In addition, defendants in all jurisdictions should be careful not to waive any Article III objections.

These types of litigation decisions are of particular concern to plaintiffs who may benefit from asserting fraudulent transfer claims before bankruptcy courts, which routinely hear such claims and will be experienced with handling them. In the end, it all comes down to a cost-benefit analysis. Every creditor will have to make his own decision in this regard. The convenience of bringing such litigation before a bankruptcy court will need to be weighed against the procedural issues that may arise because the bankruptcy court cannot issue the final judgment on such claims.

Read More:  Debts From Ponzi Schemes:  Dischargeable In Bankruptcy?

With Bankruptcy Discharge, School Cannot Deny Transcript

Overland Park Bankruptcy Attorney

Can a school refuse to issue a transcript to a debtor who had wiped out his outstanding balance owed to the school in a bankruptcy case?  No.  A recent case demonstrates the power of the bankruptcy discharge in dealing with all types of collateral issues that might come about from the wiping out of debts in a case.  In In re Moore, 407 B.R. 855, 861 (Bankr. E.D. Va. 2009), the United States District Court for the Eastern District of Virginia found that Novus Law School violated a discharge injunction by refusing to issue a transcript or award a degree to Moore, a law student, until he paid his outstanding tuition balance, which had been discharged in Moore’s chapter 7 proceeding.

The school in question here was an internet, non-accredited institution.  The debtor had completed his program at the school but still had an outstanding balance (about $6000) from his tuition bill (which was not part of a federally-insured loan obligtion).  The school inappropriately told Moore that they would not grant him a degree or issue him a transcript until his tuition was paid, even though the tuition was to be wiped out in the bankruptcy.

Moore, undeterred, filed a motion for contempt and sanctions against Novus, claiming that they had no right to refuse him his transcript or certify his graduate status to prospective employers, since such conduct was a violation of the bankruptcy discharge.  Novus disagreed.  The Court first had to find out if Moore’s debt was in fact a “student loan” that did not qualify for discharge under the bankruptcy rules.  Applying 11 U.S.C. Section 523(a)(8), the court found that the loan was not an educational debt within the meaning of the Bankruptcy Code.  Why?  Because it was not an “educational benefit overpayment” or a loan made by a governmental unit as a part of a government-funded program.  It was also not “an obligation to repay funds received as an educational benefit.”  Thus, the debt was discharged in the bankruptcy.

The next step in the analysis was deciding whether Novus’s actions (refusing to issue a transcript) were “attempts to collect a debt”.  The Court found that they were.  By refusing to issue Moore a transcript, the school was basically trying to compel him to pay his discharged debt.  This is the majority view.

By analogy, a good argument can be made that any attempt by a creditor, whose debt has been discharged, to compel a debtor into paying a discharged debt is a violation of the discharge injunction.  Refusing to release property, holding security deposits for debt collection purposes, stonewalling on information, denying rightful services, and any number of similar actions may all constitute violations of the discharge injunction.  Debtors should be aware of their rights, and bring such behavior to the attention of their bankruptcy attorney.

Read More:  Redemption Of Secured Collateral In A Chapter 7 Case

Recovering A Repossessed Vehicle After Filing A Chapter 13 Bankruptcy

If your automobile is repossessed before you file a Chapter 13 bankruptcy, the creditor will need to return the vehicle to you in most situations.  In some Chapter 13 scenarios, a case is filed right after a repossession has taken place, and a debtor will need to have the asset returned to him or her so that it can be taken care of in the Chapter 13 plan.  Can a creditor continue to hold the collateral, or must it be turned over to the Chapter 13 debtor? One case is illustrative.  In Thompson v. General Motors Acceptance Corp., 566 F.3d 699 (7th Cir. 2009), a court was called upon to determine whether an asset lawfully seized pre-petition must be returned to the estate after debtor files for chapter 13 bankruptcy, and if so, whether the asset must be returned even without a showing by the debtor that he can adequately protect the creditor’s interest.

In Thompson, the creditor (GMAC) repossessed a motor vehicle.  A few days later Thompson filed for chapter 13, and sought the return of his vehicle from GMAC through the automatic stay provision of § 362(a)(3), which provides that “a petition filed [for bankruptcy] . . . operates as a stay . . . of any act to obtain possession of property of the estate . . . or to exercise control over property of the estate.”  GMAC refused because it claimed that Thompson could not adequately protect its interest.  The court initially ruled against Thompson, but on appeal the Seventh Circuit reversed, finding that GMAC had violated the automatic stay by exercising control over the vehicle.  The court also found that GMAC could always ask for adequate protection payments from the court, so that its claim that its interests were in jeopardy was highly exaggerated.  In making its ruling, the court looked at the plain meaning of Section 542(a), as well as a Supreme Court decision (U.S. v. Whiting Pools Inc).  Basically, before any creditor can claim a need for adequate protection of its interests, the asset must be returned to the debtor.  Short of that, no rational way exists to evaluate a creditor’s assertions.   It should be noted, however, that another court has ruled differently.  In the Eleventh Circuit, a different position was taken in another recent case.

In Bell-Tel Federal Credit Union v. Kalter,  292 F.3d 1350, 1351–52 (11th Cir. 2002) the court approached the problem from a different angle.  It held that a secured creditor does not have to return a vehicle that was seized pre-petition.  While the Thompson court analyzed whether the car must be returned without a showing by the debtor that the creditor’s interest is protected, the Bell-Tel court focused on whether the car was even part of the estate. The Eleventh Circuit stated that if the property was not part of the bankrupt estate, then the debtor had no right to have the car returned. Section 541(a)(1) states that property of the estate includes “all legal or equitable interests of the debtor in property as of the commencement of the case.”

Since property seized before filing can be considered property of the estate only if the debtor still had a legal or equitable interest at the time of filing, the Eleventh Circuit looked to state law to determine whether the debtor had a legal or equitable interest in the car.  Specifically, the court looked to see if the creditor took legal title to the car when it was repossessed. The Eleventh Circuit found that, following repossession, the debtor held a very tenuous ownership claim on the car.  Because the car was not part of the estate, the court held that the secured creditor did not have to return the car.  Regardless whether we agree with the Eleventh Circuit’s analysis (shouldn’t any prepetition transfer, even an auto repossession, be part of the bankruptcy estate?  Why are voluntary transfers part of the estate, but not involuntary ones?)  the fact remains that this issue is an important one.

In our experience, it almost always happens that an auto repossessor will gladly return a vehicle to a debtor after the filing of a Chapter 13 case, as long as some provision for resuming payments is made in the plan, and as long as a case is filed without undue delay.  Creditors do not want to have to deal with used cars.  They want payments, not collateral.  Time matters as well. Once a vehicle is repossessed, it is critical to get a case filed as soon as possible.  The longer a debtor waits, the more it looks like he or she is not serious about getting the vehicle back.  Like so much else, those who fail to take timely action will lose out.

Read More:  Can Utility Service Be Disconnected In A Bankruptcy?

Violent Crimes

Overland Park Violent Crimes Attorney

Violent crimes are defined as those crimes involving force or the threat of force, or those that involve bodily harm to another.  It is not a precisely defined category, and authorities differ precisely on what may or may not be a “violent” crime.  Some types of offenses can be in more than one category of crime:  for example, aggravated sexual battery is both a sex crime and a violent crime.  Basically, a violent crime is one viewed as violent activity against a person or property that intentionally threatens or inflicts, or attempts to inflict, physical harm. Because of the seriousness of such acts and the potential damages that can result, violent crimes are typically prosecuted very aggressively by state and federal prosecutors.  In addition, alleged victims of violent crimes often have more involvement in the prosecution of these offenses than with other types of criminal offenses.

The following are some of the most common violent offenses.  Each of these offenses has a very precise definition, with very specific elements, that may vary between the states of Kansas and Missouri.  This listing is meant for general informational purposes. Some of these offenses are also commonly found as “inchoate” offenses:  that is, they are charged as “attempts” or “conspiracy” to commit the underlying offense.

Homicide.  The unlawful killing of a human being, which includes first degree murder, second degree murder, and the three forms of manslaughter.

Robbery.  The use of force, or threat of force, in the act of taking money or other property of another.  Bank robbery is prosecuted as a federal crime, as it involves federally insured depository institutions.  In many robbery situations, arrests are not actually made at the scene of the crime, but are dependent on surveillance videos, eyewitness recollections, and evidence left at the scene.  Evidentiary issues in these cases can be complex, and it is important to have an attorney who is aware of the nuances.

Assault.  The unlawful and intentional threat of inflicting violence on another.

Battery.  The actual and intentional touching or striking of another against their will, or the intentional causing of bodily harm.  This can be charged as an “aggravated” offense if certain other conditions are met.

Child Abuse.  The infliction of bodily harm on a minor child.

Kidnapping Or Criminal Restraint.  Abducting, imprisoning, or confining another against his or her will, by force or threat of force, and without legal authority.

Vehicular Homicide or Manslaughter.  Vehicular homicide cases can come about when someone is accused of reckless operation of a motor vehicle that has resulted in the death of another.

Because these charges are aggressively prosecuted and carry serious possible penalties, it is absolutely critical to contact an attorney at the earliest possible stages of the development of a case.  Under no circumstances should a person sit for law enforcement interviews, agree to polygraph examinations, or otherwise discuss possible criminal accusations with doctors or social workers, without first consulting a defense attorney.

Read More:  Sex Crimes In Kansas City 

Property Crimes

Overland Park Property Crimes Lawyer

Property crimes are very common, and involve the alleged taking of money or property.  These offenses are generally grouped into the following categories:

Burglary.  Burglary is typically defined as the unlawful entry into almost any structure with the intent to commit any crime inside. No physical breaking and entering is required; the offender may simply trespass through an open door. There need not be any forcible taking of property, like robbery, which is usually classified as a violent crime.  The definition of burglary arises out of state law, and thus, the components of the crime may differ slightly depending on the state. Federal criminal law incorporates the meaning of burglary used by the state that the crime occurred in.  Most states use the same basic definition of burglary:

  1. The unauthorized breaking and entry.  This can be actual breaking, or “constructive” breaking, with no force used.
  2. Into a building or occupied structure.  An abandoned structure generally will not qualify.
  3. With the intent to commit a crime inside.  The crime intended inside the structure need not be stealing; it can be any felony crime.  But the crime needs to be separate from the break-in itself.

Some states further divide burglary into “degrees”, that is, “burglary in the second degree”, etc, depending on the circumstances and on whether a person was in the residence at the time of the intrusion.

Shoplifting.  Generally, shoplifting is composed of two elements: (1) willfully concealing or taking possession of items being offered for sale; and (2) the intent to deprive the items’ rightful owner (typically the store) of possession of the items, without paying for the item. 

Bad Checks.  These charges come about when something of value has been received, in return for which the vendor got a “bounced” check.  These can be a grey area between civil and criminal law, and prosecutors can look to the overall circumstances.  Our experience is that too many of these charges are really civil collection matters, and do not belong in criminal court.  Depending on the situation, some prosecutors look for some higher level of “fraud” in these cases, such as closing the bank account, or if someone has put a stop-payment order on the check.

Theft. This is the taking of something of value from another, with the intent to deprive the owner of rightful possession.

Arson.  This is the willful or malicious burning of property.  It is often seen in conjunction with attempts to commit insurance fraud.  It is a serious felony and is investigated by very trained units.  These cases, while rare, can involve a high level of scientific evidence and expert testimony.

Tampering.  This is the interference in the ownership or possession of the property of another.  It is commonly found in relation to auto cases, or other transportable property.

Property Damage.  Depending on the level of damage caused to the property of another, this can either be a felony or a misdemeanor.  It can happen when someone attempts to degrade, deface, or destroy the property of someone else.

Each of these crimes listed here has specific elements that will differ from state to state. There may also be slight variations on what these offenses are called.  If you or someone you know is facing a charge involving an allegation of a property crime, you need to speak with an experienced attorney without delay.

Read More:  Drug Crimes

Domestic Battery Charges

Overland Park Domestic Battery Attorney

At Phillips & Thomas LLC, we have conducted many jury trials (in both Kansas and Missouri) on domestic violence cases, from low level misdemeanors all the way up to Class A felonies.  Domestic battery and domestic violence charges are a special subset of the category of battery charges.  Unlike regular battery, domestic battery by definition involves altercations between people who are either intimate with each other, or are close family members.  For this reason, there are special emotional dynamics surrounding these cases that must constantly be kept in mind.  It is not uncommon for the following things to happen:

  • The alleged victim may swing back and forth about whether to cooperate with a prosecution.  He or she may have been the one to call the police in the first place, and may not have anticipated that such a call would result in an arrest.  So, there can often be intense emotions going on that need to be taken into account.
  • The defendant may be unwilling to stop contacting the alleged victim by text, phone, or some other means.  Failing to comply with “no contact” orders from the court can be a serious problem with these cases.  It is important that clients understand that these court orders need to be adhered to very strictly.
  • There may be other friends or family members who insert themselves into the case, by calling the prosecutor’s office, law enforcement, attorneys, or other parties.
  • There may be connected or concurrent issues involving divorce, if the case is between spouses.  Domestic battery cases can often come about during the final stages of a failing relationship.
  • There may be connected or concurrent issues involving shared property, or property that one person has taken from another.

An attorney experienced with the nuances of domestic battery cases has seen all of these scenarios, and knows how to handle them.  Let us look in some more detail about how domestic battery charges come about.  Firstly, a battery is labeled “domestic battery” or “domestic violence” when someone allegedly commits the battery on any of the following persons:  boyfriend, lover, friend, child, family member, or appointed legal guardian of someone else.   If there has been an alleged offensive touching, it may result in a battery charge.  Simply calling the police to a residence can be enough to set in motion some serious consequences, and many people do not fully realize this.

Once an arrest has been made for battery constituting domestic violence, there are some key things that you can do in order to protect your rights. Of course you should contact legal counsel to represent you right away.  It may also be useful to document (with photos or through medical treatment records) any harm you may have been subjected to by another person’s conduct.  Do not violate any protective order against you.  Violating a court’s “no contact” order is itself a new criminal charge, and many prosecutors will not hestitate to add another charge to a defendant’s burdens.  Even if the alleged victim contacts you first, you cannot respond.  Your attorney can, on your behalf, seek to modify any court’s “no contact” orders.

There are often improper arrests in domestic battery cases.  This can happen because:

  • Police expect to make an arrest (of one or both people) when they are called about possible domestic violence.  Even if the alleged victim doesn’t want an arrest, they can be done out of “safety concerns” by the police.
  • Parties commonly are excited and agitated when contacted by police, and the police often make snap judgments on who was the “primary aggressor.”

Defenses.  Defendants have all the same defenses in domestic battery cases as they would have in regular battery cases.  It is extremely important to focus on the details of these cases so that the most favorable outcome–including dismissal–can be achieved.

Consent.  This is rare in a domestic battery scenario, but it can happen.  The idea behind this defense is that the alleged victim in the assault or battery charge “consented” to being subject to the physical contact or imminent danger of physical contact.  Essentially, the idea here is that people should be allowed to handle their own relations with each other, without interference from the government.  This defense is commonly found in sexually-related assault or battery cases.

Self Defense.  A person is permitted to use reasonable force when necessary to stop an attack on himself or herself, or when he or she reasonably believes that they are in imminent danger of harm.  The key word here is “reasonably.”  A person may cannot claim to be in fear of imminent bodily harm when an objective, neutral analysis of the situation shows he or she overreacted.  These types of situations are very fact-specific, and each case will be different.  The precise nuances of this general principle vary between Kansas and Missouri, and among many other states.  Often, a key question will be:  what level of force is permitted to repel an assault?  Under what circumstances does self-defense stretch into an offensive attack?

Defense of Others.  The situation here is similar to that of self-defense, but the focus is on the threat to some third party.  This may arise in scenarios where someone uses force to prevent harm not to himself, but to someone else.  And the requirements are generally the same, in that a person using force to protect someone else must have a reasonable belief that that person was about to be subject to imminent harm.  But the laws in Kansas and Missouri will vary on the degree of force permitted.

Insanity or Diminished Capacity.  These are rare.  They involve situations where a defendant may claim his action was not truly “voluntary” within the meaning of the law, in that he or she had some mental defect or was not able to appreciate the nature and consequences of his or her act.

Stating the general legal principles here is only the first step.  Everything depends on the facts of the particular case.  If you or someone you know has been accused of some type of assault or battery, you need an attorney with actual trial experience in this area of the law.  At Phillips & Thomas LLC, our experienced team of trial attorneys has handled these cases in jury trials and bench trials in Kansas and Missouri for many years.  Call us for a free consultation.

Read More:  Assault And Battery Charges 

Disorderly Conduct Charges

Overland Park Disorderly Conduct Lawyer

Disorderly conduct is a common misdemeanor charge.  It is generally up to the law enforcement officer’s own judgment whether he wants to arrest someone for the charge. Typical disorderly conduct (or disturbing the peace) charges result when the law enforcement officer is angry or frustrated with a situation he has been in where he feels control slipping away.  Fortunately, many of these cases are overreactions on the part of law enforcement.  They can arise during house calls from allegations of domestic abuse, or venues where alcohol may have been consumed and it is late at night, such as entertainment districts (Westport, or KC Power and Light), or at sporting events where large numbers of people are present.

Still, disorderly conduct laws differ significantly among states and municipalities, and the type of conduct covered by these laws and ordinances is quite broad. Broadly speaking, states and municipalities categorize disorderly conduct as any behavior that is likely to cause other people alarm, anger, annoyance, or an increased likelihood to engage in unlawful activity. Fortunately, disorderly conduct (or, in some jurisdictions, “disturbing the peace”) has a defined element of intent to it.  There needs to be some sort of intent to cause the alleged disorderly conduct or disruption.  And in many situations, this knowledge or intent (also called “scienter”) is lacking.

Disorderly Conduct, Disturbing the Peace, and Noise Violations

  • Fighting, tussling, or other allegedly violent behavior in public or private.
  • Excessive noise violations, possibly caused from playing music too loudly, or operating car stereos too loudly.
  • Noise violations.
  • Inciting or provoking a fight, or attempting to provoke a fight using abusive language or offensive gestures.
  • Behavior that attempts to disrupt business or government operations.
  • Refusal to leave some area when ordered by a law enforcement officer.
  • Alleged “mouthing off” or rowdiness to an officer.
  • Engaging in behavior that law enforcement views as as interference in his or her job.
  • Recklessly or willfully handling or displaying a deadly weapon or deadly instrument.

Some states and cities prohibit disorderly conduct in a public area, or conduct that disturbs the public order.  Other cities and states do not require the behavior to occur in public or affect the public. Public areas include such places as public restroom stalls, carnivals, hospital emergency rooms, and even private buildings available for public rental and entertainment. When the conduct occurs in private, it may satisfy the “public requirement” if there is some spillover effect of the private activity into the public domain.  It is not unusual for neighbors or neighborhood members to report each other for this type of violation.  But in many cases there is no public requirement.  In these situations, it is enough if a private person has been “disrupted” in some objectively unreasonable way.

Disorderly conduct crimes are misdemeanors.  For many people, this type of an offense may be their first exposure to the criminal justice system, and the process can be very upsetting and stressful.  If you have been charged with a disorderly conduct, noise violation, or peace disturbance charge, contact our office for a free consultation.

Read More: Drug Crimes  

Defalcation In A Fiduciary Capacity: Bankruptcy Adversary Proceedings Under Sect. 523(a)(4)

Overland Park Bankruptcy Lawyer

Adversary proceedings contesting the dischargeability of debt in a bankruptcy case are rare, but they do happen.  There are various types of nondischargeability actions that a bankruptcy debtor can face under 11 U.S.C. 523.  One of these is an adversary proceeding under Sect. 523(a)(4) for “fraud” or “defalcation” while “acting in a fiduciary capacity.”  This type of action is often brought as an additional count in an adversary petition along with other Section 523 claims, such as claims under 523(a)(2).  They seem to be appearing more often than in the past, as creditors increasingly seek to have commercial debts classfied as “trusts” or “trust fund proceeds.”

We have noted 523(a)(4) actions in an increasingly wide variety of scenarios, from money order debts issued by convenience stores, to actions under the Perishable Agricultural Commodities Act (PACA), to “floor plan” types of commercial loans for used automobile dealerships.  By seeking to have their debts considered trust fund debts, creditors can also make an end-run around the doctrine of equal treatment of similarly-situated creditors, and have their debts considered as priority or superpriority status.

A key issue in actions under 523(a)(4) is:  what is the precise definition of defalcation?  A recent Supreme Court case has finally clarified the definition.  The case is Bullock v. BankChampaign N.A. (No. 11-1518, May 13, 2013).  The issue faced by the Supreme Court in Bullock was what mental state would be required under Bankruptcy Code section 523(a)(4) for a debt owed by an individual debtor to be excepted from discharge because of the debtor’s “defalcation while acting in a fiduciary capacity.”  (Section 523(a)(4) in its entirety excepts from discharge any debt “for fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny.”)

The Court’s consideration of the case came as something of a relief.  The Court granted certiorari because the cases interpreting this statutory provision were split regarding where on the spectrum from negligence to actual intent one’s state of mind must fall so that the debt arising from defalcation of one’s fiduciary duty should be nondischargeable in bankruptcy.  For example, the First and Second Circuits required a minimum of “extreme recklessness.”  The Fifth, Sixth, and Seventh Circuits required a minimum of “objective recklessness.”  Mere negligence or innocent mistake was sufficient for the Fourth, Eighth, and Ninth Circuits.

The Court ultimately sided with the First and Second Circuits and adopted a mental state that embraces an “extreme recklessness” standard.  The Court agreed with the Second Circuit that adopting this mental standard “has the virtue of ease of application since the courts and litigants have reference to a robust body of securities law examining what these terms mean.”  The Court also held that a fiduciary’s conduct in handling the trust “must be of such a nature and degree that, considering the nature and purpose of the actor’s conduct and the circumstances known to him, its disregard involves a gross deviation from the standard of conduct that a law-abiding person would observe in the actor’s situation.”

So, the rule now is that the mental state required for “defalcation” by a fiduciary under Code section 523(a)(4) is basically equivalent to other fraudulent or felonious intentions characteristic of its statutory neighbors “fraud,” “embezzlement,” and “larceny”.  The Court cited the Model Penal Code in its decision, and basically heightened the level of culpability required for a creditor to meet its burden in a 523(a)(4) action.  No longer will a debtor’s mere mistake or simple recklessness as a trust fiduciary be enough for a creditor to win a 523(a)(4) judgment.  Now, a creditor/plaintiff will have to show a higher standard of “extreme recklessness.”  The distinction is critical.  And it will make a creditor’s job in a 523(a)(4) action much harder.

A key concept of bankruptcy dischargeability actions is that exceptions to discharge should be narrowly construed.  Applying a heightened intent standard for a debtor/defendant’s defalcation was consistent with the legislative intent of Congress in its formation of 11 U.S.C. 523, the Court said.  Summing up its philosophy, the Court noted, “In the absence of fault, it is difficult to find strong policy reasons for favoring a broader exception [to discharge] here…”

The Bullock decision finally removes some of the varying standards and interpretations in judicial circuits surrounding the meaning of “defalcation.”  As a practical matter in litigating 523(a)(4) actions, the creditor/plaintiff’s job has now become that much harder.  If you are facing an adversary proceeding in bankruptcy court, you need an experienced attorney.

Read More:  What Is An Adversary Proceeding?