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South Florida bankruptcy trustee accused of misappropriating funds

Chapter 7 bankruptcy is often referred to as "liquidation bankruptcy" because it sometimes requires debtors to liquidate assets and use the proceeds to pay back creditors before they are given a discharge of their debts. When liquidating assets is required, a bankruptcy trustee usually becomes involved.

Bankruptcy trustees are responsible for liquidating assets and making sure that the proceeds are used to repay creditors properly. In a sense, trustees are integral in the process to help debtors complete the chapter 7 bankruptcy process. Unfortunately, those trustees are not always as responsible and ethical as they should be.

Earlier this month, the United States Attorney in Miami charged a South Florida bankruptcy trustee with misappropriating millions of dollars in funds from bankruptcy petitioner's accounts. The people who filed bankruptcy trusted the woman to correctly repay their debtors according to their bankruptcy requirements, and she violated that trust. She also broke the law.

She has officially been charged with "conspiracy to commit wire fraud," and her lawyer is reported to have said that she plans to plead guilty. She is expected to cooperate with authorities to make restitution to the debtors and creditors who were hurt by her actions. Even so, a conviction could lead to a maximum sentence of 20 years in prison.

For individuals considering filing for chapter 7 bankruptcy, this kind of scandal can be frightening. It takes courage to decide to file, but to do so without confidence in your trustee's ethics may be even more difficult. However, individuals who qualify for chapter 7 bankruptcy should speak with an experienced attorney. A lawyer who understands the system can give you the confidence you need to get the debt relief you deserve.

Source: Wall Street Journal Bankruptcy Beat, "U.S. Accuses Ex-Chapter 7 Trustee Of Bilking $16M," Rachel Feintzeig, 4 March 2011

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