$2.6 Million in Peanut Butter Dumped Into Landfill

Posted in: General Bankruptcy

One of my strongest memories of my “waste not, want not” household growing up was our disposal of peanut butter.  After knife scraping the jar, it was cut in half to allow even more precise access.  When we had extracted the last possible morsel, the half-jar was placed on the floor for the dog.  You haven’t had your daily dose of fun until you have watched a dog push a half-jar of peanut butter excitedly around a kitchen floor.  When the dog was done, the jar halves were rinsed and recycled.

Perhaps this memory is why the following story out of New Mexico irritated me so much.  Peanut processing plant Sunland filed for bankruptcy in 2013.  A salmonella outbreak at the plant and food recall in 2012 led to the filing.  Peanut butter, manufactured with peanuts owned by retailer Costco, has been stored in a warehouse since the filing.  This week, 25 tons are on their way to a landfill.

All parties involved agree there is nothing unhealthy or unsafe about the peanut butter.  Costco reportedly refused to accept shipment of the peanut butter, but also refused to allow the peanut butter to be donated to food banks or repackaged to be sold to institutions like prisons.  Without a consensus on disposition, the bankruptcy trustee stated he had no other choice.  The disposal will expedite the sale of the processing plant.

The peanut butter is estimated to be worth $2.6 million. The peanut butter will be put in with regular landfill waste, with the last truckload expected to arrive today.

Sbarro and Quiznos File For Bankruptcy

Posted in: General Bankruptcy

Pizza restaurant Sbarro filed for bankruptcy on March 10  This filing marks the second time in three years that the chain has sought bankruptcy protection.

The filing was a prepackaged Chapter 11 bankruptcy, meaning that Sbarro had negotiated with creditors prior to filing.  The creditors knew of the impending filing and thus had incentive to negotiate debt restructuring.  The plan is now presented to the bankruptcy judge for approval.  Under the plan, Sbarro seeks to reduce debt by about 80 percent.

One of Sbarro’s main challenges was a reduction in mall patronage during the recession.  Last month, Sbarro announced that it would close over 150 of its 400 company-owned North American restaurants.  Over 500 locations are owned by franchisees and will not be affected by the filing.

Also filing for bankruptcy last week was toasted submarine sandwich chain Quiznos.  Quiznos plans to restructure through a prepackaged bankruptcy to lose more than $400 million in debt.  Competition among quick-service restaurant chains likely affected both filings.  The CEO of the company said that going forward, Quiznos would look to reduce food costs, expand local advertising, and increase sales and profits for franchise owners.

California Man Sentenced to 17 Years for Bankruptcy Fraud

Posted in: General Bankruptcy

California man Steven Zinnel separated from his wife in 1999, and the parties’ divorce precedings became contentious. As often happens following a divorce, Zinnel filed for bankruptcy in July 2005.

Prior to the bankruptcy he hid millions in assets in shell corporations and other people’s names.  After he received his bankruptcy discharge, he laundered the money back to himself with the assistance of his attorney and co-defendant, Derian Eidson.  Eidson funneled the money through her client trust account and personal bank account, and awaits sentencing later this month.  Zinnel’s apparent reason for going to all the trouble was to hide assets that would have increased his child support obligation.

FBI investigators, called upon by Zinnel to investigate his ex-wife, instead turned their focus to uncovering his misdeeds.

In addition to the 17 year, 8 month sentence, Zinnel must pay a $500,000 fine and forfeit real estate and corporate assets worth nearly $3 million dollars.

Real Housewife and Husband Plead Guilty to Bankruptcy Fraud

Posted in: General Bankruptcy

Real Housewives of New Jersey star Teresa Giudice and her husband Giuseppe “Joe” each pled guilty on March 4 to three counts of bankruptcy fraud.  They also pled guilty to conspiracy to commit mail and wire fraud.  The couple entered the pleas as part of deal with prosecutors in the U.S. District Court in New Jersey.

They were originally facing trial on 41 indictments.  The bankruptcy fraud stemmed from the couple’s 2009 Chapter 7 bankruptcy filing.  Despite the airing of the reality show, during which the couple lived and spent lavishly, the Giudices listed on the petition that Teresa was unemployed and did not disclose her income from appearing on the show.  They also failed to list business and rental income.

Their sentencing will be held at a later date.  Teresa faces up to 27 months in prison, while her Italian citizen husband faces up to 46 months and possible deportation.  They must also forfeit any money obtained through fraud.

Consumer Financial Protection Bureau Files Suit Against ITT Tech

Posted in: Student Loans

The Consumer Financial Protection Bureau announced its lawsuit today against for-profit college ITT Educational Services (known around here as ITT Tech).  The complaint was filed in the U.S. District Court in Indianapolis.

The CFPB alleges that ITT misled students by overstating job prospects and graduation salaries.  The students were allegedly pushed by financial aid staff into taking out high-interest rate “Temporary Credit” during their first enrolled year, before they were eligible for federal assistance.

The CFPB further alleges that ITT knew students would face interest rates of up to 16%, and projected a 64% default rate on their private student loans.  Further, the CFPB alleges that students would remain stuck at ITT because their credits would not transfer to more affordable public or not-for-profit schools.

CFPB Director Richard Cordray compared the for-profit college market to the predatory mortgage lending that led in part to the ’08 financial crisis.  He stated, “(m)oving forward, the Consumer Bureau will subject the financial products and services offered by for-profit colleges and their partners to the same standards as any other consumer financial product or service.”

New Legal Handbook for Tennessee Seniors

Posted in: Debt Collection, Other Areas of the Law

The Tennessee Bar Association‘s Public Education Committee has provided The Legal Handbook for Tennessee Seniors, updated for 2014.  The book provides helpful guidance for Tennessee seniors and their families on a number of issues, including social security, retirement accounts, veteran’s benefits, tax relief, Medicare, long-term care, housing, grandparent visitation rights, and estate planning.

The handbook also contains helpful information for people of any age on the general topic of consumer protection.  Topics covered include credit cards, resolving billing errors, debt collection, deceptive sales practices, and scams.

The handbook is provided free and can be downloaded here.

Detroit Files Proposed Plan to Restructure Debt, Exit Bankruptcy

Posted in: General Bankruptcy

On Friday, Detroit’s emergency manager filed a proposed plan of adjustment in the city’s bankruptcy case.  The document lays out a plan to restructure debt and exit the largest municipal bankruptcy in United States history.

The plan calls for spending $1.5 billion over the next ten years on improvements to the city, including blight removal, technology upgrades, and infrastructure repairs.  These investments aim to prevent further population loss and revitalize the city once known as the Paris of the West.

The plan relies on state and private donations to prevent the sale of city-owned art pieces at the Detroit Institute of Arts.  The DIA has pledged to raise $100 million for city pensions and will take control of city-owned art.

The bankruptcy’s impact will be felt heaviest by non-uniformed city retirees, who would see their pensions cut by nearly one-third if the plan is approved.  The plan would spare pensions for police and firefighters somewhat, with those pensions cut by only ten percent.

The plan faces numerous challenges before its final approval, with many points being negotiated in continuing mediation sessions.  The city retirees have argued that their pensions are protected under the Michigan state constitution.  The court ruled in December, however, that the bankruptcy case controls the pensions just like Detroit’s other financial obligations.  That ruling is being appealed to the Sixth Circuit.

Two, Four, Six, Eight. How Long Do I Have to Wait?

Posted in: Before Filing, General Bankruptcy

When you want to file for bankruptcy protection, but have already filed before, how long do you have to wait in between?  While technically you can refile at any time, your goal is probably to obtain a discharge of your debts.  In that case, you must carefully time the filing of your next bankruptcy petition.

I have filed a Chapter 13 before, and now I want to file another Chapter 13.  Have more than two years passed from the prior filing date?  If yes, you may proceed.  You can also file at any time but you will not be eligible for a discharge.

I have filed a Chapter 7 before, and now I want to file a Chapter 13.  Have more than four years passed from the prior filing date?  If yes, you may proceed and be eligible for a discharge.  If less than four years have passed, you can file to stop foreclosure and catch up your mortgage arrears, but you won’t get a discharge.

I have filed a Chapter 13 before, and now I want to file a Chapter 7.  Have more than six years passed from the prior filing date?  If yes, you may proceed.  Also, you may proceed if you paid 100% of unsecured debt in your prior repayment plan, or if you paid 70% and your repayment plan was offered in good faith.

I have filed a Chapter 7 before, and now I want to file another Chapter 7.  Have more than eight years passed from prior filing date to current filing date?  If yes, you may proceed.


Tennessee Attorney General Files Suit Against Vacation Timeshare Company

Posted in: Other Areas of the Law

Tennessee Attorney General Robert Cooper announced in a press release today that the State filed a lawsuit against a vacation timeshare membership club.  The club, compromised of Festiva and various affiliates, is accused of using fraudulent and deceptive tactics against Tennessee consumers.

The complaint cites to the  Federal Telemarketing Act and the Tennessee Consumer Protection Act.  The State alleges that Tennessee consumers were led to believe they had won a prize, but in order to claim the prize were required to attend high-pressure sales presentations.  The complaint also alleges that terms of membership programs are confusing, difficult to use, and differ from what was represented to the consumer at the sales presentations.

Those who purchased memberships claimed to be unable to schedule their vacations due to the resorts being fully booked.  They claim they then lost vacation “points” after being told they could save them for use in the next year.

Tennessee is not the first state to call out the company on these alleged practices.  Festiva was sued by the states of Maine and Louisiana just last month.  Attorney General Cooper stated that “(i)f you are tempted by a travel or vacation company that uses high pressure sales, it’s probably best to take your time and do your homework before you pay thousands of dollars and commit to paying maintenance fees and special assessments.”  Consumers affected by the situation are encouraged to visit www.tn.gov/consumer to report their complaint.

Debt Collector Pays Fines and Restitution In New York State

Posted in: Debt Collection

A man who operated several debt collection companies over the last five years reached a settlement with the state of New York last month.  According to the Buffalo News, the man allegedly operated his company using illegal debt collection practices. Joseph Bella’s debt collection companies operated for just a short time, then closed up shop to move to a different location under a different business name.

Pay day loans, where a debtor borrows money at a high interest rate in anticipation of paying off the loan with their next paycheck, are illegal in New York.  Despite this, Mr. Bella continued to offer these loans and then attempt to collect on them.

The companies sent requests to debtor’s employers requesting illegal information such as their social security number, hourly wage, and dates of hire.  The companies also sent letters to debtors using the name of an attorney.  However, the attorney had never reviewed the files or determined whether a letter could legitimately be sent.  They continued to reference the attorney’s name even after that attorney no longer worked for them.

Under the terms of the settlement, Mr. Bella agreed to cease the above-referenced practices.  He did not, however, admit any wrongdoing.  He will pay a total of $165,000 in restitution to affected debtors and penalties to the State of New York.  New York Attorney General Eric T. Schneiderman stated that he was “pleased that consumers who paid on payday loans will receive full restitution and Bella will receive heavy penalties.”