The debtor doesn’t have it yet, but is expecting a major payment when a class action suit settles and he comes into more than $100,000. However, he is not the lead plaintiff and his name doesn’t appear anywhere you can see as it would on other kinds of litigation.
Among the hardest kinds of assets to track down, class action awards that have yet to be paid out appear nowhere on the public record.
One such case got wide attention last month when an Illinois couple was convicted of bankruptcy fraud for concealing a pending payout of $113,000 in a class action suit involving Vioxx. They got the money, just after debts of $25,000 were discharged in a Chapter 7 filing by a judge who had no way of knowing about this pending payment.
The tip-off came from the debtor’s class action attorney, who knew that his client had withheld the information about the pending payment from the bankruptcy court.
But absent a conscientious lawyer, how would you find evidence of a class action payment that’s on its way?
- Make sure to ask for it specifically, even if the statutory asset disclosure form in your state does not make class action awards a separate category. The reason you have to ask is that unless your debtor is the lead plaintiff, the list of class action plaintiffs is carefully protected by class action administrators, and isn’t even provided to the court as a matter of course. Claimant lists that do make it to court are not public documents.
- Interview people close to the debtor. We’re written extensively about the power of interviews on our other blog, The Ethical Investigator, here and here. If you were in line to receive $113,000, you could possibly keep that information from the bankruptcy court, but you would perhaps tell colleagues or friends about the settlement. The only way to reach those colleagues or friends is to call them and strike up a friendly conversation with them.
- Don’t pin your hopes on the Bankruptcy Trustee auditing process. While a powerful tool, audits have been performed on only a fraction of the consumer bankruptcies. As of March, probably because of the federal budget sequester, all audits have been suspended. If you want to uncover bankruptcy fraud, you’re probably going to have to do it yourself or hire someone to help you.