The topic of asset forfeiture is not uncommon in legal defenses, criminal prosecutions, and law enforcement. Bankruptcy is another topic that is usually debated within the judiciary system. Bankruptcy could and does affect asset forfeiture. Asset forfeiture laws give law enforcement officers the power to seize property considered as proceeds of crime. Prosecutors and the government are using this tactic to battle against corruption and sale of illicit substances and narcotics.
You could challenge asset forfeiture in court if your property gets seized following a criminal investigation. Many states’ laws require that the prosecution must provide proof beyond a reasonable doubt that your assets are subject to forfeiture. However, some law enforcement officers abuse asset forfeiture laws and attempt to channel assets they seize into the government agencies. Thus, the federal asset forfeiture program stipulates what law enforcers can keep after a seizure. However, every state entails its laws that control asset sharing.
If charged with criminal activities, you have numerous defense options. Apart from common legal defenses, the defendant could file for relief in bankruptcy. If your assets have been seized for any criminal or civil case, contact the Asset Forfeiture Attorney. We help clients to recover seized assets and forfeited property across the country.
The Purpose of Asset Forfeiture
The federal government has used asset forfeiture for a long time in many forms. According to federal law, property/ asset forfeiture refers to the process where your rights to particular property get completely stripped following your crime commission. Forfeiture statutes are legal where they affect only assets that are instruments and proceeds of crime.
Property Forfeiture and the War Against Crime
Following a high crime rate, especially drug sale and abuse, both the federal and state governments enacted forfeiture laws to support law enforcement agencies in fighting crime.
For many years, jailing criminals and drug lords have not helped much to disband illicit networks and cartels. Convicted criminals could still manage and oversee their gangs from prison. The amounts of money and worth of assets involved in the business of drugs are exceedingly high, and this resulted in the continuation of narcotics business. To bring the illicit trade to an end, the government enacted the forfeiture statutes that involved seizing assets connected to criminal activities.
Congress implemented the Comprehensive Drug Prevention and Control Act and the Racketeer Influenced and Corrupt Organization (RICO) in 1970. These two laws entailed criminal forfeiture for the first time on American soil to stop narcotics and drug business.
In 1984, due to limitations and uncertainties noticed in the statutes, Congress amended them and included the items that law enforcement can seize real property. The amendment allowed prosecutors to take profits that the criminal and drug lords made.
Legal Definition of Bankruptcy
Bankruptcy allows you or your company to get excused from paying a debt to meet your financial needs. The federal law controls bankruptcy in America. Under federal law, there are two main forms of bankruptcy, namely:
- Liquidation bankruptcy (chapter 7). Here, you, as the debtor, are required to give out your property for sale, and the returns shared between creditors. After surrendering your property, all your debts get settled permanently.
- Reorganization bankruptcy (chapter 13). You are allowed to remain with your property but promise to repay the debts in installments
The process of filing for bankruptcy entails filing a petition and paying specific fees in court. In the appeal, you should include information like your income, assets/ property, expenses, and money you owe creditors.
The most common bankruptcy, chapter 7, requires that you hand over all “non-exempt” assets to a bankruptcy trustee. Non-exempt property is that which you are not allowed to keep while with the exempt property, you could keep property like household stuff, clothes, tools you use to earn income, the cars you use to take your kids to school and go to work, and your family home. The supervising officer sells the non-exempt property and pays the creditors with the proceeds. After the process, creditors are prohibited from collecting any other debt from you.
Using Bankruptcy As a “Defense”
Since the passing of the forfeiture law, prosecutors have used this jurisdiction to seize the property of criminal suspects. While there are many legal defenses you could use in such an event, some suspects consider filing for bankruptcy.
If you are charged with crime and file bankruptcy, the bankruptcy court takes control of your property. According to the Bankruptcy Code (section 326(a), there are exceptions to which the bankruptcy court could protect your estate.
After successfully filing with the bankruptcy court, you should continue attending court proceedings at the state/ district court. Whether or not you are convicted for a criminal offense, asset forfeiture leaves a deep hole in your financial life. You need to hire an experienced asset forfeiture lawyer to help with a successful filing of bankruptcy. You also need a lawyer if your property to get unlawfully seized in a criminal investigation.
Benefits of Bankruptcy Limits in Chapter 7 and 13
Filing for bankruptcy when struggling with numerous debts could offer relief to some extent. Bankruptcy status could halt telephone calls from creditors, some lawsuits, salary garnishment, and asset forfeiture. Bankruptcy could also do away with other forms of debt like personal loans, medical bills, balances of credit cards, and much more.
However, your bankruptcy status cannot prevent some obligations and creditors. For example, you must settle your student loans if you cannot offer proof of hardship, alimony, tax debts, and child support.
Halt Harassment from Creditors and Prosecution
The bankruptcy court orders an "automatic stay" in the instance you successfully file for bankruptcy. The stay helps cease forfeiture proceedings in lawsuits, creditors, and salary garnishments. However, your criminal case should proceed as normal minus asset forfeiture, and your creditor could request for support payments.
Temporarily Halt Repossession, Eviction, and Foreclosure
The bankruptcy court’s order could halt all these if they are still pending:
- Evictions. An eviction process stops once you file bankruptcy. However, if the court has already passed your eviction judgment, a bankruptcy cannot help you
- Foreclosure/ repossession. An automatic stay halts repossession and foreclosure, but if you file for Chapter 7, the bankruptcy statute cannot help keep your assets
Eliminate Nonpriority Unsecured Debts and Credit Card Debt
If you file for bankruptcy following a criminal charge debt that gets wiped out, include unpaid gym memberships, unsettled utility payments, overdue medical bills, and personal loans. The rate at which your debts get cleared hangs on the bankruptcy chapter you file. For example, if you file chapter 7 bankruptcy, clearance could take around three to four months, and, if you opt to go the chapter 13 bankruptcy way, you must repay a fraction of your unsecured debts per court agreement (typically, three to five years)
Eliminate Secured Debt
Bankruptcy could also eliminate secured debt like car repayment and mortgage. However, you cannot keep your car, home, or the collateral used to secure the payment.
Debts That Survive Chapter 13 Bankruptcy
Chapter 13 bankruptcy stipulates that you should repay some debt through an agreed period. You could pay non-priority creditors, unsecured loans, and have the rest of the debts discharged when your bankruptcy ends.
What Debts Are Not Dischargeable Under Chapter 13 Bankruptcy?
Chapter 13 bankruptcy cannot discharge debts you are ordered to repay in fines or compensation after a court order or conviction for criminal offenses.
Domestic Support Responsibilities
Bankruptcy, whether chapter 7 or 13, cannot discharge support obligations like alimony and child support if your ex-spouse files a support lawsuit. You are required under Bankruptcy Code to settle domestic-related support fully if the court orders so.
Criminal Penalties/ Fines You Owe a Government Agency
Chapter 13 bankruptcy cannot discharge the debt owed to a government agency, subject to fines, punishment, or asset forfeiture.
A chapter 14 plan requires that you pay priority debts like income tax debt due in the last three years before filing for bankruptcy.
An asset forfeiture attorney is a must-have, especially if your chapter 13 concludes prematurely. Refusing to pay taxes in the US is a serious crime, and if charged, the prosecution could push for property forfeiture. Your lawyer could help change your Chapter 13 to a Chapter 7 bankruptcy.
Driving Under the Influence Debts
Driving under the influence is a serious traffic offense. Things get worse when your DUI offense causes the death of someone else.
If someone else is injured, bankruptcy cannot discharge your debts if the prosecution proves beyond a reasonable doubt that you drove while drunk and caused harm. However, bankruptcy could discharge property damage that results from your DUI.
Debts Resulting from Crimes You Committed Maliciously and Willfully
The court cannot discharge judgment a creditor obtained against you in for harm you caused to someone else. These types of debts where malicious and willful intent is involved are not dischargeable.
However, in chapter 13, the creditor must provide proof in court to have the debt not eliminated. Also, while chapter 7 allows the creditor to pursue debt resulting from property damage, chapter 13 only allows the creditor to pursue debt resulting from wrongful death and bodily harm.
Creditors and Debts, You Don’t Disclose
When filing for bankruptcy, you want to detail all your creditors, including their present addresses. The bankruptcy court contacts your creditor before discharging the debt. If you omit a creditor, then the debt survives your bankruptcy.
Other types of debts that Chapter 13 bankruptcy cannot discharge are fraudulent ones. However, the courts allow for the debts discharging if the creditor fails to offer proof of fraud in court.
Laws That Allow Asset Forfeiture
Over 200 federal laws allow forfeiture of property in the US. Common federal forfeiture laws involve criminal offenses like:
- Obscenity and child exploitation
- White-collar criminal offenses
- Crimes involving drugs and narcotics
US C 853 Title 21 stipulates the legal framework for asset forfeiture in lawsuits entailing federal drug offenses. Under subsection (a), if you get convicted for any drug crime, you should forfeit to the federal government all proceeds you gained from the offense. The statute also requires you, if convicted, to forfeit to the American government all instruments used to facilitate your crime commission.
The law lists property that the government could forfeit as real estate, together with plants growing in or structures on the land. The property includes tangible and intangible things like securities, claims, rights, interests, privileges, and personal property.
Property of the Estate
Many people wonder if assets seized during parallel forfeiture and bankruptcy proceedings couple be the property of the estate. According to the Bankruptcy Code 541(a), your (debtor) equitable and legal interests become the property of a bankruptcy court the moment you file for bankruptcy. Under USC. Section 541(a)(1) If you file bankruptcy after the judge has ordered the forfeiture of your assets, it is considered that you had no interest in the said property at the start of the bankruptcy claim.
If you file for bankruptcy before the court orders for forfeiture of your property, the bankruptcy estate could take control over your assets. When a district court enters a pre-trial restraining order barring the debtor from destroying or changing ownership of their assets, the forfeited property remains on hold.
Also, if the federal government issues forfeiture orders following a criminal case, your rights to property get stripped. The court could issue a restraining order to all the federal government to take over your property; hence, barring you from transferring, destroying, or performing any act that negatively affects the chances of asset forfeiture in the future. With the help of a reputable asset forfeiture attorney, you can use reverse or trump the protective orders the district court imposes.
After you, the debtor, files for bankruptcy when facing criminal charges, the bankruptcy estate has the jurisdiction to halt the forfeitability of your property. If the federal government keeps pushing for forfeiture, it could investigate the exact date of your crime commission. If your bankruptcy proceeding was pending when the district court ordered the seizure of property, the bankruptcy estate/ trustee is stripped off the rights to control the assets. However, if your bankruptcy proceeding is pending, and you keep pushing for bankruptcy, your rights to assets are transferred to the bankruptcy estate.
If you file for bankruptcy before a forfeiture proceeding or a restraining order from the district court, you retain rights to the property since the government has not obtained a pre-trial restraining order nor an asset seizure warrant. If the government gets a seizure warrant before your bankruptcy is determined, the bankruptcy court loses the right to the property due to the relation-back doctrine.
The US Supreme Court detailed the effects of the relation-back doctrine in United States V. Stowell. The principle involves both criminal and civil forfeitures.
The Automatic Stay
An “automatic stay” goes into immediate effect the instant you file for bankruptcy. That means no other person can proceed with forfeiture actions against you.
US C 362(b)(1) exempts you from the automatic stay if criminal asset forfeiture warrants against you exist since they are in personam. Unlike criminal asset forfeiture, civil forfeiture is not a penalty following your criminal offense, because it is in rem. Under US C 362(b)(4), when you file for bankruptcy, when a civil forfeiture proceeding is pending, the court bars any processes in place to seize your estate property.
The Bankruptcy Appellate Panel (BAP) for the Ninth Circuit details how automatic stay relates to civil forfeiture. The US federal government, in In re Chapman, claimed that Darryl Chapman allowed the manufacture of marijuana in his home. Chapman filed for chapter 7 bankruptcy, but the court exempted police power and asked the government to provide evidence for its forfeiture claims. The BAP, however, exempted civil forfeiture from the automatic stay, because it was necessary for fighting drug trafficking.
The bankruptcy court entails power over forfeiture matters connecting to a bankruptcy proceeding. However, this doesn’t imply that the bankruptcy court has original jurisdiction over all bankruptcy cases. Under US C 1334(a), district courts entail exclusive and original jurisdiction of all chapter 11 bankruptcy cases.
District courts, according to US C 1334(b), have original jurisdiction but exempted from the exclusive one in civil proceedings. US C 157(b) explains that the bankruptcy courts are units under the US District Court.
Bankruptcy courts lack enough authority and jurisdiction over civil forfeiture. Also, the automatic stay doesn’t affect the proceedings of civil forfeiture. That means bankruptcy statutes allow the continuation of civil forfeiture proceeding unrestricted.
Contact an Asset Forfeiture Attorney Near Me
Congress enacted the asset forfeiture laws in a bid to fight crime, including drug traffic and other serious felonies. The decision was after the government realized convicts could run their criminal network while in prison. Asset forfeiture, especially for property and money convicts that were gained or used to carry out illegal activities, helped disband several criminal organizations.
However, being a criminal suspect doesn’t mean you are guilty. If charged with a serious crime, the prosecution could push to ensure your property gets seized. With the help of Asset Forfeiture Attorney, you could file for bankruptcy as a defense tactic and prevent the government from forfeiting your assets.
Contact our lawyers today for guidance on how bankruptcy and asset forfeiture works. We could also offer the best and detailed evidence if you or your loved one’s property get seized following a criminal proceeding in court. Call us today at 888-571-5590.