Bankruptcy Fraud Charges Against San Fernando Man for $7 Million

A San Fernando Valley man from Van Nuys was ordered detained pending trial on federal charges alleging he ran a foreclosure-avoidance scheme that raked in $7 million from distressed homeowners.

Michael “Mickey” Henschel, 68, was arrested Wednesday by federal agents pursuant to an 11-count indictment returned by a Los Angeles federal grand jury on June 8, according to the U.S. Attorney’s Office.

According to the indictment unsealed after his arrest, Henschel owned a Van Nuys-based company he operated under several names, including Valueline.

Prosecutors allege that Henschel and several co-conspirators marketed illegal foreclosure- and eviction-delay services to homeowners who had defaulted on their mortgages and renters who were facing eviction.

As part of the scheme, Henschel and the others allegedly persuaded homeowners to sign fake grant deeds that purported to show the homeowners had conveyed an interest in their properties to fictional third parties.

Henschel and his co-conspirators allegedly filed bankruptcies in the names of fictional persons and entities to trigger the automatic stay provision of the Bankruptcy Code, which meant that foreclosure sales were stalled.

Henschel allegedly delayed evictions in a similar way, filing fraudulent documents in state eviction actions and sending similar documents to sheriff’s offices.

In addition to monthly fees paid for the illegal services, Henschel allegedly charged some homeowners large fees before agreeing to clear title to their properties.

During the course of the scheme, from October 2010 through July 2013, Henschel and his co-conspirators collected more than $7 million, according to the indictment.

The indictment charges Henschel with one count of conspiracy, eight counts of bankruptcy fraud and two counts of wire fraud. Trial was scheduled for Aug. 8.

Supreme Courts Rules Debt Collectors Do Not Violate Bankruptcy Proceedings.

Justices say companies can’t be sued for trying to recover old credit card debt from people in bankruptcy protection.

A divided Supreme Court ruled Monday that debt collection companies can’t be sued for trying to recover years-old credit card debt from people who seek bankruptcy protection.

The 5-3 ruling is a blow to consumer groups that complain debt collectors are unfairly misleading people into repaying old debts even when they are not required to under the law.

The court sided with Midland Funding, which was trying to collect $1,879 in debt an Alabama woman had incurred more than 10 years earlier. Aleida Johnson argued that Midland was wrong to go after the debt because Alabama law has a six-year statute of limitations for a creditor to collect overdue payments.

While Johnson ultimately avoided paying the debt, a federal appeals court said she could sue Midland for trying to collect it as a violation the Fair Debt Collection Practices Act. That law prohibits collection companies from making a “false, deceptive, or misleading representation” or trying to recover debt through “unfair or unconscionable means.”

Writing for the majority, Justice Stephen Breyer broke with his liberal colleagues to say efforts to recoup old debt during the bankruptcy process do not violate the law. He said it wasn’t false or misleading because bankruptcy law technically allows such claims.

And Breyer said it wasn’t unfair or unconscionable since a bankruptcy trustee can object to any claims that are so old they don’t have to be repaid. That’s what happened in Johnson’s case, and Breyer said that reduces any concern that consumers might unwittingly pay a debt that is too old.

Breyer’s opinion was joined by Chief Justice John Roberts and Justices Anthony Kennedy, Clarence Thomas and Samuel Alito.

In dissent, Justice Sonia Sotomayor said the practice “is both unfair and unconscionable.”

“Professional debt collectors have built a business out of buying stale debt, filing claims in bankruptcy proceedings to collect it, and hoping that no one notices that the debt is too old to be enforced by the courts,” Sotomayor said.

Her dissent was joined by Justices Ruth Bader Ginsburg and Elena Kagan.

Justice Neil Gorsuch did not participate in the case.

Giving the Metaphorical Middle Finger to The Bankruptcy Court Lands Attorney in Jail.

U.S. Bankruptcy Judge Charles Rendlen III  issued a bench warrant for the owner of a bankruptcy firm and a suspended lawyer, saying it was the only way to force them to repay clients whom they had bilked.

At the end of the blistering nine-page bench warrent, U.S. Bankruptcy Judge Charles Rendlen III stayed the warrant’s effect for a week to give one last chance to Critique Services LLC owner Beverly Holmes Diltz and lawyer James C. Robinson.

Rendlen wrote that Diltz and Robinson had ignored an April 21 order to return a $635 fee to former clients.

Given their “long history of refusing to obey Court orders and employing contempt as a litigation strategy … “a politely insistent request or a ‘strongly worded’ directive” was unlikely to work, he wrote.

He continued: “Monetary sanctions mean nothing to persons who have no intent to ever pay them. Therefore, the Court must find some other mechanism for obtaining obedience.”

“The Court recognizes a metaphorical middle finger when it is given one, and it is not obligated to feign hope that a lesser form of coercion will garner obedience from Robinson and Critique Services LLC,” the order says.
Rendlen ordered the pair held for 30 days or until the money is paid. But he also said that the U.S. Marshals “have better things to be doing with their valuable time,” and wrote that the warrant would become effective on Friday and be delivered to the marshals for “execution” if Diltz and Robinson didn’t heed his warning.

Rendlen has repeatedly blasted the St. Louis company and lawyers who work for it, saying they have targeted “primarily working poor, minority citizens of St. Louis for almost two decades.”

Last year, the Missouri Attorney General’s office sued Critique Services to shut it down.

In a consent judgment filed in March and amended earlier this month, Diltz admitted that the company did not perform as advertised for some clients, and he agreed to close and agreed to repay $90,504 to 167 people, as well as $25,000 in civil penalties to Missouri and $10,000 to the bankruptcy court.

One Year and One Day Prison Term for Bankruptcy Fraud.

Dance Moms reality TV celebrity Abby Lee Miller has been sentenced to one year plus one day in prison, fined $40,000, and ordered to forfeit $120,000 as punishment for her admitted federal bankruptcy fraud. A federal judge in Pittsburgh also ordered Miller to pay a $40,000 fine and spend two years on probation following her release.

Prosecutors said Miller had attempted to conceal nearly $750,000 in revenue from bankruptcy creditors and sneak the $120,000 in Australian revenue into the country in the luggage of adult and child travel companions.

Assistant U.S. Attorney Gregory Melucci told the judge that Miller was getting bankruptcy court help “with one hand and stealing with the other,” to satisfy, “enormous greed and extreme arrogance.” He said she had gone from “Dance Mom” to “Dance Con.” Miller told Judge Joy Flowers Conti that she’s ashamed, sorry, and accepts responsibility for her actions.

Miller must report to federal authorities to begin serving her sentence in 45 days. The judge said she’d recommend to the federal prison system that Miller be allowed to serve her time at a federal facility near Los Angles, where Miller currently has her business. Her dance studio in Penn Hills, which is now closed, was started by her parents. The judge said that with 10 months of good behavior, Miller may be eligible to enter a halfway house to serve the balance of her federal sentence.

What is Medical Bankruptcy?

A recent survey published by Consumer Reports, based on a poll of 2,000 consumers conducted this year and statistics showing that personal bankruptcy filings have fallen from more than 1.5 million in 2010 to 770,846 last year. The publication acknowledges that many factors have contributed to the decline, particularly 2005 changes in bankruptcy law that made personal bankruptcy harder and more costly to file and the general improvement in the economy since 2008. But its experts “almost all agreed that expanded health coverage played a major role in the marked, recent decline.”

The Consumer Reports study is a new data point in a long-running debate about the impact of medical costs on U.S. households and the effect of bringing insurance coverage to millions more Americans. The issue has become highly politicized, in part because healthcare costs affect households in myriad ways and defining “medical bankruptcy” is difficult.

An especially rigorous analysis published in 2014 by Daniel A. Austin, a law professor at Northeastern University, concluded that even though Warren’s definition was too broad, it was nevertheless true that “medical bills are the single largest cause of consumer bankruptcy.” Austin placed the percentage of medical bankruptcies at 18% to 25% of all personal filings nationwide.

It’s unsurprising that medical costs might stand alone as a spur to bankruptcy. They can come on suddenly, they’re often unexpected, and they can be huge. A household living on the edge of solvency, whether because of overspending, unwise reliance on credit, or other financial pressures could be pushed over the cliff by a sudden health crisis. That underscores how difficult it is to define “medical bankruptcy” — is it the preexisting financial strains that caused the bankruptcy, or the new health-related factor? What is known is that among bankruptcy filers listing any medical debt among their liabilities, those expenses were heavy indeed. About 30% of all debtors owed more than $10,000 in medical bills when they filed for bankruptcy.

The Consumer Reports survey supports the conclusion that Obamacare delivered that relief to millions. Jim Molleur, a Maine bankruptcy attorney, told the publication, “We’re not getting people with big medical bills, chronically sick people who would hit those lifetime caps or be denied because of preexisting conditions. They seemed to disappear almost overnight once ACA kicked in.”

The implications of the Republican repeal of the ACA are inescapable. It is very likely we will see an uptick in Bankruptcy filing in the coming years as a result of the repeal of the Affordable Care Act.

New Bankruptcy Rules Starting December 1, 2017

After several years of drafting, debate, compromise and fine tuning, it appears that major changes to the administration of consumer bankruptcy cases are imminent. On April 27, 2017, Chief Justice John Roberts submitted to Congress amendments to the Federal Rules of Bankruptcy Procedure that will have a profound impact on consumer bankruptcy cases. The most noteworthy changes are:

  1. the required use of a Model Chapter 13 Plan (Official Form 113), subject to a district “opt-out” under certain conditions;
  2. the explicit requirement that secured creditors file a proof of claim, qualified by the express recognition that a lien is not void due only to the failure to file such a claim;
  3. the establishment of a proof of claim bar date tied to the bankruptcy filing date;
  4. the establishment of certain deadlines related to plan confirmation; and
  5. the express recognition of certain mechanisms for determining the amount of secured and priority claims.

Model Chapter 13 Plan – Amended Rule 3015 provides that if there is an official form for a plan filed in a Chapter 13 case, that form must be used unless a local form has been adopted in compliance with Rule 3015.1. Amended Rule 3015 further provides that nonstandard provisions are effective only if included in the appropriate designated section of the form. Rule 3015.1 allows districts to adopt a local form for a plan filed in a Chapter 13 case, subject to a number of restrictions that ensure the district’s retention of the key content of the official form. Amended Rule 3015 and Rule 3015.1 should streamline the plan review process for creditors, who now will be able to more easily locate the debtor’s proposed treatment of their claims and any nonstandard provisions within the plan.

Proof of Claim Requirement and Timeline – Amended Rule 3002(a) clarifies that secured creditors must file a proof of claim for the claim to be allowed, provided that a lien that secured a claim against the debtor is not void due only to the failure of any entity to file a proof of claim. Amended Rule 3002(c) provides that in voluntary cases under Chapter 7, 12, or 13, a proof of claim is timely filed if it is filed not later than 70 days after the bankruptcy filing date. Under Amended Rule 3002(c)(7), a proof of claim filed by the holder of a claim that is secured by a security interest in the debtor’s principal residence is timely filed if:

  • the proof of claim (Official Form 410), together with the proof of claim attachment (Official Form 401A) and escrow analysis (if applicable) required under Rule 3001(c)(2)((C), is filed not later than 70 days after the bankruptcy filing date; and
  • any attachments required by Rule 3001(c)(1) and (d) – such as the note (with any endorsement or allonge), mortgage or deed of trust, and relevant assignments or supporting documents – are filed as a supplement to the holder’s claim not later than 120 days after the bankruptcy filing date.

These amendments tighten the proof of claim deadline for creditors, but also should provide both more certainty on a case-by-case basis with respect to the bar date. In contrast, the current rule provides a deadline tied to the first date set for the meeting of creditors, which may vary by case or district. Moreover, the amendments permit creditors to submit the proof of claim and attachments related to the claim amount within 70 days, while providing creditors with an additional 50 days to collect the related loan documents to be filed as a supplement.

Plan Objection and Confirmation Hearing Deadlines – Amended Rule 2002(a) provides that the clerk, or some other person as the clerk may direct, shall give at least 21 days’ notice by mail of the deadline to object to confirmation of a Chapter 13 plan. Amended Rule 2002(b) provides that the clerk, or some other person as the clerk may direct, shall give at least 28 days’ notice by mail of the hearing on confirmation of a Chapter 13 plan. Amended Rule 3015(f) also provides that an objection to confirmation of a plan shall be filed and served at least seven days before the date set for the hearing on confirmation, unless the court orders otherwise. These rules provide a degree of uniformity and predictability across districts with respect to the timing of key events in the confirmation process.

Determining the Amount of Secured and Priority Claims – Amended Rule 3012 expressly sets forth various mechanisms by which courts may determine the amounts of secured claims, namely a motion, claim objection, or a Chapter 12 or 13 plan. Courts may determine the amount of priority claims by motion (after a claim is filed) or claim objection. Notably, Amended Rule 3015(g) provides that any determination made in the plan made under Rule 3012 about the amount of a secured claim is binding on the holder of the claim, even if the holder files a contrary proof of claim or the debtor schedules that claim, and regardless of whether an objection to the claim has been filed. This provision underscores the need for creditors to carefully review the debtor’s plan to determine whether an objection is necessary.
The foregoing amendments, while burdensome in some respects, should aid creditors in their efforts to formulate more streamlined procedures related to consumer bankruptcy cases. Uniform proof of claim deadlines, coupled with consistent plan content and notice and objection deadlines across districts, should foster a level of predictability and allow creditors to more efficiently process consumer bankruptcy cases. The tightened proof of claim deadline, while likely presenting an initial challenge to creditors with regard to the financial information needed to populate the proof of claim form and attachment, provides flexibility with respect to the gathering of supporting loan documents.

Bankruptcy Exit Plan for San Bernardino: How, When, and How Much.

San Bernardino, won final court approval on Friday January 27, 2017, for its financial restructuring plan, clearing the way for the city to exit the bankruptcy case it launched more than four years ago at a cost of $25 million when its leaders learned it was facing insolvency.

“I look forward to the city having a prosperous future,” U.S. Bankruptcy Judge Meredith Jury said at the conclusion of a hearing in Riverside, California.

The city’s plan involves cutting costs by folding its fire department into San Bernardino County’s fire services district. Retiree healthcare costs will also get slashed while city employees’ pensions will be protected, and San Bernardino will pay holders of its pension obligation bonds 40 percent of what they are owed to erase $45 million of the debt over time.

San Bernardino expects its restructuring to cut $350 million in spending over 30 years, according to a city spokeswoman.

Judge Jury’s decision capped San Bernardino’s efforts, including lengthy negotiations with its employees, retired employees and creditors, to repair its finances. In December, Judge Jury had said she would approve San Bernardino’s plan (see below), the product of a bankruptcy that cost the Southern California city at least $25 million to press and litigate.

San Bernardino filed for Chapter 9 municipal bankruptcy in 2012, marking the third filing of its kind that year by a California city.

San Bernardino’s filing came on the heels a report by city staff that said the city faced an imminent financial crisis because it had exhausted its reserves and projected spending for the looming new fiscal year would exceed revenue by $45 million.

The case is In re City of San Bernardino, in U.S. Bankruptcy Court, Central District of California, No. 12-28006. The final proposed plan can be viewed below.

3rd proposed amended plan

Turn a Bad Deal Around with Bankruptcy. So Says The Trump, So Says The Kedikian.

In case you might have been misled about the benefits of filing bankruptcy when you run into money troubles, here comes Donald Trump on why filing bankruptcy is a smart thing to do. I don’t agree with everything the Donald says, or any other politician for that. But I have to agree with the Donald on this one.

Trump has come out swinging about the benefits of filing bankruptcy. In his defense he has made the case why bankruptcy is both legal and a good move at times.


It would be very difficult for Trump or anyone else to make the case bankruptcy is not a smart thing to do when an enterprise is failing or struggling. That appears to be exactly the reason he’s filed bankruptcy in his business dealings. So if “The biggest business people have used the bankruptcy laws to their advantage” then why shouldn’t you?

What happens when not filing bankruptcy costs you your retirement, your health and your marriage? And worst of all most of the reasons that people hesitate in filing bankruptcy are myths that are just not true.

Filing bankruptcy is a smart and an advantageous tool for people to consider, just like Donald Trump did for his businesses, to allow them to move forward financially. Besides, even the Federal Reserve Bank of New York agrees that people who file bankruptcy do better financially than those who don’t.

Filing a chapter 7 bankruptcy isn’t personal. And in the words of Donald Trump, it’s “just business.” So what’s holding you back? I don’t expect you to file today, but keep an open mind and explore your options while you still have your retirement, health and marriage intact. call our office for a free consultation. We can get you out of debt but can’t help you run for president of the USA. Why? because we only practice in bankruptcy.

What Not To Do When You are Loaded? File Bankruptcy.

If you have A Jaguar, a 34 foot boat, cash and Certificates of deposits, you don’t file bankruptcy. And even if your cousin did it, it does not mean you should either. The FBI arrested eight people in May, 2016, charging them with allegedly concealing more than $3 million in assets from federal bankruptcy court in Miami.

According to allegations in the indictment, one couple liquidated a certificate of deposit worth approximately $141,829 in 2010, and then filed a joint petition for Chapter 7 bankruptcy in 2011. When asked about the accuracy of her disclosures in the bankruptcy petition, Yachezkel Nissenbaum “made false representations,’’ according to a press release from the U.S. Attorney’s Office. The couple has three young daughters who are now in the care of the Department of Children and Families.

In another arrest, Walter Lista, 43, of Pinecrest, transferred and concealed a Jeep Wrangler, a 34-foot boat, The Isabella, approximately $41,200 in cash and his interest and roles in companies he owned. The indictment alleges Lista failed to disclose the transfer of these assets, valued at more than $160,000, when he filed for Chapter 7 bankruptcy on May 30, 2013.

Rolando Garcia, 52, and Aileen Crespo, 43, of Miami. According to allegations in the indictment, they transferred assets held jointly to Crespo in a divorce settlement, before filing Chapter 7 bankruptcy. Among the assets allegedly concealed: properties in North Carolina, valued at $336,300; $36,000 in cash used to buy a Jaguar valued at approximately $80,000; and $100,257 in cash from the sale of a condo in the Bahamas.

Rebecca Solemani-Appelbaum, 50, of Boca Raton, who is accused of liquidating approximately $102,445 from her IRA account and transferring the money into a family member’s account, according to the indictment’s allegations. She is accused of not disclosing this transfer in her bankruptcy petition and various amended filings.

Finally, Gregory Lee Cutuli, 65, and Kathleen Anne Smith Cutuli, 65, both of Plant City, who are accused of transferring Kathleen’s $1.8 million federal income tax refund to Gregory and concealing the transfer in their Chapter 7 filing in Miami bankruptcy court, according to the indictment’s allegations. The indictment alleges Kathleen declared bankruptcy to avoid paying money to her former business partner. Investigators said the couple also failed to disclose furs, jewelry, household goods and cash.

Bankruptcy does not work well for individuals who try to commit fraud. Not worth the risk folks. Call 818 409 8911 and talk to a real bankruptcy attorney when you have a question.

Need to do Time in a Five Star Jail? Bankruptcy Can Help Cover Costs For You!!

You’re busted, heading to jail for a one-time mistake, say, petty fraud or drunk driving. You’re small, frail, haven’t used your fists since the fifth grade and are about to meet some seriously hard-core dudes at county jail. Don’t worry there are what is called pay-to-stay jails. The Beverly Hills Police Department has one.  The program offers individuals an alternative to serving time in a county jail facility. A jail sentence can be served in the safe, clean, and secure environment of the Beverly Hills Police Department’s Jail facility (honestly that is how the BHPD advertises it). It costs $110.00 per day. City of Glendale has a similar program, that costs $90.00 per day. Location, Location, Location.

Desperately wanting to avoid county jail, You might have decided to rack up some debt indulging your stay at the above five star pay-to-stay jails. Can you discharge them in bankruptcy? Well, with the right bankruptcy attorney at your side you may be able to discharge the debt. No folks, I am not making this up. Its one of these weird but true stories that have actually happened.

Jacob Jerome and Ashley Kaye Milan filed chapter 7 bankruptcy in which they listed, as an unsecured, non-priority debt, $3,600.00 owed to Dakota County incurred by Mr. Milan under the state pay-to-stay program for prison inmates. Unlike court costs and fees which are administered by the district court collector, the pay-to-stay program is administered by the Dakota County Sheriff’s Office.

The county filed an adversary complaint seeking declaratory judgment that the debt was not dischargeable and the parties filed cross-motions for summary judgment.

Section 523(a)(7) renders nondischargeable a debt that is: 1) a “fine, penalty, or forfeiture,” 2) payable to a governmental unit, and 3) “not compensation for actual pecuniary loss.” The controversy in this case revolved around the first and third prongs of this test. In this case, the court reasoned that the debt did not arise out of a court order, however, but out of a program established by the state and administered by the DCSO. The court, therefore, turned to the three-part test to determine whether the debt was nonetheless nondischargeable.

The court rejected DCSO’s argument that the costs are “penal” because they are a result of Mr. Milan’s criminal conviction and incarceration. The court found no connection by statute or otherwise between the cost recoupment program and the criminal justice system that would justify calling the costs a “penalty.”  Nor could it be deemed penal as having been included in a court order or as part of the criminal process. As such, it did not meet the first requirement of the exception to discharge test set forth in section 523(a)(7).

The Milan court found no similar penal purpose behind the pay-to-stay program. The program was codified in the state’s civil administrative code rather than its criminal code. Its stated purpose was to help the county recoup some of the costs of incarceration and it was directly related to the county’s actual costs. Moreover, in the event that a pay-to-stay debtor fails to pay the costs, the statute provides for ordinary civil collection methods to be used rather than recourse to the criminal justice system.

The court dismissed found in favor of the debtor and granted summary judgment. This case is currently on appeal to the BAP for the Eighth Circuit, No. 16-6012.

One final note here is that most local pay-to-stay programs require payment upfront. So probably you will need to borrow the money to pay them. But still you should be able to discharge the debt that you borrowed for that purpose. You just need to have the best bankruptcy attorney who will find these legal jewels and get you out of jail.

So next time you get in trouble with Glendale Police Department, whether you are rich or poor, you might consider the five star treatments, MasterCard may help with that. For everything else, there’s Bankruptcy.