Real-Life Decision Making
When you are assigned a bankruptcy case, you are responsible for finding
out how many assets the person has. Assets are items that could be converted
to cash -- mortgages, cars, jewelry, trust funds, savings accounts
and so on.
Bankrupt people (known as "bankrupts") are allowed to keep a certain amount
of assets, since they will need a home, an inexpensive car, clothing and other
items. The laws in your area stipulate the dollar amount of assets that a
bankrupt can keep. You are required to sell any assets that exceed that limit.
The money you make from the sale is used to cover administrative costs
and is split among the creditors.
Sometimes people try to keep their assets a secret so you won't sell
them. This is considered fraud. If you catch someone hiding assets, you are
required to take legal action. If you do not find out, and the assets are
later discovered, you could be personally responsible for repayment.
Today, you meet with your new case -- a single mother who is raising three
children. The woman has a steady job as a nurse, but her expenses are high.
She has a number of debts, including $150,000 that she owes on various credit
cards.
The woman tells you that she has very few assets. She and her children
live in a rented apartment. She drives an older car. The family has clothing,
household furnishings and a few small electronic items such as a camera and
an older television set that isn't worth much money.
You feel very sorry for the woman, who is deeply troubled by her situation.
But there is one puzzling thing. How could she have charged $150,000 on credit
cards and not have any assets to show for it?
You ask the woman what she bought with the credit cards. She replies that
the money was spent on dentistry for the children, family vacations, restaurant
meals, movies, repairs for the old car, which was always breaking down, and
veterinary bills for the children's puppy.
What do you do?