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Eighth Circuit Upholds Denial of Imprisoned Auto Magnate's Request to Exempt Payments - In re Hecker

January 14, 2013

Vincent Howard and our Temecula personal bankruptcy attorneys were interested to see a bankruptcy case involving a Chapter 7 bankruptcy filer who has gotten a lot of press in his home state of Minnesota. Denny Hecker made a lot of money from numerous auto dealerships before he filed for bankruptcy in 2009. The bankruptcy filing ultimately backfired on him, landing him in prison for hiding assets. In In re Hecker, he asked the Eighth U.S. Circuit Court of Appeals to reverse a lower court's finding that he should not be permitted to amend his bankruptcy petition to exempt payments owed to him by a business partner. The bankruptcy court found that Hecker had time to make that amendment and hadn't done it until money was about to be paid to the bankruptcy estate. The district court and the Eighth Circuit affirmed.

Hecker and two of his companies made a contract in 2005 with GELCO Corp., in which GELCO would make a series of payments in exchange for vehicle leasing rights. In 2009, Hecker filed for Chapter 7 bankruptcy, listing the contract as non-exempt personal property with a value of $6 million. He did not claim the payments due as exempt property or as income, either in his original filing or in two amendments. The Chapter 7 trustee and two creditors made claims against GELCO for the money, and after negotiations, made a settlement agreement including $2.07 million to be paid to the estate. The trustee moved for court approval, and on the last day for objections, Hecker filed one, saying some of the GELCO payments were exempt personal income under Minnesota law. At the hearing, his attorney moved for a continuance so Hecker could move to amend his exemptions, but the bankruptcy court denied the request, saying Hecker had no standing because he had no claim to the money. He appealed to the district court, which granted the trustee's motion to dismiss, and Hecker again appealed.

In its analysis, the Eighth Circuit said the issue was whether the motion for a continuance was properly denied; if it was, the court said, Hecker had no standing to object to the settlement because he had no interest in the money. Granting a continuance is within the discretion of a trial court, and the Eighth found no abuse of discretion by this bankruptcy court. Hecker had never before shown an interest in the money, despite two years of bankruptcy. During that time, he amended his exemptions twice without mentioning this money. He represented to creditors in earlier filings that he was self-employed or unemployed, with no expectation of future wages. The trustee relied on this information when negotiating the settlement on behalf of the estate. Furthermore, Hecker waited until the last moment to file his objection, which the Eighth thought showed a "lack of diligence (if not outright deception)." It was unmoved by his claim that he had no counsel until just before the hearing, saying this too reflects a lack of diligence. Thus, it affirmed the bankruptcy court's order.

Vincent Howard and our Westminster consumer bankruptcy lawyers suspect there's much more to this story. Hecker has been convicted of hiding his assets, which suggests that he may have lost a lawyer who did not want to be involved in fraud on the bankruptcy court. Under those circumstances, it's not surprising that he was not diligent about claiming exemptions. He may have been stymied by inconsistent or absent legal advice, or perhaps he acted without legal advice, to his cost. In general, we advise our clients to be as honest with us as possible about their financial situations. As Hecker's case shows, there's a lot to lose from fraud on the bankruptcy court, including your freedom. Complete honesty also helps Vincent Howard and our Upland individual bankruptcy attorneys understand your financial situation well enough to set up a bankruptcy plan that works well for you and positions you well for life after bankruptcy.

If you feel overwhelmed by your debt and you're ready to talk to an experienced attorney about the possibility of a bankruptcy, call Howard Law, P.C. You can send us a message online or call 1-800-872-5925.

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