A chiropractor from Cleveland, Tenn., could face serious criminal charges for filing for bankruptcy protection but allegedly concealing that he had more than $100,000 in brokerage accounts that officials say he could have used to pay off his debts.
U.S. bankruptcy officials said Dr. James Lyle Schroder also undervalued four pieces of real estate and other personal property by a collective $367,000 and failed to list his ex-wife as a creditor, even though he had a court-ordered domestic support obligation.
The case against Dr. Schroder represents one of the more severe instances of alleged personal bankruptcy fraud in the Eastern District of Tennessee, bankruptcy officials said.
Very few fraud cases are recorded each year, but U.S. Attorney Russ Dedrick said his office still sees people willing to lie to skirt financial responsibilities. All petitioners are warned in writing that lying in a bankruptcy case is a federal crime and can lead to criminal conviction.
"We see about 10 to 15 cases (of bankruptcy fraud) a year," Mr. Dedrick said.
Mr. Dedrick would not comment on Dr. Schroder's case.
Efforts to reach Dr. Schroder were unsuccessful.
Supervisory assistant U.S. attorney Perry Piper said bankruptcy fraud is a "pernicious crime" and that his office "doesn't necessarily look at monetary values in deciding whether or not to prosecute." Dr. Schroder has not yet been charged with any criminal offense.
Dr. Schroder attempted "to escape debts rather than repay them," trial attorney Nicholas B. Foster, who works for the U.S. bankruptcy trustee in Chattanooga, noted in court documents.
Dr. Shroder filed Chapter 7 bankruptcy, which allows people to walk away from debts, in September. In October, he tried to convert the case to Chapter 13 bankruptcy, which allows an individual debtor with at least some financial resources to work out a repayment plan.
On Dec. 15, a bankruptcy judge denied the conversion attempt. The judge ruled that Dr. Schroder's actions were "particularly egregious" since he knew he had cash in several brokerage investment accounts.
Judge John C. Cook wrote that it appeared Dr. Shroder "omitted significant assets in the hope that such assets would not be discovered" and added, "The debtor's attempt to convert to Chapter 13 would be an abuse of the bankruptcy system."
Dr. Schroder defended himself at the hearing, saying he didn't know he had to disclose brokerage investment accounts among his assets.
In addition to possible criminal charges, Dr. Schroder also is facing a motion by Mr. Foster to deny the discharge of his debts under Chapter 7.
If Judge Cook grants the motion at a hearing in January, Dr. Schroder forever would be responsible for the debts he listed in the current bankruptcy case, even if he were to file for bankruptcy in the future.