Bankruptcy and Bankruptcy Fraud March 2018 In This Issue Volume 66 Number 2 Part I: Executive Office for United States Attorneys United States Introduction to Part I …………..………...............................................................3 Department of Justice Executive Office for By James A. Crowell IV, Acting Director, EOUSA United States Attorneys Washington, DC 20530 The Civil Division’s Role in Bankruptcy Litigation…………………………….5 James A. Crowell IV By Ruth A. Harvey Acting Director Dischargeability of Debt……………………………………………………..……9 Contributors’ opinions and statements should not be considered an By Jeffrey J. Lodge endorsement by EOUSA for any policy, program, or service. Collection of Criminal Restitution and the Automatic Stay…………………..15 The United States Attorneys’ Bulletin By Greg D. Stefan is published pursuant to 28 C.F.R. § 0.22(b). Direct Appeals of Bankruptcy Court Orders The United States Attorneys’ Bulletin Under 28 U.S.C. § 158(d)(2)……………………………………………………..21 is published by the By Matthew J. Troy Executive Office for United States Attorneys Office of Legal Education 1620 Pendleton Street Setoff and Recoupment Through the Lens of SSA Fraud Columbia, South Carolina 29201 Recovery in Bankruptcy………………………………………………………...29 By Michael J. Kelly Editor in Chief K. Tate Chambers Protecting the Medicare Program in Health Care Provider Lead Editor Bankruptcy Cases………………………………………………………………..43 Nikki Piquette By Leah V. Lerman Assistant Editors Becky Catoe-Aikey Federal Student Loan Debt in Bankruptcy: Recent Movement Brenda S. Mercer Towards Income-Driven Repayment Plans in Chapter 13……………………53 By Amanda L. Anderson and Mark A. Redmiles Law Clerks Gurbani Saini Brandy Sanderlin Part II: Executive Office for United States Trustees Internet Address https://www justice gov/usao/resources Introduction to Part II…………………………………….…………………….75 /united-states-attorneys-bulletins By Clifford J. White III, Director, EOUST Send article submissions to Editor, Basic Bankruptcy………………………………………………………………...79 United States Attorneys’ Bulletin National Advocacy Center By Antonia G. Darling, Judith C. Hotze, and Jason Blumberg Office of Legal Education 1620 Pendleton Street Columbia, SC 29201 Bankruptcy Jargon Deciphered: A Short Guide to Bankruptcy Terminology………………………………………………………..97 Cite as: 66 U.S. Attorneys’ Bulletin, By Debra L. Schneider March 2018 Bankruptcy Statistics Offer View of Filings, Enforcement, Distributions………………………………………………………..…………...109 By Jane E. Limprecht and Tanta Caraman Interplay Between Forfeiture and Bankruptcy………………………………117 By Alice W. Dery Why is a Bankruptcy Charge Valuable to Any Investigation?.......................131 By Charles R. Walsh Bankruptcy and Bankruptcy Fraud March 2018 In This Issue Volume 66 Number 2 Parallel Bankruptcy and Criminal Proceedings: Why Parallel Bankruptcy Proceedings are Different………………………..135 United States By Michael J. Heyman Department of Justice Executive Office for United States Attorneys The Bankruptcy System: A Valuable Resource for Washington, DC 20530 Fraud Prosecutions……………………………………………………………..151 James A. Crowell IV By Gregory Baruch Acting Director Bankruptcy Fraud Charging Decisions……………………………………….163 Contributors’ opinions and statements should not be considered an By Jennifer A. Giaimo and Kevin Rapp endorsement by EOUSA for any policy, program, or service. The United States Trustee as a Watchdog for Fraud and Abuse…….……...171 The United States Attorneys’ Bulletin By David W. Newman is published pursuant to 28 C.F.R. § 0.22(b). Sentencing in Bankruptcy Fraud Cases………………………………………187 The United States Attorneys’ Bulletin By Carole Ryczek is published by the Executive Office for United States Attorneys Federal Law Generally Precludes Bankruptcy Relief for Office of Legal Education Debtors with Marijuana Property Interests….................................................197 1620 Pendleton Street Columbia, South Carolina 29201 By Gregory Garvin Editor in Chief United States v. Robert Lee Keys: A Case Study…………………………….209 K. Tate Chambers By Pamela J. Griffith and Debra L. Schneider Lead Editor Nikki Piquette Note from the Editor in Chief …………………………………………………217 By K. Tate Chambers Assistant Editors Becky Catoe-Aikey Brenda S. Mercer Law Clerks Gurbani Saini Brandy Sanderlin Internet Address https://www justice gov/usao/resources /united-states-attorneys-bulletins Send article submissions to Editor, United States Attorneys’ Bulletin National Advocacy Center Office of Legal Education 1620 Pendleton Street Columbia, SC 29201 Cite as: 66 U.S. Attorneys’ Bulletin, March 2018 Bankruptcy and Bankruptcy Fraud Part I: Executive Office for United States Attorneys Introduction to Part I…………………………………………………....………………...3 By James A. Crowell IV, Acting Director, EOUSA The Civil Division’s Role in Bankruptcy Litigation…………….……………………….5 By Ruth A. Harvey Dischargeability of Debt…………………………………………………………………..9 By Jeffrey J. Lodge Collection of Criminal Restitution and the Automatic Stay…………….……………..15 By Greg D. Stefan Direct Appeals of Bankruptcy Court Orders Under 28 U.S.C. § 158(d)(2)…………..21 By Matthew J. Troy Setoff and Recoupment Through the Lens of SSA Fraud Recovery in Bankruptcy…………………………………………….…………………...29 By Michael J. Kelly Protecting the Medicare Program in Health Care Provider Bankruptcy Cases………………………………….……………………………………..43 By Leah V. Lerman Federal Student Loan Debt in Bankruptcy: Recent Movement Towards Income-Driven Repayment Plans in Chapter 13……………….……………53 By Amanda L. Anderson and Mark A. Redmiles March 2018 United States Attorneys’ Bulletin 1 Page Intentionally Left Blank 2 United States Attorneys’ Bulletin March 2018 Introduction James A. Crowell IV Acting Director Executive Office for United States Attorneys Thousands of debtors each year enter bankruptcy proceedings owing money to the United States or to victims of federal crime, including tax debtors, corporations, restitution judgment debtors, individuals, partnerships, farmers, sole proprietorships, and others. Through its adept and capable attorneys, the Department of Justice represents and advocates on behalf of the United States as a creditor or party in interest in Title 11 bankruptcy matters. Assistant United States Attorneys (AUSAs) handling bankruptcy matters have two primary and equally important objectives. First, AUSAs seek to preserve the United States’ monetary claims against bankruptcy debtors and estates and to collect debts owed to the government or victims of federal crimes. AUSAs in the civil divisions of United States Attorney’s Offices (USAOs) represent many federal Departments/Agencies in bankruptcy court—Education, Agriculture, Internal Revenue Service, Environmental Protection Agency, Housing and Urban Development, and Small Business Administration, to name a few. These AUSAs advocate to preserve non-dischargeable debts for later collection action after the end of the bankruptcy case. For example, AUSAs appear in bankruptcy court to preserve from discharge student loan debt owed by capable debtors who have borrowed the money from the federal government to fund their education and should be held to the loan repayment terms. When criminals file bankruptcy to try to shed their debt, AUSAs in bankruptcy courts advocate that restitution judgments are not dischargeable, preserving the debt for the benefit of federal crime victims. AUSAs also undertake collection of debt owed to the United States through the bankruptcy process. A portion of debt owed to the United States might be paid monthly by the debtor through a Chapter 13 plan of reorganization or in a Chapter 7 liquidation distribution from the case trustee. In both instances, AUSA advocacy benefits the public fisc. The second objective is prosecuting bankruptcy crimes, which are addressed by AUSAs in the USAOs’ criminal divisions. Bankruptcy crimes and procedures are set forth in Title 18 of the United States Code, and include knowing and fraudulent concealment of assets, false oaths and claims, bribery, embezzlement from the bankruptcy estate, and bankruptcy fraud. The long-standing concept for bankruptcy relief in the United States is to provide honest but unfortunate debtors with a fresh start. However, dishonest debtors who engage in fraud, concealment of assets, and perjury in bankruptcy matters are not deserving of a fresh start—and will find themselves under indictment, before a judge, and punished. For example, in one recent case, AUSAs prosecuted debtors who failed to disclose in their bankruptcy petitions $350,000 in cash, a country chalet, a 1932 Ford hot rod, and a 50-item weapon collection; and in another case the debtor failed to disclose insurance policies valued at more than $100,000. In addition to concealment of assets and fraud cases, AUSAs have successfully prosecuted individuals for bankruptcy perjury and making threats against a U.S. Bankruptcy Judge. As an AUSA in the District of Maryland, I prosecuted numerous bankruptcy fraud cases. I understand the seriousness of these offenses and the need to prosecute them and deter fraudsters from taking advantage of our bankruptcy system. Accordingly, it is with great pleasure that I present this issue of the USABulletin focused on bankruptcy issues. The articles selected for this issue provide information and insight into the practice, challenges, and objectives of the USAOs and the Department of Justice in these cases. Some of the articles, such as Dischargeability of Debt and Direct Appeals, give insight into the complexity of bankruptcy law under Title 11 of the United