Soldier Can’t Discharge Military Debt in Bankruptcy, Court Rules

A recent case in North Carolina Eastern Bankruptcy Court clarified some issues regarding the ability of certain debts to be discharged in Chapter 7 bankruptcy proceedings. Ryan v. Defense Finance and Accounting Services outlines the case of a soldier who received an honorable discharge from the U.S. Army after re-enlisting for six years and accepting a re-enlistment bonus. Upon his involuntary discharge, the soldier filed for bankruptcy and attempted to include the unearned portion of his bonus in those proceedings.

In August 2012, Kyle Ryan re-enlisted in the U.S. Army for a six-year tour of duty. Ryan agreed at that time to repay the unearned portion of his $18,200 re-enlistment bonus if he could not complete six years of service under his agreement with the U.S. Army. After serving just 15 months of his six-year obligation, Ryan tested positive for hydrocodone on August 21, 2013. He claimed to have taken one of his wife’s painkillers to treat pain caused by an unreported neck injury.

Ryan was honorably discharged from the U.S. Army in March 2014. A portion of his unearned bonus was withheld from his final paycheck from the Army; the remainder was billed to Ryan directly. On May 12, 2015, Ryan filed for Chapter 7 bankruptcy and sought to have the remaining unearned bonus debt, a sum of $9,667.21, included in these proceedings. He specifically addressed the issue of the debt associated with the unearned bonus by filing a Proof of Claim regarding this debt on August 7, 2015. The bankruptcy was discharged under the provisions of Chapter 7 on November 9, 2015.

The Defense Finance and Accounting Service (DFAS) filed an answer to the request for relief included in Ryan’s bankruptcy on October 7, 2015, asserting that the DFAS claim is exempt from discharge in Chapter 7 bankruptcies and providing a full accounting of the exact amount of the debt still owed. On January 28, 2016, DFAS filed a Motion for Summary Judgment in the amount of $9,765.14 against Ryan, who responded by filing an Objection to Defendant’s Motion for Summary Judgment. During the resulting court proceedings, the DFAS lowered its claim to $8,989.64. This still represented a severe burden for Ryan financially.

Ryan argued that the entire amount should be discharged in the bankruptcy and that, if not discharged, he should owe only $3,815.31 to DFAS. He further asserted that his separation from the U.S. Army was not voluntary and that, consequently, he was not responsible for the debt incurred. The court considered the evidence presented and reached its decision on March 31, 2017.

Unfortunately for Ryan, not all debts are dischargeable in bankruptcy. The U.S. Bankruptcy Court for the Eastern District of North Carolina, Raleigh Division, found that Ryan was required to repay the unearned bonus because he filed bankruptcy less than five years after the date that this debt was incurred. Had Ryan waited until five years after the bonus contract had been terminated, he might have been able to discharge this debt along with others during his bankruptcy proceedings.

Ryan’s case highlights the need to consult with a qualified bankruptcy attorney before beginning any legal actions in the state of New York. Bankruptcy is a complex process that requires an in-depth knowledge of the law. By working with a qualified and experienced NYC bankruptcy attorney, you can protect yourself against unwanted legal complications while enjoying the best possible outcome for your case.

Insurance Salesman Convicted of Tax Fraud for not Filing Accurate Tax Returns Since 1996

Terry DiMartino of Newington, CT was convicted of one count of corruptly interfering with the due administration of the Internal Revenue laws, two counts of filing false tax returns and five counts of willfully failing to file tax returns.

During DiMartion’s trial, evidence showed that although he was an insurance salesman, and earned millions of dollars in insurance commissions, he did not file accurate tax returns or pay the taxes owed. In 2007, DiMartino filed three false returns, including one requesting a fraudulent refund of over $14 million. He also set up nominee entities to conceal and divert his insurance commissions and hide his assets from the IRS.

It was shown at trial that DiMartino had not filed an accurate tax return since the 1996 tax year.

Sentencing has been set for July 2017.  DiMartino faces a maximum sentence of three years in prison for the charge of obstructing the IRS, three years in prison for each charge of filing false returns and one year for each count of failing to file his returns.  He also faces monetary penalties.

Interior Designer Redecorates his Tax Returns

The owner of a Kirkland, WA, interior design firm, Daniel Nix was indicted in April 2017 on thirteen counts of tax evasion, eleven counts of providing fictitious financial obligation and one count of corrupt interference with the administration of the Internal Revenue code.

As alleged in the indictment, as early as 1998 and from 2000 to 2007, Nix refused to pay his income tax which totaled more than $340,000, using shell companies to hide his income, filed false bankruptcy claims and filed false claims against the government.

For the tax years 2010-2013, Nix again attempted to hide his income to avoid paying taxes.  Nix sent 11 fake money orders exceeding $1 million to the IRS in 2013 to make it appear as if he was paying his tax obligations.

Tax evasion carries a maximum prison sentence of up to 5 years and a $250,000 fine.  For presenting fictitious financial statements Nix can be sentenced to up to 25 years in prison and an additional fine of $250,000. Attempts to interfere with the administration of the tax code is punishable by up to 3 years in prison and a $5,000 fine.

Spa Owners Caught Massaging Their Income

Four family members from Queens, NY were indicted on charges of failing to pay more than $1.5 million in taxes. Steve Chon and his brothers Daniel Chon, Victor Chon and his daughter Stephanie Chon were charged with two counts of grand larceny in the second degree, eight counts of criminal tax fraud in the second degree and one count of criminal tax fraud in the third degree.

From the tax years 2010 to 2013, it’s alleged that the four failed to report millions in income to avoid paying the $1.5 million due in taxes.

If convicted, the four could spend anywhere between five and fifteen years in prison.

Kingpin of U.S. Tax Scam Arrested in India

Upon arrival at Mumbai’s International Airport, Indian police arrested Sagar Thakkar, 24, also known as Shaggy, for being the mastermind behind a call center IRS scam that targeted thousands of Americans and netted more than $300 million.

In October 2016, the U.S. Justice Department charged more than 60 people in India with participating in the scam, where call center agents impersonated IRS employees or other federal officials and demanded payment for non-existent debt.

Call center operators would threaten their potential victims with arrest, imprisonment, deportation or hefty fines if they did not pay immediately. They also told people to make their payment by prepaid debit cards, or to wire transfer money to accounts that were stolen or fake identities. Authorities have identified at least 15,000 people in the U.S who were targeted.

Following the arrests in October, Thakkar fled to Dubai and also spent time in Thailand. During that time, it is alleged he led a lavish lifestyle, staying at five-star hotels and purchasing expensive cars.

The U.S. is working with India to have Thakkar extradited to the United States.