The Real Case of a “Real Housewife of New Jersey”: Willful Failure to Fully Disclose Assets and Income to the Bankruptcy Court May Result in the Denial of a Discharge and Criminal Prosecution

The Bankruptcy Case of Teresa Giudice – better known as one of the “Real Housewives of New Jersey” – and her husband provides an example of debtors who mindlessly leaped from a very hot frying pan into a much, much hotter fire when they filed a Chapter 7 Bankruptcy in the United States Bankruptcy Court in Newark.  In March, Ms. Giudice and her husband pled guilty to a number of federal criminal charges, which include allegedly attempting to evade their creditors by deceiving the United States Trustee about their income and assets.  They are scheduled to be sentenced in September 2014. Teresa Giudice, 41, faces up to 27 months in jail, while her husband, Joe, 43, faces up to 46 months, and possible deportation because he is not a United States citizen.

A Debtor seeking relief under the United States Bankruptcy Code must fully disclose all of their assets and income to the Bankruptcy Court.  For “consumer debtors” who seek to discharge unsecured debt such as credit cards and medical bills by filing a Chapter 7 Bankruptcy petition, the process is simple and straight-forward. If debtors receive all of their income from employment, they must submit their pay stubs for a six-month period prior to the filing of their petition, and must provide copies of their income tax returns for the past four (4) years.  Debtors who own a home must provide a copy of the Deed or other proof of ownership, mortgage statements or other proof of the balance on their mortgage(s), an appraisal of their property.  These documents are reviewed by the Trustee to determine whether any equity in the home exists, and to verify whether any equity can be claimed as exempt and protected in the case.

When  the Petition is filed, it must be signed by the debtors, who are required to attest “under penalty of perjury” that the required information is true to the best of their knowledge.  The United States Trustee who is appointed by the Court to represent the interests of creditors and the bankruptcy estate may sometimes dispute the value of a debtor’s assets – most often the value of their home or whether certain income, such as a bonus,  should be included when the debtor’s income is calculated.   Disputes with the Trustee over the value of a property or whether payments received by the debtor should be included in the calculation of the debtor’s income are not unusual and are either settled by negotiation between the debtor’s attorney and the United States Trustee or by the  Court.

But willfully and deliberately concealing assets and/or income from the Bankruptcy Court by failing to list them on the schedules that debtors  are required to file is an entirely different matter, and is a federal crime because the Bankruptcy petition and schedules signed by debtors are signed  “under penalty of perjury”.  Such conduct is rare because it requires a blend of arrogance and stupidity. It  almost never happens, but unfortunately and inevitably sometimes it does.

On October 29, 2009, Teresa Giudice and her husband, Joseph Giudice, filed a Joint Chapter 7 Bankruptcy Petition in the United States Bankruptcy Court, under Case 09-39032. They sought to discharge unsecured non-priority claims in the amount of $7,193,723,47, which included, among other debts, store credit cards totaling $89,254.81, owed to Bloomingdale’s, Neiman Marcus, and Nordstrom.

On September 2, the United States Trustee, filed an Adversary Complaint, under case number 10-02159-MS against Gudice, seeking a denial of a discharge and other relief.  The Complaint presents a detailed list of the property which the Giudices attempted to conceal.  It includes real estate, luxury automobiles and other personal property, bank accounts, and a book contract which was to pay Mrs. Guidice a $250,000.00 advance to write a book entitled “The Skinny Italian”.   The U.S. Trustee Complaint alleged:

“69. The Defendants also produced a book contract between Hyperion and the Defendant wife, pursuant to which the Defendant wife was to receive an initial advance of $250,000, an additional advance of $30,000, and royalties based on sales of her cookbook.
70. The Defendant wife’s contract with Hyperion was dated October 22, 2009, approximately one week prior to the petition date, and was signed by the Defendant wife on November 18, 2009.
71. To date, the Defendants have not filed amended schedules that disclose the existence of the book “Skinny Italian,” the publishing deal with Hyperion, Defendant wife’s ownership of TG Fabulicious, , or Defendant husband’s ownership of 1601 Maple Avenue Associates, . “
Adv. Pro. 10-02159-MS Paras 69 -72.

The Guidice matter presents an extreme example of the failure of a debtor to disclose income and assets. The Guidices’ case is so extreme and their efforts so clumsy that they present a comic picture of two greedy wannabees who for some reason thought they could ‘get over’ on the Bankruptcy Court and the Trustee.  However, there is, nonetheless, something to be learned from this matter.  Those who seek the protection of the Bankruptcy Court must fully disclose absolutely all of their income.  Willful failure to do can result in devastating consequences – and yes – full disclosure means FULL DISCLOSURE with no exceptions.


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