Failed $191 Million Bankruptcy Shows Why Honesty Is the Best Policy

The Buchalter Law Group

Can you get away with lying about your income or other details on your bankruptcy petition? Our attorneys will always tell you no, and a recent trial is a great illustration of the consequences of dishonesty.

In 2017, two doctors (Sajid and Debra Ravasia, a psychiatrist and gynecologist, respectively) filed Chapter 7 bankruptcy in 2017 because two of Debra’s businesses failed, and they owed about 8,000 former clients. According to the couple’s petition, they owed a total of $191 million, and the court originally settled for this amount.

However, the U.S. Trustee’s Office objected to the settlement, and the subsequent trial convened last month.

Through the course of the trial, acting Trustee Gregory Garvin proved by a preponderance of evidence that the Ravasias:

  • Understated their income. Debra said she was unemployable and listed her income as $0 for multiple years after shutting down her businesses. According to data obtained from an investigator and the IRS, however, Debra made more than $260,000 in a single year. Additionally, Sajid made more than twice as much as he stated on the petition.
  • Overstated their debt. Their original attorney, Dan O’Rourke, had said they calculated the $191 million amount by attributing $20,000 to each of their 8,000 creditors.
  • Overstated other expenses. These expenses included $1,500 on clothes per month, as well as lawn care, private school tuition, and more.
  • Shielded ownership of assets. In total, the doctors failed to account for nearly half a million dollars in personal property, and they withdrew almost $15,000 from their bank account just days before filing bankruptcy. They also signed over the remainder of their loan on a ski condominium to Ravasia’s father for $1, but they continued to pay bills for the property, used it as a vacation home, and kept most of their personal property there.
  • Communicated the above falsehoods knowingly and fraudulently. According to the trustee, the couple provided this false information to avoid a reorganization plan through Chapter 11 or 13, which would have required them to partially repay their creditors. The doctors acknowledged these inaccuracies during the trial.

In agreement with the trustee, Chief Bankruptcy Judge Frederick Corbit ruled against the doctors, thereby denying the Chapter 7 petition. The Judge pointed out that the purpose of bankruptcy is to provide a fresh start for the honest debtor, but the Ravasias purposefully misrepresented their financial situation in multiple ways. Even without the condominium issue, the Judge said there was more than enough evidence to rule against the Ravasias.

Submitting an Effective (and Truthful) Petition

The Ravasias lied substantially about many aspects of their financial circumstances. But trustees, creditors, and other involved parties can raise objections over much smaller issues. To file a bankruptcy petition that accomplishes your goals, you’ll need more than just honesty—you’ll need professional guidance and integrity from a seasoned, highly reputed attorney. The Ravasias may have included the false information themselves, but their lawyers let it happen. They may have even encouraged it in the hopes of securing a more dramatic win.

At The Buchalter Law Group, we will always put your best interests first. With our support, you can rest assured your petition will have the highest possible chance of success.

Put our 45+ years of experience to work for your case. Request your free initial consultation by contacting us online or calling us directly at (321) 320-6088 today.

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