Ponzi schemes have allowed individuals to amass large amounts of money by swindling others. Fortunately, many of these individuals get caught. But one individual who was charged with fraud and bribery in relation to a ponzi scheme recently filed for Chapter 7 bankruptcy in Sacramento, California.
The individual conned $20 million out of an Indian community. He targeted 190 members in a plot known as an affinity scheme. The scheme focuses on a particular racial, ethnic, religious or national group in which the schemer belongs. After the individual was indicted, he then filed for bankruptcy.
However, the bankruptcy trustee is now suing at least 135 of the victims to recover the money that the schemer paid back before filing for bankruptcy. A Ponzi scheme works by giving money that came from more recent victims to earlier victims to prevent them, the earlier victims, from complaining.
Chapter 7 bankruptcy allows individuals to eliminate some or all of their consumer debt. Most individuals choose Chapter 7 because they can discharge instead of reorganize debts. Debt restructuring is what takes place in Chapter 13 bankruptcy.
Filing for Chapter 7 bankruptcy can discharge many types of debt including secured loans, mortgages, credit cards, medical bills, and some tax debt. The type of debt that cannot be discharged includes child support, student loans, and second mortgages that were stripped off.
Filing for bankruptcy also has the advantage of stopping creditors' collection actions. This includes putting an end to all foreclosure proceedings and repossessions. It will also stop wage garnishment. Bankruptcy can be a tool in regaining control of finances.
Source: The Sacramento Bee, "Ponzi scheme, bankruptcy collide in Sacramento courts," Denny Walsh, Oct. 17, 2012