Debtors Arrested for Ignoring Bankruptcy Court Orders, Spending Tax Refunds

Spending a tax refund that belongs to a bankruptcy estate or ignoring court orders may get you arrested by the U.S. Marshals Service and brought before the bankruptcy judge for contempt of court.

The moral of the story is don’t spend your tax refunds without talking to your bankruptcy lawyer first to make sure they are your refunds to spend.  Spending a refund that belongs to the bankruptcy estate can get you in a lot of hot water including denial of your discharge, judgment for the money and arrest if you ignore court orders to appear.

If you have made a mistake and spent refunds inappropriately, don’t ignore court orders.  Let you lawyer know so a plan can be made to make amends.  Getting arrested does not have to happen to you.

Judge Janice Miller Karlin of the U.S. Bankruptcy Court for the District of Kansas, Topeka Division, issued a new policy regarding bench warrants on January 26, 2009:

To assure the sanctity of this Court’s orders for turnover, appearance, etc., the Court will occasionally issue a Bench Warrant directed to the United States Marshal to bring the party who has failed to comply with a court order (hereafter “offender”) before the Court to show cause why the Court should not find the offender in contempt.  Bench Warrants are usually granted after the offender has had significant notice of the existence of the court order requiring action.  In addition, the USMS has adopted a procedure of sending a warning letter to the offender upon receipt of the Bench Warrant, indicating that if the matter is not immediately resolved, the USMS will bring the offender before the Court for a determination of whether the offender is in contempt, and if so, what remedy is appropriate.

Processing Bench Warrants takes valuable time from other important USMS business.  The Court is aware that sometimes, when the USMS has physically located the offender at a residence, job site, or otherwise, the offender represents to the USMS that he has, in fact, complied, or the offender requests additional time to comply. The Court has recently been made
aware that oftentimes, the offender has not, in fact, complied, or, upon being given additional time, does not comply. The USMS is then required to go back out to again serve the Bench Warrant, using valuable time. Again, since the offender will usually have had weeks, if not months, to correct any misunderstanding about what is required by the Court order, the Court has directed the USMS to proceed to bring the offender in on a Bench Warrant the first time, rather than to attempt to determine whether there has been compliance, or whether additional time to comply is warranted.  That is the job for the Court.

This will result in more offenders being detained and brought before the Court, which should be communicated to represented parties by their counsel. In addition, it is this judge’s policy to follow the USMS request that they not be required to provide return transportation to the offender, and it is further the policy of the Court to award costs to the USMS for its time and expenses expended in processing these warrants. Those costs will have to be paid before the debtor will receive a discharge, if the debtor is the offender.

About Jill Michaux

Jill Michaux is a Kansas bankruptcy attorney. She can be found on Google+. She and her partner, Mark Neis, are Topeka's only board certified consumer bankruptcy law specialists.