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Foley & Honigmann represented a debtor in an Arizona bankruptcy case [ In Re Lenke, 249 B.R. 1 (Bkrtcy.D.Ariz. 2000)] which Judge Randolph J. Haines found interesting and important enough to warrant publishing his decision.
Summary: The debtor was being prosecuted by the Maricopa County Prosecutor for allegedly stealing funds from a corporation of which he was a joint owner. Prior to the institution of the criminal prosecution the debtor had filed a Chapter 11 which he then converted to a Chapter 7. The Debtor received his discharge in October, 1998, which discharged his debts, including those he may have owed to the corporation. Nonetheless, the debtor's business partner and attorney convinced the prosecutor's office to bring charges against the debtor.
It was shortly after the charges were filed that the debtor retained Foley & Honigmann to argue that the criminal prosecution was essentially a disguised effort to collect a debt discharged in bankruptcy, which is a violation of the discharge injunction. The Debtor sought to permanently enjoin the prosecutor's office from proceeding with its case.
Basic Holding: The judge ruled that criminal prosecutions to collect discharged debts may be enjoined. However, the judge determined that the debtor must first be found guilty in order for the bankruptcy court to revisit the case and determine if the prosecutor's office was acting in violation of bankruptcy law. As it turns out the debtor's criminal attorney successfully defended the case and the debtor was found innocent.
Foley & Honigmann list this case among their victories, as the court's ruling agreed with their position that criminal matters can be enjoined under certain circumstances, and despite the futile attempts made by the Arizona Attorney Generals office to argue that the bankruptcy court has no jurisdiction over criminal matters.
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