[EXCLUSIVE] ‘RHONJ’ James Kridel Responds To Teresa Giudice’s Bankruptcy Case Reopening

Season seven of The Real Housewives of New Jersey premieres this July with cast members looking to repair shattered relationships.

That story arc sounds familiar, no? Everything old is new again, especially when it comes to Teresa Giudice’s legal misadventures.

Judge Stacey L. Meisel recently ruled that The Real Housewives of New Jersey star’s bankruptcy case must be reopened. “Upon the motion of John W. Sywilok, Esq., and for good cause shown, it is ORDERED … This case is reopened.”

An indispensable element of the American legal system is the expectation that proceedings and lawsuits in the courts are not founded upon deception. To that end, the law imposes requirements of honesty and good faith when parties bring claims to the courts for resolution.  Reopening a bankruptcy case has become an increasingly popular means of redressing wrongs by individuals who have previously filed for bankruptcy and failed to disclose assets in the bankruptcy proceeding.

Now that a federal judge has reopened Teresa’s bankruptcy case, her assets are going to be evaluated with a fine-tooth comb. Teresa and John W. Sywilok, Esq. (bankruptcy Trustee) are locked in a bitter legal battle after the latter filed a motion on April 29 to reopen her bankruptcy case. 

Trustees usually ask the court to take this type of action because either he/she finds assets that were not disclosed in the bankruptcy paperwork; he/she discovered material mistakes in the bankruptcy petition; or he/she realized that the debtor failed to list valuable property in the schedules.

Ultimately, the decision to reopen is within the discretion of the court, and granting a motion to reopen does not afford substantive relief but simply provides the opportunity to request further relief. 

In this case, the Trustee may have moved to reopen Teresa’s bankruptcy if there was evidence that she was fraudulent in her bankruptcy filings or untruthful in her testimony during the meeting with the Trustee and creditors. If the Trustee learns that she attempted to hide assets from him, the court could seize the asset, impose civil fines, and refer her for criminal prosecution.

Remember Teresa submitted false documents to the bankruptcy court.

“We aren’t going to let people who abuse the system take advantage of the system,” noted James Kridel, Teresa’s former bankruptcy attorney.

Teresa may only have herself to blame for the reopening of the bankruptcy case, which could force the court’s hand to investigate further her assets. Kridel emphasizes,

“Without the legal malpractice case, the bankruptcy case wouldn’t be reopened. She set these wheels in motion.”

To preserve the integrity of the bankruptcy process, the Bankruptcy Code imposes strict requirements of disclosure and good faith dealing upon debtors like Teresa Giudice seeking bankruptcy’s myriad protections. Teresa has been dealt a major blow with the reopening of the bankruptcy case.

“It is the Trustee’s sole discretion to do whatever he wants to do. John W. Sywilok could say, ‘Teresa, we are going to look into your assets,’” explained Kridel.

“This was a decision by the Trustee who did this because of her antics. The Trustee believed that this [legal malpractice case] was a pre-petition asset. He cited the same cases I cited,” Kridel remarked to me over the phone on May 24.  He continued, “It opens a lot of other problems for her. People may look to Teresa for other things.” 

Judge Meisel’s decision may allow the reality star’s unsatisfied creditors to collect potential proceeds from a lawsuit she filed against James Kridel or seek reimbursement from other sources of undisclosed income. While there may have been a fulfillment of a number of creditors, some creditors still exist.

Just because there is another asset, i.e., the legal malpractice suit, that doesn’t mean such asset will actually yield a payout to creditors. The legal malpractice cause of action is an asset of the bankruptcy estate, since the events giving rise to it stem from the activities of the debtor pre-bankruptcy. The Trustee will have to determine the value of this legal malpractice asset and whether its liquidation will provide a meaningful payment to creditors along with what will be the cost of litigating this legal malpractice matter. The Trustee must engage in this analysis to determine if it is financially and legally appropriate to pursue a legal malpractice suit against James Kridel. 

CLICK: EXCLUSIVE: Teresa Giudice’s Malpractice Suit Bombshell—Bankruptcy Attorney Speaks Out! 

With respect to administration of assets, the court could find that reopening would benefit creditors if assets were unknown, or their value concealed, at the time the bankruptcy was closed. Did the debtors (Teresa and Joe Giudice) conceal or fail to disclose certain assets? Bankruptcy cases are reopened when there is evidence that the debtors were less than truthful about their properties and possessions.

The duty to disclose based on the Bankruptcy Code’s broad disclosure requirements does not end at the moment of filing, and a debtor seeking bankruptcy protection is said to face substantial and ongoing asset disclosure obligations. Any property, including assets such as real estate and claims against third parties, must be listed on schedules of the debtor’s bankruptcy petition. In theory, all assets are available to be liquidated and the proceeds distributed to the unsecured creditors.

There are certain cases in which the debtor fails to list assets, either mistakenly or intentionally. In such cases, the Chapter 7 Trustee never has the opportunity to evaluate the asset and determine whether it might generate any funds for the unsecured creditors. Under such conditions, property that should have been listed is deemed to remain property of the debtor’s Chapter 7 bankruptcy estate. The Trustee must “protect the integrity of the Bankruptcy Code and the court, and if he believes someone is abusing it, he can right that wrong,” warns Kridel.   

Grab your gavel, join the conversation, and let us know what you think about this latest legal development regarding Teresa Giudice.

 

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