On Buying a House During Bankruptcy

The new MckMama McKinney house

Recently, watchers of the MckMama train wreck were treated to the news that blogger Jennifer McKinney has bought a home. This lovely home in West Salem, Wisconsin, was most recently on the market at $289,900.

Jennifer “MckMama” McKinney bought the home under a contract for deed arrangement, also called a land contract. She paid $20,000 up front, with a balance of $282,500 to be paid monthly with annual interest at 6.95%. The contract matures on April 15, 2013, which means she must pay in full at that time or lose her downpayment and lose the house. That can be done with cash on hand or some other form of financing, like a bank loan. If they buyer defaults on the land contract, the property typically reverts to the seller and the buyer loses all money previously paid.

Readers have questions about what this purchase means since Jennifer and Israel McKinney are currently in the middle of a Chapter 7 bankruptcy proceeding. A home purchase does not affect the bankruptcy proceeding.

Typically, those in Chapter 7 or recently out of Chapter 7 aren’t able to get financing anywhere. In this case, the owners of the property, Dale and Lisa Arndt, obviously did no research on Jennifer McKinney before extending her credit. If they had, they would have discovered the many foreclosed homes in the last few years, how the McKinneys trashed a recent rental property and screwed the landlord, and how the McKinneys have screwed many people and companies out of many hundreds of thousands of dollars they owe thanks to family spending sprees, and then proceeded to lie to the bankruptcy court in an attempt to defraud those same creditors through the bankruptcy process.

If the McKinneys were in Chapter 13 bankruptcy, they could not buy a house without the approval of the bankruptcy court. Chapter 13 resolves debt with a payment plan, and with creditors getting part or all of the money they are owed. Because the McKinneys are in Chapter 7, there are no limitations on them purchasing anything now.

I have speculated that the McKinneys will not have their debts discharged in bankruptcy, as trustee Gene Doeling has been doing a fine job of uncovering their fraud. If he has anything to say about it, Jennifer and Israel McKinney will be saddled with their debts forever. So while the McKinneys are free to spend all of their money right now, they do it with the knowledge that they have hundreds of thousands of dollars of debt that will not go away through bankruptcy, and which they will be responsible to pay.

What’s the debt tally including the new house? The original bankruptcy filing showed liabilities of $725,483. If you subtract the value of the house (with the hope that the bank can sell it for enough to satisfy the McKinney mortgage), that would leave approximately $279,000 in credit card debts, medical debts from Jennifer’s great RV hospital tour of 2011, unpaid federal taxes, and other miscellaneous debts. To that we add the claim for $50,000 of unpaid wages made by Israel McKinney’s former employee Lee Youngman (with the hope that he can prove it and will prevail in court). Interest has likely been accumulating on all of these debts, so we could safely add another $25,000 (probably even more) for accrued interest. And then we add the new house at $290,000.

That brings us to a grand total of $644,000 owed to creditors, assuming the best case scenario and the McKinneys end up owing nothing on the last foreclosed house. If the bank short sells it, however, the McKinneys could owe the difference between the mortgage balance and the sales price of the home. This $644,000 only includes the KNOWN debts. There are likely additional debts that Jenny and Israel have incurred in 2012.

Wow. It’s apparently good to be MckMama. Not a care in the world. Running up hundreds of thousands of dollars of debt on top of the hundreds of thousands of dollars already owed (which, if not discharged in this bankruptcy, will never, ever be discharged in bankruptcy).

Hawking dangerous Xyngular diet pills (a combination of a starvation diet, high levels of caffeine and appetite suppressants, and dangerous DMAA), via a product-based pyramid scheme, which like all other MLMs, is designed to guarantee that 99% of the participants will lose money. The once-popular My Charming Kids blog has turned into a space simply to advertise Xyngular products over and over, and dupe people into signing up for the scheme. Jennifer rakes in more money, but spends it even faster. What a life!

If you’re interested in learning more about the evils of multi-level marketing schemes like Xyngular, start here. All MLMs are essentially the same, so you can just change the company name as you read.

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39 Comments

  • Hambone says:
    8 August 2012

    Thanks for the update, Tracy. In my opinion, she also has addition medical bills for 2012 that haven’t been included in her massive mountain of debt. Her son was hospitalized in January, she was hospitalized in February. I don’t think these new medical bills were included in the amended paperwork in March, and I’m almost certain she had no health insurance at that time since she mentioned in separation paperwork that she was looking into getting it.

  • Tracy Coenen says:
    8 August 2012

    Hambone – You’re right. I should clarify that these are only the KNOWN debts. I am sure she’s run up plenty of other debts this year.

  • denise armbruster says:
    8 August 2012

    Will she ever ever learn. The owners of that house omg are they in for a surprise. Why on earth would they not research whether its mcklosers or anyone else. Dumb.

  • Patrice says:
    8 August 2012

    How this woman can do all of this and still show her face in public is beyond me! Living like that is disgusting yet she seems to have no remorse.

    I don’t understand why she cannot understand that all of these terrible decisions will have consequences. Heck, with all the foreclosures, debts and an inability to discharge them, she is already facing some of the consequences. She has all of that hanging over her head but that isn’t enough for her apparently. She has to straddle herself with almost $300,000 MORE debt! I cannot begin to comprehend why she would want that.

  • Susan says:
    9 August 2012

    Unbelievable how this woman always comes out smelling like a rose.

  • ashley says:
    9 August 2012

    This woman is such a scam artist, I hope she doesn’t leave the owners with a trashed home and huge utility bills. How she can even continue to blog and act like she hasn’t harmed or taken advantage of anyone is so wrong. After all her lying and scamming, it’s beyond me how she can still show her face and still blog publicly. She is such a pathetic joke.

  • Betty says:
    9 August 2012

    What is your reasoning for posting a live link to the location of someone’s new home in your post? What is the source of your information, do you have the public documents to back up that she purchased the home in the manner you state?

  • Tracy Coenen says:
    9 August 2012

    Betty – I am simply providing information that is found in public records. If you check the links in the article, you will see the public records that show that she “purchased the home in the manner I state.”

  • JBH says:
    9 August 2012

    I <3 you.

  • Allie says:
    9 August 2012

    Tracy,

    Very important to note:

    House #4 (before the Farm) in Becker, MN was ALSO a Contract for Deed — for which she denied over and over and over. But MWOP has the actual signed document. They put down in the neighborhood of $30K, were paying an astronomical amount each month in payments alone, and for some reason (many believe it was a scam to make it appear more distraught and poor to help move the soon-to-be-filed bankruptcy along; obvious FAIL), they just picked up (after selling a ton of stuff in front yard garage sales) and walked away. Just up and walked away from a house they were in a land contract with (with 2 or 3 years remaining on that contract, to which they are still responsible for) leaving the owners of the Becker house with their $30K downpayment and all the money they’d paid into it. To add to the craziness, they (according to the court tapes), made two payments to the seller right before vacating the house and moving to the Farm leaving even more shaking heads. My point in all this is — they’ve done Contract for Deeds before, and even then, they walk away! Granted, the owner gets to keep all the money they pay into it, but it’s just another example of how these two societal rejects just move around like the scamming gypsies they are. The owners of the new property should be made aware of their history with land contracts as well.

    Thank you for this excellent piece, Tracy!

  • Tracy Coenen says:
    9 August 2012

    You’re welcome, Allie. I know that some people think the sellers of this property will make out okay if Jennifer defaults and leave the house. I’m not convinced of that. Based on the history of the McKinneys, if they do have to leave the house, they’re going to leave it trashed. It will be damaged, painted ridiculous colors, filthy, with rotting food, trash, and diapers everywhere, bugs, etc. The sellers will have quite an expensive mess to clean up.

  • Midwest Mom says:
    9 August 2012

    Are the tax implications of the default on the CfD similar to those on default of mortgage? Do they have to pay taxes on the part written off as in a mortgage default?

  • Betty says:
    10 August 2012

    Public records is your justification? With that said, I will certainly look at your posts in a different light in the future with a clear lack of professionalism and integrity. Drama and clicks seems to be the motive and that’s a shame.

    I did check the link in the article, it doesn’t link to a public website, the only link to a public information website is the live house link. There isn’t header, footer or any documentation on your link that shows the source.

  • Tracy Coenen says:
    10 August 2012

    Betty – I’m sorry you didn’t understand my earlier comment. The information in the link IS the public record. I provided the actual information, rather than a link to the source. So again, this information is freely available in public records, and I’ve simply posted it here for the information of interested consumers and taxpayers.

    If you’ve been following this story, you’re aware that the McKinneys are trying to fraudulently ditch out of their debts, essentially leaving consumers and taxpayers to foot the bill for their spending sprees.

    For that reason, I think this information is of interest to the public, and since it’s readily available for free to the public, I thought I’d just do everyone a favor and provide the information here.

  • Susan says:
    10 August 2012

    Betty, when someone lives their life on the internet, they forfeit privacy. Tracy did not post anything that invades Jennifer’s privacy as Jennifer has already invaded it herself.

  • Tracy Coenen says:
    10 August 2012

    Thanks Susan. My view on it is a little different. There are lots of bloggers who blog about their lives, and I have no interest in any of the details about their money and where they live.

    This case is different. Jennifer and Israel McKinney have attempted to defraud the Bankruptcy Court, and indirectly every consumer and taxpayer. The only way to stop people like this is by exposing their shenanigans. In this case, the purchase of this house while still trying to ditch out of their debts with lies and incomplete information requires exposure. In my opinion, of course. :)

  • Tracy Coenen says:
    10 August 2012

    And I certainly understand there are people who believe the location of the house should be kept private. I respect the fact that Anja won’t publish those types of details on her site. I think it’s exceedingly kind to Jennifer, her family, and others involved.

    I don’t think she’s wrong for doing that. She’s got excellent reasons for doing so.

    It’s just that on THIS site, I think there is a public interest in posting all of the details in order to hold Jennifer accountable for her actions.

  • Betty says:
    10 August 2012

    She has five excellent reasons for doing so, five minor children who are innocent in any and all wrong doings of their parents and you have made it quite easy for anyone to find them. You don’t have any reason for posting private details except that you can.

    I can’t think of any public interest in knowing the location of their current home, a home with minor children.

  • Tracy Coenen says:
    10 August 2012

    Betty – No one cares about “finding” Jennifer’s children. But even if they did care about finding the kids, it is very simple to do without my article. The location of the family was not secret and they are not in the witness protection program. You are completely overreacting to a non-issue.

  • Alysha says:
    10 August 2012

    Betty – if your only point of contention is that her address is shown, you really need to pull your head out of your butt. Sorry, I know that’s harsh, but good grief – a “public” blogger putting every.single.detail of her life out there & you are concerned about her address (which anyone could easily find WITHOUT this site) being shown? Wow.

  • Kat says:
    11 August 2012

    I am amazed by the number of people that are so intent on exposing this person. Every detail of her life is fodder for people that do not even know her. I agree she is a financial mess. I also think more than one person has mentioned that she may suffer from a mental illness. I am confused about how exposing every facet of her life is going to cure her. Yes, I know if one searches the public records this info can be found, does that justify publishing it and then having people blog and tweet directing people to this blog post. Seems like the pot calling the kettle black situation. If a person is mentally ill does making fun of them and exposing every little thing about their life make them less mentally ill? Or does it feed the mental illness and encourage them to continue down the path of destruction taking those in their path with them. If the courts cannot stop her, what makes you think you can?

  • Tracy Coenen says:
    12 August 2012

    Kat – I know nothing about whether Jennifer McKinney is mentally ill or not, and I don’t really care. What I do care about is holding Jennifer accountable. Why does that matter? By writing about the frauds MckMama has committed, I am increasing the chances that people in the future will not be swindled by her. Hopefully, anyone considering entering into a financial transaction with Jennifer will research first. Hopefully anyone signing up for a business of hers or sending money to her will do research first.

    You see, fraudsters do their deeds in the dark of night. They rely on the secrecy of it all to get away with swindling more and more people. By exposing the lies and frauds, I am hopefully helping others to avoid becoming victims of the McKinneys.

    As for the courts not being able to “stop her”…. I think the courts can and will stop her. It’s called a denial of discharge of bankruptcy. Ms. Fraud will be on the hook to pay those debts for the rest of her life. Nothing would make me happier.

  • Edwina says:
    13 August 2012

    Tracy,

    your work here is so comprehensive and thorough, it’s very nice. my question is this: HOW will she be held any more accountable for her debts than she was previous to trying to dump the same debts while bringing in an income more than sufficient to have prevented her from acquiring them in the first place? can they garnish her earnings? will the payment plan be some pitiful hundred dollars a month (like her old tax debt?) What will stop her from continuing to refuse payment? who will stop her from using the emergency room like a family doctor and then passing the bill on to the taxpayers? She belongs in prison, in my opinon.

  • Tracy Coenen says:
    13 August 2012

    Excellent question, Edwina. Her creditors will follow her to the ends of earth until she pays. They will require her to set up payment plans with them (reasonable ones, not some pitiful amount) and if she doesn’t pay as agreed, they can get out the big guns.

    That will include slapping a lien on any house she owns. The can swipe money directly out of her bank accounts. They can garnish wages and they can garnish 1099 income that may come from Xyngular, Google, etc.

    The creditors will have to jump through some hoops, but they will eventually get their money from her.

  • Edwina says:
    13 August 2012

    Thanks for your reply, Tracy! I guess I can’t help but feel that she is somehow untouchable as far as these things go- she hasn’t yet been held to task for nearly a million dollars worth of theft- so how could anyone believe that three times that amount won’t be just as easily skirted? she spends money and hides money- I don’t see any way to keep her honest aside from liquidation and jail time. otherwise it’ll just be a wild goose chase across the midwest in campers and RVs pit stops in contract for deed homes that she SOMEHOW can manage to come up with copious amounts of cash for (but somehow she’s not able to come up with a similar amount owed in wages to their former employee…how sad. How sinfully sad.)

  • Lindy says:
    14 August 2012

    Thank you for all your hard work. Jennifer is also scaming the state of Wi. She has Badger Care medical insurance paid for by the tax payer.
    If she is claiming her income is $55,000. Once again she is scamming the tax payers. This is not right! We know she makes over $150,000 per year. How can we find out if she is getting insurance based on her lies.

  • kat says:
    14 August 2012

    Based on a little research into your background, I am not sure your opinion matters much. I don’t for one minute think you are doing this to hold Jennifer accountable, it appears you are doing it to satisfy your need to get your name out there and you are using her as fodder to do that. I have been watching for almost 4 years while those on the many website set up to ‘keep her accounable’ have predicted her demise almost monthly. Seems to me she is still going strong. Is she a financial mess, yes, just like many of those that make comments to ‘keep her accountable’. Obviously no one is researching her before entering into business or contracts with her, or just maybe since her financial problems are very similar to many thousands of other people she just does not stand out in the vary large crowd. Do I want her to pay her bills, you bet your bippy I do. Do I think the constant ‘exposure on the web’ is going to make a hill of bean of difference, not for a minute. I think it satifies the writer to delude themself into thinking they are ‘holding her accountable’. Just my opinion, doesn’t really matter to anyone, but I felt a need to speak out about this situation. I know a few things about fraudsters, flim flam, matchstick, or whatever you want to call it. She does not fit the profile in my opinion. She fits the profile of a person with a mental illness that has self control and self esteem issues.

  • Tracy Coenen says:
    14 August 2012

    Kat – I don’t need to “get my name out there.” My name is very “out there” already. And even if I did want to get my name “out there,” Jennifer McKinney would not be the vehicle I would use. Why? Because my clients don’t know who she is and don’t care one iota about her. Writing about Jennifer is not for potential clients. It is simply doing my part to expose a fraud that has hurt many people. And that’s what this blog is about: exposing scams.

    Apparently the “few things” that you know about fraud are not enough. I have been certified as an expert witness in state and federal courts. I have written books about fraud. I am well-respected in my field. And in my humble opinion, Jennifer McKinney fits the profile of a fraudster to a T.

    As for “research” into my background, you no doubt found that I am highly educated, highly credentialed, highly published, and widely known in my field for being a thorough and competent fraud investigator. :)

    You may not think my opinion matters, but Gene Doeling does. And that’s who counts, because he CAN make Jennifer pay for her frauds.

  • sher says:
    22 August 2012

    I have been wondering how Jennifer is going to explain/justify to the trustee/court her obvious decline in other money making sources once it was discovered how much she was really making off of them and once she realized the trustee could take them from her. It is obvious what she has done. Any idea how this might play out?

  • Tracy Coenen says:
    22 August 2012

    It’s not going to matter in bankruptcy court. Jennifer is free to work as little or as much at anything she wants. She can stop working all together. She’s not an indentured servant, so she’s not obligated to keep blogging.

    The thing is… she’s giving up the sustainable business of blogging for the unsustainable money of MLM. In order to keep making the big bucks, she’s going to have to keep recruiting into infinity. And she won’t be able to do it because she has now used up her market. All of her blog readers have joined or don’t want to join, so there is no one new to keep recruiting. Sure, she’ll get a few new ones here or there. But nowhere near the volume she has gotten up until now.

    99% of people lose money in MLM, and Jenny’s turn to stop making money is going to come soon as she has used up her warm market and has nowhere else to recruit from.

  • Pat says:
    25 August 2012

    Absolutely. I don’t understand why she seems to be making these decisions without any thought of long-term sustainability. She seems to build her lifestyle on whatever her current income is (actually well beyond her current income) and it doesn’t seem like she realizes that it will likely change drastically with an MLM.

    She’s nowhere near the top of the pyramid so she’s going to flame out big time. What is she going to do then? Why would she want to set herself up to lose yet another home and lose tons of money in the process when she already has such a heavy burden of debt to deal with already.

  • Kerrie says:
    25 September 2012

    Hi Tracy,

    Wondering how Jennifer McKinney closing down her blog is going to affect the upcoming trial. Was it hers to run down or does it belong to the Trustee.

    Also, what will the Trustee be doing as far as preparations for the trial? What sort of information will he be gathering & preparing? What about her legal representative?

    I so want these people to be held accountable for their abominable actions but worry this won’t happen.

    Thanks so much for keeping us updated.

  • Tracy Coenen says:
    25 September 2012

    Kerrie – I suspect that Jennifer and the trustee have come to some agreement, and that’s why she’s closing the blog now. I don’t think the bankruptcy court can force her to stay in business on the blog. So even if they haven’t come to an agreement on how the bankruptcy will be closed, I don’t think there would be any negative consequences for her.

    She’s screwed either way. The debts are hers to pay. And her earnings from any venture can be garnished by creditors.

  • Tracy Coenen says:
    25 September 2012

    I do not think there will be a trial. She can’t win this one. So that’s why I think they’ve negotiated some sort of settlement. Whatever it is, it can’t be good for Jennifer. Maybe a little less bad, and it saves the bankruptcy court the time and expense of further litigation.

  • GreenInOC says:
    14 October 2012

    @kat, “Do I think the constant ‘exposure on the web’ is going to make a hill of bean of difference, not for a minute.”

    It seems to have made a huge difference for Mr. Doeling and the creditors she has already committed fraud against.

  • Huh? says:
    23 March 2013

    Is this the house of hers that went up in flames last night?

  • Observing Observer says:
    24 March 2013

    I think exposing her might alert her next potential victims. I would certainly Google anyone I was entering into a financial agreement with, apparently not every one does, though.

  • Cindy says:
    29 March 2013

    Sure is.

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