McKinney Bankruptcy Case Settled: What’s Next?

Jennifer McKinney (aka MckMama) and Israel McKinney appear to have settled all claims in their bankruptcy filing in which trustee Gene Doeling alleged fraud, saying:

The Debtors have concealed, destroyed, mutilated, falsified, or failed to keep or preserve any recorded information, including books, documents, records, and papers, from which the debtors’ financial condition or business transactions might be ascertained. The debtors failed to keep adequate books and records from which their financial transactions could be ascertained. The co-debtor was receiving cash payments from photography clients that were not disclosed and for which she has been unable to provide an accounting.

In a document filed yesterday in Bankruptcy Court, it appears the McKinneys and the trustee have come to a settlement in the case.  Jennifer and Israel McKinney have already agreed to a waiver of discharge, which means they must keep (and pay!) all their debts and the debts in the original bankruptcy filing can never be discharged through bankruptcy.

Now the McKinneys are agreeing to pay to the trustee (for the benefit of creditors) for the value of the non-exempt assets (the ones they lied about in the bankruptcy filing) in order to put this matter to rest.

The agreement reads as follows:

The trustee filed a complaint to deny discharge on May 24, 2012, alleging that the debtors had several undisclosed assets at the time of the bankruptcy filing. These included an undisclosed PayPal account, undisclosed receivables, an undisclosed travel trailer and undisclosed domain names.

The debtor Jennifer McKinney  contends that the PayPal was not set up by her, was not owned by her, and was never accessed by her. The undisclosed receivables amounted to $1,460. The camper was a 1950’s model that had a value of $750. The debtor has agreed to and does assign and transfer ownership of the domain names of mckmama.com” and “mycharmingkids.net” to the bankruptcy estate, and will assist the bankruptcy estate in obtaining title and ownership of these domain names so they can be liquidated by the bankruptcy estate. The debtors also have $1,624.70 of nonexempt equity in a 2005 GMC Yukon sport utility vehicle.

The trustee has agreed to accept the sum of $3,500 from the debtors for the value of the nonexempt assets, payable over three months beginning October 1, 2012 and continuing on the first of each month thereafter.

Both debtors have voluntarily waived their discharges in this bankruptcy case and the court entered an order waiving their discharges on October 10, 2012. Upon approval of this agreement, the trustee will dismiss the remaining claims in adversary proceeding 12-6024.

So what does this mean? The bankruptcy case and the related case filed by the trustee will be closed, so long as the judge accepts the settlement and MckMama pays the $3,500 she is agreeing to pay.

However, there’s a slight problem with this most recent filing. Those who have followed Jennifer McKinney know that in fact, she did have a PayPal account that she regularly used in her business. She used the PayPal account to receive payments for her photography business, as well as other things. In this blog post from September 2011, Jennifer directs people to sign up for photography classes and pay via PayPal (click to see full size):

Jennifer also admitted several times in the bankruptcy creditors meeting that she had a PayPal account she actively used:

TR:     How do you get paid by Amazon?

JM:     PayPal.

TR:     You get merchant credits?

JM:     I don’t know what that is.

TR:     So merchants put a credit on your account, like Amazon, for example. They give you a credit for deals that come through your site so that you have, let’s just say $100 of things you can buy at Amazon.

JM:     Oh. Maybe they offer it. I just take it as a straight up payment to PayPal.

 

And:

TR:     So you have the Burst income, you’ve got the Google AdSense, you have the media consultants, you have the PayPal account. You don’t list any of those things in your bankruptcy schedules, right?

JM:     I didn’t separate them out and I didn’t list as much as I had coming in, no.

TR:     Well you have a PayPal account, a bank account, with money in it, right?

JM:     Yes.

TR:     Money that you can put in and take out?

JM:     Right, but everything from the PayPal goes right to my bank account, so I didn’t list it because it’s not—it’s effectively just a door into my bank account. For the money on here I listed, it would have been from my bank account.

TR:     That’s not what the question asked. The question asked you to list all bank accounts, doesn’t it?

JM:     Yeah, I didn’t list my PayPal account. I didn’t think of it as a bank account. I’m sorry.

 

I do wish that Mr. Doeling had investigated this issue further, sending a subpoena to PayPal for all records on Jennifer and Israel McKinney.  Jennifer has publicly claimed that someone set up fake PayPal accounts in her name to frame her for bankruptcy fraud. Her blog post is but one small shred of evidence proving that Jennifer had a PayPal account of her own, and no amount of “framing” by anyone else could change that.

Does all of this mean that Jennifer and Israel McKinney will not be held to account for their lies to the bankruptcy court?

No. The trustee is getting what he wanted from the McKinneys. He is getting the value of the assets they didn’t disclose (less the PayPal account, which he is apparently leaving alone based on Jennifer’s false representation that she didn’t have a PayPal account). He has likely weighed the probability of winning at trial, and what would be recovered, and has decided that this makes the most sense to everyone. (i.e. Even with a trial, there may not be anything more that he could recover.)

This settlement does not mean that criminal charges could not be brought against the McKinneys for bankruptcy fraud. There is no telling whether or not this may happen. This decision is out of the hands of the trustee, and will be made by federal prosecutors. There is no way to know if the prosecutors are considering this case for criminal charges.

Also, Jennifer and Israel are still on the hook for all of the debts in the original filing. They must pay those, and can never have them discharged in bankruptcy.

And there is still the possibility of trouble with the Internal Revenue Services. The McKinneys owe tens of thousands of dollars in unpaid taxes, and they’re not going to get out of that. While there is a process called Offer In Compromise through which taxpayers can have their tax debts reduced, I doubt that the McKinneys would qualify for such a deal. They are young and have lots of time to earn money and pay what they owe. The IRS has no reason to cut them a deal…. especially when chances are good that the have a long history of improper reporting and underpaid taxes.

While many had hoped to see a greater consequence come out of the bankruptcy case, I believe this outcome is the best we could have hoped for. Mr. Doeling has settled the claims he can settle, and has done the best job he can of getting assets for the benefit of creditors. Any other action is out of his hands, although I hope he has referred the case to the federal prosecutor for further action.

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23 Comments

  • Erica says:
    3 November 2012

    What does it mean that they have to pay back all of the debt that they attempted to get discharged? Who is going to make them do that and what is going to happen if they don’t pay it back? It really seems that they have stolen $750,000 and no one is doing anything about it. And what about the IRS? Are they going to do something? Will their passports be frozen since they owe the IRS so much?

  • Tracy Coenen says:
    3 November 2012

    The creditors can pursue the McKinneys into infinity for payment of these debts. They can go to court, get judgments against them, and start garnishing pay (wages and 1099 income) and taking money out of their bank accounts. It will take some work on the part of the creditors to get paid, but they can get paid by the McKinneys.

    I can guarantee that the IRS will be aggressive in pursuing what is owed by the McKinneys. While the bankruptcy was pending, the IRS was limited in what it could do. Once the bankruptcy was closed, that left the IRS free to pursue all collection methods. And you better believe they will get what is owed to them. :)

  • Cassie says:
    3 November 2012

    Hi Tracy,

    Could you please explain what the benefit of totaling the Tukon was in regards to the bankruptcy?

    There was something very fishy about that whole crash.

    Would it be correct to assume that the vehicle no longer hold equity and therefore the McKinney’s are off the hook for it? Thus reducing the payment to the court?

  • Tracy Coenen says:
    3 November 2012

    I don’t know if the Yukon was totaled purposely. If it was, I doubt that there was any benefit to be gained in the bankruptcy filing. If anything, I would suspect that the benefit was (a) insurance money, and (b) a way to explain a new vehicle to the sheeple.

    I do not believe the totaled vehicle changes the amount the McKinneys owe under this agreement, since this agreement was filed AFTER the “accident.”

  • Jenny says:
    3 November 2012

    Tracy,
    Regarding the PayPal, I believe Jennifer admitted to having a PayPal account, but claims that an additional PayPal account was opened in her name by someone else. Many believe she actually had multiple PayPal accounts through different email addresses.

  • Tracy Coenen says:
    3 November 2012

    Yes, but NO PayPal accounts were disclosed in the bankruptcy filing. That means there is still at least one account that should have been deemed non-exempt (due to failure to disclose) and should have been pursued by the trustee.

  • Jrrmommy says:
    3 November 2012

    Wonder if JM or any of the other memers of this diet pill extravaganza are paying taxes on their ” bonuses”. Hope the IRS comes down hard on her

  • Carrie says:
    3 November 2012

    First, the statute of limitations on debt in both MN and WI is six years from the time of default. Her credit cards more likely have three year statutes. All she needs to do is avoid her creditors for a few more years and she’s home-free.

    Second, PayPal acts as a bank, complete with FDIC insurance, so there is zero way someone could open an account in someone else’s name. Try to open a PayPal account. They require you to verify your identity.

    She is a liar, scammer, and a cheater. Unfortunately for the rest of us she appears to have been born under a special star. She has never had to pay the consequences for her actions and I don’t believe she will ever. She will go on lying, scamming, and cheating and we will continue to have to pay, literally, for her choices.

  • Tracy Coenen says:
    3 November 2012

    The statute of limitations dictates how long creditors can pursue someone for a debt and/or sue them for the debt. So long as they sue the McKinneys before the statue of limitations runs out, they preserve their rights. So they sue and get a judgment, and then work to collect it. They’ll need to get a judgment anyway if they want to garnish earnings or levy bank accounts. So simply waiting won’t help the McKinneys.

  • Carrie says:
    4 November 2012

    I understand what the statute of limitations means. I stand by what I originally wrote. They have to find her before they can sue her. As long as Ms. Mckinney continues to duck and dodge her creditors – notice she didn’t alert the Court to her recent address change – she will get off debt-free.

  • Tracy Coenen says:
    4 November 2012

    The McKinneys are easy to find, and will continue to be easy to find. Go creditors!!!! :)

  • Tracy Coenen says:
    4 November 2012

    Jennifer & Israel McKinney
    W5441 Innsbruck Rd
    West Salem, WI 54669

  • AntiEverythingMck says:
    5 November 2012

    And since Jen is spamming her phone # out in her pill hawking emails, creditors might as well have her # too – phone # 608-304-3471

  • Jemma says:
    5 November 2012

    Tracy, since their was obvious evidence, based on what the trustee said to the mckinney’s that a paypal account existed…why did he not persue this since the paypal account(s) held a significant ammount of money. She admits in the transcript that it(and more than one) exists so why would he drop something of such significance and with such an ammount due?

  • Tracy Coenen says:
    5 November 2012

    Jemma – I don’t know for sure. I am wondering if she drained the Paypal account before filing for bankruptcy. If that’s the case, then the trustee would not be able to recover anything anyway, since the balance was $0 at the date of filing. That seems the most logical answer, although I have absolutely no facts on what really happened regarding this account.

  • sher says:
    7 November 2012

    It has been reported (fact???) that the mcks have bought a new (2012)car. I can’t for the life of me figure out how someone with their financial problems can swing that unless they paid in cash. If they do own the car is it protected from creditors?

  • AntiMckEverything says:
    9 November 2012

    Jen lost her iphone in Dubai….but isn’t it surgically attached to her hand? Maybe she couldn’t resist the new iphone – or maybe she was getting calls from creditors who found her # listed here. Lets hope she isn’t stupid enough to spam her # out in emails again. Karma is such a bitch.

  • Renee says:
    2 January 2013

    Anyone know where I can listen to the audio?

  • Tracy Coenen says:
    2 January 2013

    The audio is here: http://mckmamatruths.com/creditors-meeting-ii/

    I highly recommend listening. It is extremely entertaining to hear the McKinneys tell lies and get caught in them, and also have very selective memory!

  • 2Short4Fraud says:
    16 January 2013

    We need to punish that C*nt I think her house and property should atleast get some nice eggs tossed onto it or something lol

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