CHICAGO (AP) — It's an audacious scheme even for a city with a reputation for corruption: Hundreds of Chicago residents allegedly filed for bankruptcy, not because they're actually bankrupt, but to get out of paying hefty impound fines and retrieve their towed cars for free.
A complaint revealing the existence of the alleged fraud was released Thursday after the arrest of a 30-year-old Chicago man accused of offering, for a fee of his own, to show drivers how to initiate bankruptcy proceedings just long enough to get their cars out of a city auto pound fine-free.
"This is the first time I've ever heard of anything like this," said Mehul Desai, a Chicago bankruptcy lawyer with no link to the case. He added that people whose cars are impounded often live on low incomes and are desperate for options once traffic and parking fines start adding up.
Daniel Rankins was the only suspect arrested Thursday, but the complaint says revenue officials believe more than 1,000 people filed for bankruptcy in Chicago to avoid fines that could run from hundreds to several thousand dollars.
The car owners allegedly used partially filled-in forms Rankins provided to file for bankruptcy at a federal court office. No officials or attorneys are alleged to be involved in the fraud.
Rankins made an initial appearance in federal court in Chicago Thursday. The judge ordered he be held at until a detention hearing Monday. His attorneys declined comment.
An investigation was launched after revenue officials noticed more and more car owners were listing only two entities as creditors: an auto pound and the city's Revenue Department.
According to the complaint, Rankins and other mediators would linger around the city revenue office to single out drivers seeking release of their impounded cars and approach them. In exchange for explaining the filing process, Rankins would typically ask for payment equal to half or a third of the fine being asked by the city, the complaint says.
With the bankruptcy filing, the creditors — the city auto pounds — would automatically be notified they can't demand payment from the car owner.
By the time individuals' Chapter 7 cases came before a judge, they would have long since retrieved their cars. They wouldn't appear in court, and the judge would dismiss the case.
After that dismissal, however, the city would likely target the cars again for failing to pay the impound fines, said Desai.
"They're going to boot your car and get it back again," he said. "It's a short-lived victory."
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