The Chapter 7 trustee can file a lawsuit to go after game show winnings of bankruptcy debtor Kathy Cox. This past week, I received a phone call from a Hiram Georgia client asking for my opinion about this situation they read about in the newspaper.
While Kathy Cox was the Georgia State Superintendent of Schools, she and her husband fell into a difficult financial situation. Her husband was a builder and as we all know, Georgia real estate has tanked. As a consequence of the real estate meltdown, she and her husband were forced to file for Chapter 7 bankruptcy protection.
Approximately two months before she filed, Kathy Cox won one million dollars on a Fox Broadcasting game show entitled, “Are you smarter than a 5th grader.” Kathy Cox went on the show intending to donate all of the proceeds to the Georgia Academy for the Blind in Macon, the Georgia School for the Deaf in Cave Spring and the Atlanta Area School for the Deaf in Clarkston.
The Atlanta Journal reports that Kathy Cox stated, “If anybody had watched the show, it was so clear I was there as the state superintendent. That money had nothing to do with what was happening to us personally.” (see AJC article).
In her bankruptcy case, the Chapter 7 trustee filed a lawsuit to recover her game show winnings for her creditors. Despite her intentions, the Chapter 7 trustee has a right and a duty to go after the funds that she won. She had legal title to the funds. The Chapter 7 trustee has to do his job and make every effort to recover funds on behalf of the creditors of the bankruptcy estate. The fact that she donated the money to a worthy cause is not relevant.
I commend Kathy Cox for her desire to donate those funds to those schools. Had she kept all the money for herself, she might have been able to use that cash to avoid bankruptcy. I have no doubt that she fully intended to donate that money before she ever stepped onto that show. She clearly has a great heart.
The lesson to be learned from this story is that a Chapter 7 bankruptcy can recover money or property that a debtor has given away shortly before filing.