The William Jefferson Chronicles

William Jefferson gets bad news from bankruptcy trustee
By Bruce Alpert, Times-Picayune
October 16, 2009, 9:57PM

A trustee overseeing William and Andrea Jefferson's bankruptcy filing says the former congressman and his wife may have exceeded statutory income standards and therefore may have to seek financial relief under stricter terms.

The determination this week by Trustee Michael Chiasson in New Orleans Bankruptcy Court means that the Jeffersons could be forced to file under Chapter 13 of the Bankruptcy Code, instead of the Chapter 7 filing they made after Jefferson's Aug. 5 conviction on federal corruption charges.

Under Chapter 7 bankruptcy, all of a debtor's assets are sold to pay creditors in a formula approved by the court. However, some property can be exempt, and once the eligible assets are exhausted, the remaining debts go unpaid.

Under Chapter 13, income earned over the next three years by the couple could be earmarked for debt repayment.

The couple's daughter Jamila Jefferson-Jones said the family would have no comment on the report.

"The bottom line is that Congressman Jefferson has run into an obstacle in his bankruptcy case," said Mark Wessman, a law professor at Tulane University.

Under a 2005 law that Jefferson supported when he was in Congress, filing under Chapter 7 of the bankruptcy law was made more difficult for people who didn't really need the protection from debts provided by the statute.

The law states that a court "shall presume abuse exists" if the debtor's monthly income for the six months prior to the filing, after allowing for some expenses, exceeds an amount fixed by formula.

Chiasson said he has determined the income for the Jeffersons is higher than allowed by the 2005 law.

Under the law, a debtor can "rebut the presumption of abuse" only if special circumstances can be demonstrated. Legal experts said it's unclear whether a lengthy prison sentence, which Jefferson faces, would qualify as special circumstances.

Jefferson also learned this week that his license to practice law has been suspended by the Louisiana state Supreme Court.

Federal Judge T.S. Ellis III in Alexandria, Va., is scheduled to sentence Jefferson on Nov. 13.

The Jeffersons filed for Chapter 7 bankruptcy three weeks after the guilty verdict, stating that the couple have debt of as much as $10 million. The debts include $5.7 million for the Washington lawyers who represented Jefferson during the lengthy corruption investigation and trial, which ended with his conviction on charges of soliciting bribes, money laundering, depriving citizens of honest services as a member of Congress and turning his congressional office into a racketeering enterprise.

He was acquitted of charges of obstruction of justice, violating the Foreign Corrupt Services Act and three honest services counts.

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Bruce Alpert can be reached at or 202.383.7861.

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