Are Undocumented Workers Entitled to a Fresh Start? an Analysis of the Ellis Standard and Potential Criminal Consequences Under 18 U.s.c. § 152

• Publication year: 2020

Are Undocumented Workers Entitled to a Fresh Start? An Analysis of the Ellis Standard and Potential Criminal Consequences under 18 U.S.C. § 152

Anthony Rivera

ARE UNDOCUMENTED WORKERS ENTITLED TO A FRESH START? AN ANALYSIS OF THE ELLISSTANDARD AND POTENTIAL CRIMINAL CONSEQUENCES UNDER 18 U.S.C. § 152

Abstract

Research and case law on U.S. bankruptcy law and how it applies to undocumented immigrants is extremely sparse. There are currently over eight million undocumented immigrants in the U.S., many of whom work "on-the-books" jobs using false Social Security numbers (SSNs). These undocumented workers contribute billions of dollars to the U.S. economy in the form of income, property, and sales taxes—much of which is allocated to fund the U.S.'s social safety net.

Although undocumented immigrants are eligible to file for bankruptcy because they satisfy the definition of a "person" under 11 U.S.C. § 101(41), they file at a much lower rate than their U.S. citizen counterparts. Many choose not to file for bankruptcy because of a fear of deportation. Is this fear a warranted one? Would petitioning for bankruptcy expose someone to unwanted immigration consequences? Are there criminal consequences that undocumented immigrants—and the attorneys whom advise them—should be aware of before submitting a bankruptcy petition to the U.S. Trustee's office?

This Comment primarily focuses on the latter question, analyzing whether the use of a false SSN in obtaining employment is a violation of 18 U.S.C. § 152, the criminal enforcement mechanism for bankruptcy violations. Multiple circuits use the six-factor test outlined in U.S v. Ellis, a 1995 Seventh Circuit case, to determine whether an action rises to the level of a convictable offense. In analyzing this question, this Comment creates the character "Christina"—an undocumented debtor in the U.S. who used her U.S. citizen cousin's SSN on her employment application—to determine whether her actions fall within the purview of 18 U.S.C. § 152.

The inspiration for this analysis comes from the work of Chrystin Ondersma—one of the few academics who has published works on the intersection between bankruptcy and the lives of undocumented immigrants. In her article, titled Undocumented Debtors, Ondersma stated that "[i]t is not clear . . . that policing debtors' use of false SSNs for employment purposes is properly within the purview of bankruptcy officials and administrators," arguing that "[t]urning in a W-2 with a false SSN does not meet the elements of

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bankruptcy fraud [under 18 U.S.C. § 152] unless the debtor is seeking to discharge debt relating to that SSN." This Comment analyzes this argument after being unable to find any case law or scholarship on the issue.

Additionally, this Comment looks at the issue of undocumented immigrants filing for bankruptcy in a practical manner by (1) highlighting issues that may arise in advising undocumented immigrants to file for bankruptcy and (2) considering public policy in determining whether it would be in the best interest of both undocumented immigrants and the U.S. to provide a pathway for all "persons" to pursue bankruptcy without being deterred by fear of detention or deportation. In sum, this Comment hopes to contribute to the nascent discussion of the intersectionality of bankruptcy and immigration law and determine whether the ubiquitous "fresh start" principle is a possibility for all persons.

Introduction

The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA)¹ —enacted on April 20, 2005—reformed the U.S. Bankruptcy Code (the Code) in an attempt "to emphasize 'personal responsibility' and to reduce the number of people filing for bankruptcy[.]"² One of the provisions of the Code that BAPCPA amended was 11 U.S.C. § 521, which now requires a debtor to disclose proof of income from all her sources, as well as "[E]vidence of payment received within 60 days before the date of the filing of the petition, by the debtor from any employer of the debtor[.]"³ Today, debtors disclose this information and begin their bankruptcy petitions for the purpose of obtaining a "fresh start," a concept first articulated in Local Loan Co. v. Hunt.⁴ There, the U.S. Supreme Court noted that bankruptcy gives "the honest but unfortunate debtor who surrenders for distribution the property which he owns at the time of bankruptcy, a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt."⁵

Although Local Loan was decided during the U.S. Great Depression, hundreds of thousands of debtors each year still seek a fresh start when falling

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upon hard times. In 2010, during the "Great Recession," 1.5 million bankruptcy petitions were filed in the U.S.—a number which decreased to about 776,000 in 2017.⁶ Although they do not file in significant numbers—for reasons discussed infra—undocumented immigrants are among those who file bankruptcy.

In order to work in the "formal sector," as opposed to working "off-the-books" jobs where employees are paid in cash and there is virtually no paper trail, many undocumented debtors use invented, purchased, or borrowed Social Security Numbers (SSNs).⁷ Moreover, many undocumented immigrants are able to secure credit and bank accounts either through the use of SSNs or Individual Taxpayer Identification Numbers (ITINs).⁸ Thus, an undocumented debtor working in the formal sector and seeking to petition for bankruptcy post-BAPCPA will have to show "evidence of payment received within 60 days before the date of the filing of the petition,"⁹ which will likely come in the form of pay stubs containing the invented, purchased, or borrowed SSN.

The Code does not discriminate on the basis of immigration status.¹⁰ Nevertheless, the use of an invented, purchased, or borrowed SSN may present issues when an undocumented debtor seeks to file for bankruptcy. Although the Code, which includes BAPCPA, is in Title 11 of the United States Code,¹¹ the criminal enforcement mechanism for bankruptcy is in chapter 9 of Title 18 of the United States Code. Pertinent for the purposes of this Comment is 18 U.S.C. § 152(3), which imposes a punishment for any person "knowingly and fraudulently mak[ing] a false declaration, certificate, verification, or statement under penalty of perjury . . . in relation to any case under title 11[.]"¹²

In 1995, the Seventh Circuit held that there are six elements the government must prove to show a violation of 18 U.S.C. § 152(3): "(1) a bankruptcy proceeding existed under Title 11; (2) the defendant made a statement relating to the proceeding; (3) the proceeding was under penalty of perjury; (4) the statement related to a material matter; (5) the statement was false; and (6) the statement was made knowingly and fraudulently."¹³ In addition to being adopted

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by the lower federal courts in the Seventh Circuit,¹⁴ what will be referred to hereafter as the "Ellis standard" has also been adopted by District Courts in the Sixth¹⁵ and Tenth Circuits,¹⁶ the latter of which applied Ellis in 2017.

This Comment will explore whether the use of an invented, purchased, or borrowed SSN is a violation of 18 U.S.C. § 152. For clarity, this Comment has created the character "Christina." Christina is an undocumented debtor in the U.S. who used her U.S. citizen cousin's SSN on her employment application when she began working for her employer in the formal sector ten years ago. Although she has gained her income by using her cousin's SSN to obtain employment, Christina obtained credit through the use of either (1) her ITIN or (2) the methods available for undocumented immigrants to obtain credit discussed infra. However, post-BAPCPA, Christina has fallen on tough times and filed for bankruptcy in order to obtain a fresh start.

The SSN used by Christina will hereafter be referred to as "false," but will not be referred to as "borrowed" or "invented." One of the definitions provided by the Oxford Living Dictionary for "false" is "[n]ot according with truth or fact; incorrect."¹⁷ Here, Christina listed her cousin's SSN on her employer's application which asked for her SSN—a written statement that is incorrect. The verb "borrow" is defined as "[t]ak[ing] and us[ing] (something belonging to someone else) with the intention of returning it[,]"¹⁸ while the verb "invent" is defined as "[c]reat[ing] or design[ing] (something that has not existed before)[.]"¹⁹ With regard to the former, it would be impossible for Christina to "return" the SSN back to her cousin, as she already used it on her employment application. In the latter case, Christina did not "create" something that did not exist before. Instead, Christina appropriated her cousin's SSN—which was already in existence at the time—and used it as her own.

In determining whether Christina can, and should, be convicted under 18 U.S.C. § 152, this Comment will look at statutory interpretation of 18 U.S.C. § 152, the Ellis standard, case law, and policy considerations. Since the Ellis standard has been adopted in other circuits, analysis of case law will not be limited to the Seventh Circuit. Instead, this Comment will look at holdings

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across all U.S. federal courts, including bankruptcy courts, in arguing that Christina should not be convicted under 18 U.S.C. § 152.

The application of 18 U.S.C. § 152 to false SSNs has not yet been decided—or even discussed—in case law. Thus, this Comment will cover an issue of first impression and argue that Christina's use of a false SSN does not satisfy the Ellis standard because the second, fourth, and sixth elements are not satisfied. In support of this argument, this Comment will first provide background information about how undocumented immigrants acquire credit (and debt), whether undocumented immigrants can petition for bankruptcy, and whether they should submit a petition. The latter of these three will focus on the potential immigration...