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Man Fakes Bankruptcy to Reduce Child Support, Faces 17 Years in Prison

Bankruptcy is a federal process intended to help individuals find relief from debts that they can never repay – it is NOT meant to be abused for personal gain. One California businessman recently found this out the hard way after being busted by the FBI for bankruptcy fraud.

The Backstory

Gold River businessman Steven K. Zinnel and his wife divorced in 1999. The divorce was contested and increased in contention as it progressed. In 2001, Mr. Zinnel sent an email to his wife and told her that he planned to file for bankruptcy and that she would not get any money from him, not even child support for their two teenage children.

Zinnel officially filed for bankruptcy in 2005; however, during the years leading up to this point, he proceeded to hide millions of dollars in assets by setting up a trust (with help from his lawyer and alleged lover) to launder money from an investment in an electrical firm; hiding money in shell companies; and putting money in accounts with other people's names. His intention was to disguise his true income and assets so that he would be required to pay less in child support.

The Investigation

Mr. Zinnel was not truly eligible for bankruptcy, but because he had hidden most of his money, he successfully pulled the wool over the eyes of bankruptcy court – but not the Feds. Zinnel took a stab at his ex wife by asking the FBI to investigate her for allegedly trying to get illegal access to his private health insurance information, but his plan severely backfired.

When the Feds spoke with Michelle (Zinel's ex wife) and heard her side of the story, they became suspicions of Zinel's bankruptcy filing. The president of the electrical company that was helping Zinel hide his assets agreed to cooperate with the FBI and set up a meeting with Zidel, his lawyer-lover Derian Eidson, and two undercover federal agents. Zinel and Eidson were quickly indicted.

The Final Verdict

Found to be worth several million dollars – far from being eligible for bankruptcy – Zinel was convicted of 15 counts of bankruptcy fraud and money laundering. He was ordered to forfeit $2.8 million of his assets and to pay $500,000 in fines. He was also sentenced to serve 17 years in prison, having already been incarcerated since July.

Read more about the story through the New York Times or the Sacramento Bee.


Are you struggling with debt? Make sure that you are eligible for bankruptcy before you file! While you may not fake bankruptcy on purpose, you should still prepare for the means test and be sure that you qualify for Chapter 7 or Chapter 13 in order to avoid any problems with the federal government. Consult an Irvine bankruptcy lawyer from Peter Rasla & Associates, P.L.C. today by calling (949) 390-9994!