"Real Housewives of New Jersey" star Teresa Giudice has paid off or is in the process of paying off the vast bulk of her creditors, her lawyers told a federal judge Tuesday, in an attempt to block the reopening of the bankruptcy case that helped land her in prison for a year for fraud.
But U.S. Bankruptcy Court Judge Stacey L. Meisel ruled against Giudice and reopened the proceedings. Meisel's decision may allow the reality star's unsatisfied creditors to collect potential proceeds from a lawsuit she filed against her bankruptcy attorney James Kridel. Giudice was not at the hearing.
Giudice's lawyer Carlos Cuevas told Meisel that Giudice now has a payment plan in place with the Internal Revenue Service, which filed a $551,563 tax lien against her last year, and that she has paid or has agreements to pay 27 of the 29 creditors listed in her 2009 bankruptcy filing.
Giudice, who lives in Montville Township and whose husband Joe is currently serving his sentence for bankruptcy fraud and conspiracy to commit wire and mail fraud, is contesting one of the two remaining claims, to a construction company, and is in talks to pay off the other, to an infertility clinic.
"It was always her intent to pay her bills," Cuevas said.
"Satisfied means paid in full in my book," Meisel told Cuevas and co-counsel Anthony Rainone, who are also representing Giudice in her legal malpractice claim against Kridel. "There may have been a satisfaction of a number of creditors ... but the fact remains that creditors still exist."
Meisel's ruling did not address whether or not her creditors are entitled to all or any portion of an award should Giudice win the malpractice case.
Cuevas argued that Giudice's claim arises from Kridel's actions after she filed for bankruptcy -- including allegations Kridel left out assets and income, which formed the basis of prosecutors' bankruptcy fraud case against Giudice -- and thus should not be considered part of her estate.
He also said that Giudice shouldn't be forced to share any award because she suffered personally from Kridel's alleged malpractice: being separated from her four daughters, being labeled a felon, and losing business opportunities. ("The emotional scars run deep," Giudice stated in court papers).
John Sywilok, who was appointed by the bankruptcy court to represent Giudice's creditors in 2009, filed the motion to reopen the bankruptcy proceedings. His lawyer, Michael Kopelman, argued that her malpractice claim against Kridel dates to before the initial bankruptcy filing, and thus Giudice shouldn't be allowed to keep the entirety of possible lawsuit winnings.
"Her creditors have suffered too," Kopelman argued.
The lawyers will attempt to settle the case -- perhaps agreeing to a percentage that could be set aside for Giudice's creditors. Failing that, they will head back before a judge to determine whether Giudice should have to share any winnings.
Those winnings are hypothetical at this point. A state court judge in Morris County recently ruled against Kridel's motion to dismiss, and the case will likely not go to trial until next year at the earliest.
"If Teresa loses, everybody loses," Kopelman told NJ Advance Media after the hearing.
Vicki Hyman may be reached at vhyman@njadvancemedia.com. Follow her on Twitter @vickihy or like her on Facebook. Find NJ.com/Entertainment on Facebook, and check out TV Hangover, the podcast from Vicki Hyman and co-host Erin Medley on iTunes, Stitcher or listen here.
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