Self-Created Bills of Exchange: What Creditors Need to Know About the Redemption Theory Scam

Over the past 25 years, consumers have used The Redemption Theory as a basis for fraudulent debt elimination schemes that have become pervasive and widespread on the internet. It is incredibly important for every type of creditor to understand how to protect their interests against such schemes.

The scheme proceeds as follows: consumers create their own “bill of exchange” stating that the U.S Department of the Treasury, or some other third party, shall be responsible for paying the debt at hand, the consumer presents such bill of exchange as payment to their creditors, the creditors refuse to honor such meaningless pieces of paper, and thus the consumer sues their creditor for the creditors refusal to accept the bill of exchange as payment.

Every court that has encountered this scheme has found it to be both (1) fraudulent and (2) frivolous.¹ Such bills of exchange have been found to not be a valid legal document or tender, and any argument to the contrary is “clearly nonsense in almost every detail.”²

Courts have observed that a consumer’s use of a bill of exchange to satisfy debts are based on Redemption Theory, which has been widely rejected by courts across the country. The Redemption Theory claims that a person has a split personality: a real person and a fictional person called the “strawman.” The “strawman” purportedly came into being when the United States went off the gold standard in 1933, and, instead, pledged the strawman of its citizens as collateral for the country’s national debt.

Redemptionists claim that the government has power only over the strawman and not over the live person, who remains free. Individuals can “free themselves” by filing UCC financing statements, thereby acquiring an interest in their strawman. Redemptionists also claim that the government created an exemption account at the U.S. Treasury for each strawman. Adherents to the theory believe that by filing a UCC financing statement on themselves, they become a creditor of their strawman’s exemption account. They can then access the value of that account by issuing a bill of exchange (or sometimes a similar instrument called a “sight draft”) to a payee who then must look to the U.S. Treasury Department for payment, or so the theory claims.

Courts that have considered Redemptionist Theory and other similar theories have routinely rejected them as being “frivolous and a waste of judicial resources.”³ One court described the Redemptionist Theory as such: that debtors may issue a bill of exchange requiring the government to pay their debts out of secret trusts as being “equal parts revisionist legal history and conspiracy theory.” Courts have consistently found that bills of exchange, notes, and letters of credit supposedly drawn on treasury accounts are not legal tender and are, in fact, nothing more than “worthless piece[s] of paper”⁴ and are “a string of words that sound as though they belong in a legal document, but which, in reality, are incomprehensible, signifying nothing.”⁵

It is clear to see that courts across the United States are in consensus that an attempt to pay off a debt with a self-created bill of exchange is akin to a conspiracy theory and holds no legal weight. However, even with the courts consistent refusal to recognize such theory, consumers continue to argue the opposite. Therefore, it is imperative that creditors and their attorneys are aware of the existence of such theories and are prepared to protect their client’s interest from these fraudulent schemes.

Cincinnati Attorney Danielle Bechard regularly advises creditors on emerging consumer defense tactics and fraudulent schemes, helping them stay informed and protected in an evolving legal landscape. If you would like to learn more about Weltman’s consumer collections solutions, connect with Danielle at any time.

This blog is not a solicitation for business, and it is not intended to constitute legal advice on specific matters, create an attorney-client relationship or be legally binding in any way.
 

¹ See e.g., In re Hill, No. 1:14-BK-15544-SDR, 2015 WL 5575499 (Bankr. E.D. Tenn. Sept. 18, 2015) for a discussion of this exact problem and the frivolity of such claims.
² Bryant v. Washington Mutual Bank, 524 F.Supp 2d 753, 760 (W.D. Va. 2007).
³ In re Barnes, 2010 WL 3895463, at *5 (citations omitted); see also Barnes v. Citigroup, Inc., 2010 WL 2557508, at *4 (E.D.Mo.2010); In re Fachini 470 B.R. 638, 641 (Bankr.M.D.Ga.2012); In re Hayes, 2011 WL 4566378, at *3 (Bankr.S.C.2011); In re Harrison, 390 B.R. 590, 594–95 (Bankr.N.D.Ohio 2008); Blocker v. U.S. Nat'l Ass'n, 993 N.E.2d 1154, 1157–58 (Ind. Ct.App. 2013); Stevenson v. Bank of America, 359 S.W.3d 466, 468 n.6. (Ky.Ct.App.2011).
⁴ In re Walters, 2015 WL 3935237, at *2 (Bankr.S.D. N.Y. June 25, 2015); Blocker, 993 N.E.2d at 1157–58; McElroy v. Chase Manhattan Mortg. Corp., 134 Cal.App. 4th 388, 393 (Cal. Ct.App. 2005).
⁵ See In re Fachini, 470 B.R. 638, 641 (M.D. Ga. 2012).