October 2011

The popular wisdom says that an individual or a married couple can file for bankruptcy under either chapter 7 to discharge debts without paying them, or chapter 13 to pay back some of the debts through a court-administered, multi-year, partial debt repayment plan, while a business files under chapter 7 if it is going out of business, or chapter 11 if it needs to reorganize.  There is some truth to this wisdom, but it fails to take into consideration the personal chapter 11 bankruptcy.  This post looks briefly at just a few characteristics of personal chapter 11 bankruptcy.
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In spite of the claims of some starry-eyed economic analysts that the recession ended in June 2009, and that we’ve been  in an “economic recovery” since then – sure had me fooled – unemployment has been stubbornly high, both at the national and at the California levels. 

According to the U.S. Bureau of Labor Statistics the national rate is 9.1% and the California rate is 12.1%.  Is this a temporary problem, or one that is a new, permanent structural problem?
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Bankruptcy is an effective way of wiping out debt, and it can be an important tool in preparing for what some experts predict will be the next great depression. 

Thomas H. Kee Jr. is the president and CEO of Stock Traders DailyHe has accurately predicted market cycles in advance using his multi-tiered technical indicators since starting Stock Traders Daily in January 2000. 

On October 12, 2011, Mr. Kee wrote the following in the Wall Street Journal’s MarketWatch

The U.S. economy, and probably the global economy as a result, are headed towards a Greater Depression, and there is nothing anyone can do to stop it now . . . [T]he only saving grace may be China, but China seems to have gotten so far ahead of itself that eventually it too will fall. . . . [T]he only solid promoting market based stability has been the demand from BRIC [Brazil, Russia, India, and China] countries, mostly China, and if that pares back the result will devastate the global economy as we know it today. . . . Eventually there will be a material hit to these BRIC economies, and the fragile nature of mature economies will not be able to offset that weakness. [I]f China were to suddenly experience an uncontrolled decline in GDP, global stock markets would collapse, corporate earnings would crumble, the unemployment rate would skyrocket . . .

But China is in no danger of economic collapse, right?  Hmmm. 
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In bankruptcy you can protect your retirement accounts if they are ERISA-qualified:  things like 401(k)s, 403(b)s, and pension plans, or IRAs (IRAs are not ERISA-qualified, but they are still protected due to the U.S. Supreme Court opinion in Rousey v. Jacoway, 544 U.S. 320 (2005).  By this I mean that they are protected from the depredations of bankruptcy trustees, and hence from the claims of creditors, because they can be exempted using the appropriate exemption table.  In a previous blog I discussed the exemption process in great detail.  As long as you hire a high-quality attorney you should be able to keep all of your retirement.  In sum, if you file for bankruptcy protection your retirement accounts will not be in jeopardy – at least not because of your bankruptcy.

But what about the underlying solvency of your retirement accounts?  How sure are you about the stability of the accounts themselves?  Is your retirement plan one of the many that invest in municipal, state, and federal bonds?  If so, do you know how safe these investment vehicles are?
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A recent corrupting trend in Chapter 13 bankruptcy is creating serious challenges for honest Chapter 13 debtors, their attorneys, mortgage companies, and Bankruptcy Courts.  The problem is a new foreclosure scam called property dumping, and it illustrates the ingeniously evil thinking of some real estate crooks.

Property dumping has cropped up in response to the