A fellow bankruptcy attorney recently asked me this question based on his reading of 11 U.S.C. § 523(a)(7), which provides (with emphasis added):

A discharge under section 727, 1141, 1228 (a), 1228 (b), or 1328 (b) of this title does not discharge an individual debtor from any debt— . . . to the extent such debt is for a fine, penalty, or forfeiture payable to and for the benefit of a governmental unit, and is not compensation for actual pecuniary loss . . .

Since the obligation to repay a social security overpayment is a debt to a governmental unit, but could be characterized as “compensation for actual pecuniary loss,” the questioner wanted to know if it could be discharged in bankruptcy.
Continue Reading Can A Social Security Overpayment Be Discharged In Bankruptcy?

In my last post I discussed reaffirmation of debts in bankruptcy.  Near the end of the post I described some loans I had seen my clients take out with interest rates as high as 496%.  At the end of the post I said that that loan shark rate was perfectly legal and promised to tell you why.  This post fulfills that promise by providing you with a bit of history.  I know, there’s no future in history – bad joke.  But this history may prove both enlightening and entertaining.

On April 20, 2005 President Bush signed into law the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”) (uncharitably referred to by some as “BAPCraPA”).  BAPCPA made some sweeping changes to the Bankruptcy Code.  These changes affect not only debtors contemplating bankruptcy, but also attorneys – and not just bankruptcy practitioners.

I.          The Origins Of American Bankruptcy Law

Article 1, section 8 of the U.S. Constitution grants Congress the power:  “To establish . . . uniform rules on the subject of bankruptcies throughout the United States.”  Why did the Founders feel that it was necessary to include this power in the relatively short list of enumerated congressional powers?
Continue Reading A Bankruptcy History Lesson

In my last post I discussed the nation’s financial condition, and contrasted national bankruptcy with personal bankruptcy.  In this post I will contrast the nation’s credit rating with personal credit rating.

I.          The Nation’s Credit Rating

Some time ago I wrote “Bankruptcy And Your Retirement Accounts”, in which I talked about the growing problems with retirement funds that had invested in various types of government debt.  I observed that since many states and municipalities had large unfunded obligations on such things as employee pension and medical plans, the quality of some state and municipal bonds as investment vehicles could be headed toward junk bond status.  In passing I referred to the recent downgrading of federal debt.

Well, it looks like a further downgrading of federal debt is in the offing – perhaps even before Christmas.
Continue Reading Personal Credit Rating And National Credit Rating

If you’re considering filing for bankruptcy protection, you’re not alone.  Large numbers of your fellow citizens are thinking the same thoughts.  And large numbers have already filed for bankruptcy protection this year – I’ll give you the exact number later in this post.  But what about the nation as a whole?  How is it doing?

I.          National Bankruptcy?

In the November 17, 2011 Los Angeles Times Michael A. Memoli reported:

The Treasury Department confirmed this week that the national debt has surpassed $15 trillion – that’s 15, followed by 12 zeros . . .

A little more than a week earlier, in the November 7, 2011 Los Angeles Times, Mr. Memoli reported:

The federal government recorded a $1.3-trillion budget deficit in the 2011 fiscal year, roughly even with the previous year’s shortfall.

What does this mean?
Continue Reading Personal Bankruptcy And National Bankruptcy

When the foreclosure sale looms large, filing for bankruptcy protection prior to the sale date is probably the only smart move. It avoids the unpleasant post-foreclosure sale tax hit, and frees you from owing the bank anything.

Those of you who have followed these posts for a while know that I have predicted a new wave of residential and commercial foreclosures. I stand by that prediction, the residential portion of which has just been bolstered by a recent article by Don Lee in the Los Angeles Times:
Continue Reading Foreclosure And Bankruptcy: An Update

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. 
Continue Reading The Next Great Depression And Bankruptcy

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