Arizona Bankruptcy Attorney Blog

I just read a remarkable article in The Japan Times by a Japanese Economist and University Professor named Noriko Hama.

Apparently, from his particular viewpoint, the governments of various countries are issuing surreal press releases about the economies of those countries.

And he doesn't leave his beloved Japan unscathed by his critical analysis.

All in all, it's a very interesting article about many countries around the globe that seems to have a real problem with addictive spending disorder.

And putting it a slightly different way, it appears that from the viewpoint of Professor Noriko Hama, the Economic Emperor has no clothes!

The United States is having some problems with debt these days.

Ordinary consumers are laden with guilt when they think about having too much debt, after losing a job, a bout with cancer, a heart attack, a divorce, and losing their other job.

But Cities and Counties and States and, well, the United States seem pretty relaxed about walking down a road that involves saying, "Charge it!"

There are now three major municipalities in the United States that may start a landslide of filings under Chapter 9 that will dwarf most bankruptcy filings of the past.

The most-talked-about-teetering-on-the-edge-of-bankruptcy municipality is Jefferson County, which has famously hired famous bankruptcy attorney Kenneth Klee; as to creditors, it's always good to send the very best message that you're serious, right?

Harrisburg, Pa., needed to pay interest of $68,000,000 on bonds. Harrisburg has a yearly total budget of about three million dollars south of that.

Does anybody else see a problem with that?

Then there's Detroit, which floated bonds to the tune of $250,000,000, which bonds were grabbed up quickly because the Michigan promised it would cover defaults on those bonds.

Does that seem like a great idea to you?

Me, neither.

Not long ago when I said "Big Three" I was talking about the three biggest automakers in the world, all U.S. Corporations.

What a difference a debt makes.

I have read polls suggesting that 85% of those polled believed that a filing was a good idea.

This is one of those few cases where the agonizing over bankruptcy vs. non-bankruptcy options is happening with a municipality, rather than an individual.

In a nice article subtitled "a short history of the entitlement state", the Wall Street Journal sets out a group of graphs.

Now, I've seen graphs for all sorts of things, and this is something I know to be true; figures don't lie, but liars can figure.

The graphs in this article look kinda like the real deal to me.

And the underlying message of the article is simple, I think.

Lady Ga-ga can overspend. NFL Players can overspend. Stay-at-home Moms can overspend.

Anybody can overspend when they don't pay attention, because spending is fun. It's been called "retail therapy", which is a fairly funny turn of phrase, but the consequences are much less fun.

And countries can overspend. It happened in the Weimar Republic, which ultimately destroyed a republic and gave us Adolf Hitler. Argentina overspent, and printed money like it was...paper. And crying for Argentina was probably a good idea. The Soviet Union, the ultimate entitlement state, disintegrated when it overspent other people's money.

So now the question will become, "Should the United States keep doing what it's doing?"

My answer?

It may not matter; it may be too late at this point.

After all, the United States is about to lose its perfect credit rating, for the first time in thirty years.

Surprisingly, that won't be the end of the world. The United States has defaulted, on purpose, six times in the past (don't hold me to that; it may be seven or eight). And our credit bounced back.

Of course, when an individual loses a credit rating, the interest rates on their credit cards goes crazy.

But this time, our credit as a country won't bounce back until we get spending under control.

Because anybody can spend more than they make, and we've been on that road for a long time now.

Oh, yeah. The bankruptcy process for an individual is no fun at all.

And you might want to look at Greece to see what insolvency does to the everyday life of a citizen when the country is clearly insolvent.

It's not a pretty picture, and it's getting worse every day in Greece.

The "B" word is hard to take at first for anybody.

After all, "bankruptcy" is based on the an Italian phrase meaning "broken bench", which wasn't a very pretty debt-management technique when it was practiced in Florence in the late Middle Ages.

But I was entertained by the article in Bloomberg by Margaret Newkirk, Martin Z. Braun and Kathleen Edwards.

The general idea behind the article is that people in Jefferson County are experiencing "sewer fatigue", and that they just want closure on the constant talk about their debt crisis.

Frankly, that's a pretty common emotional experience in connection with bankruptcy.

And once people make up their minds to file a bankruptcy, they tend to want to do it right away.

That can be a problem for some folks, if they don't pass the means test!

But there are many ways to skin that cat.

None of them fun, or easy, of course.

But that's the way the banks wanted it when they lobbied Congress to get the 2005 Amendments to the Bankruptcy Code that led to the Bankruptcy Gold Rush of '05, and the Great Bankruptcy Drought of '06 and '07, which in turn led to the "deep mining" techniques of the panel trustees in bankruptcy cases today.

Let's talk briefly about "charge-offs".

A lot of smart people look at their credit reports and say, "Hooray! It says the bank has charged-off my loan! I won't have to file my Chapter 7 Bankruptcy after all!"

WRONG, insolvency breath!

A charge off, or a charge-off, is an internal bank accounting device, which the bank is required to take when a loan is troubled enough.

Banks hate charge-offs.

Here's why.

A bank is the next best thing to a printing press, because I've been told that a bank can loan about 13.7 times as much dough as it has in deposits.

Sound like smoke and mirrors to you?

Me, too.

But leverage works in two directions, so if a bank has a troubled loan and is required to charge it off, that reduces the amounts it can loan by 13.7 times the size of the loan, right?

So a smart bank will bend over backwards to make a loan a "performing loan", so the bank doesn't need to charge it off and reduce its ability to loan.

Except that a lot of bank regulations, which are written in Icelandic Runes or Sanscrit, make that difficult.

So what's a poor bank to do?

Well, I liked this article, which discusses a bank that reserved against part of a loan that was going bad (a loan that is going bad is sort of like a slow-motion train wreck; you know what it'll look like when the process is done, and it ain't pretty).

But for us today, the important part of the article is this: while the bank may be charging off the loan in question, it is also going "to aggressively pursue the recovery of the amount owed in the bankruptcy court proceedings, as well as through other avenues that may be available."

So if you partied when you saw that your bank loan was "charged off", good. Parties are good, right?

But you're still going to need to see a bankruptcy lawyer after the partying is done.

The Jefferson County Commission hired bankruptcy counsel.

It didn't make a decision to file a Chapter 9 Bankruptcy, but it hired a specialist who knows how to handle this sort of case, because Kenneth Klee worked on the Orange County Chapter 9 Bankruptcy Case about a decade ago.

It never ceases to amaze me that the simple act of hiring a serious, experienced, credentialed, and well-reputed bankruptcy specialist has effects.

Kinda like hiring a particularly fast gunfighter for your side of the corral.

See, when a litigator says that his clients are going to file bankruptcy, the usual response of opposing counsel is "Yeah, yeah, we've heard it all before."

But when those folks go and hire a real bankruptcy lawyer, that increases the chances of settlement dramatically.

And sometimes (not always) that means the bankruptcy doesn't need to be filed.

Also note that in consumer cases, the best show-and-tell exhibit for a settlement conference are draft bankruptcy schedules, meticulously completed.

On the other hand, once the potential debtor has filled out the schedules, that means they have also crossed a psychological Rubicon, and are much more likely to say "Forget the settlement; let's file!"

In the good old days, formerly known as "these trying times", there was a brief vogue for a class of seers called "futurists".

Alvin Toffler was a good-quality futurist, and I need to re-read his book "Future Shock" to see where he was spot on, and where he was spot off.

And my buddy Rick Cook, in his book "Shift Happens", discussed the transitional phases in the publishing business that have made e-books one of the few areas in this economy where people can make money.

And I hope all my clients run out and buy his book and become e-book millionaires. AFTER their bankruptcy filing. It will complicate things slightly if they write and publish an e-book prior to filing, because the income stream will make it harder to pass the means test, and they'll need to buy back their non-exempt e-book from the bankruptcy trustee in their case.

Now, I'm a bankruptcy lawyer in Phoenix, AZ.

But something few people know is that I'm a part-time futurist.

Because being a futurist isn't hard.

You look at today and put it on steroids. You just have to guess which muscles will get bigger and where the fat will go away. Not that there's a lot of fat in this economy.

And here's my next prediction as a futurist.

We're going to see a lot of newspaper bankruptcy cases.

Anybody who wants news can get it today, and get it for free on the Internet. Some premium news sites require registration, and some require a small token of financial appreciation. But seldom as much as a newspaper. And there's that whole "the advertisers are all going bankrupt" issue. Note that gross revenues are down for radio and television advertising, as well.

Newspapers, especially, have an uphill battle. People can either pay for a huge stack of cheap newsprint, covered in smeary carbon print, or they can go to the comfort of their computer screen and check the news before they go to the site of their current addictions, Facebook.

And here's my second prediction as a futurist: Facebook will continue to do very well, but will wilt over the years from competition. Google has a better lock on its economic space, because the magical Google Search Algorithm is so far in advance of its competitors that catching up will be very hard for anybody to do.

And Google+?

That will take a while to grow; as of today, I can't see a compelling reason to move traffic there. But the buzz is strong.

This I can predict this without any risk of failure: if Google+, Google will simply launch another Facebook killer that will, eventually, work.

So if I were you, I wouldn't spend a lot of money investing in newspapers, unless you're guessing that you can buy them for dirt-cheap, and wait forever until they bounce back; and I'd be tentative about Facebook, only because if Google wants that ecological niche, Google has a strong track record.

And, yeah, we'll see a lot more newspaper bankruptcy cases before this depression is over; and the same goes for magazines.

Once you have an e-reader, you tend to cancel your subscriptions to print media, and get subscriptions to rss feeds.

Whatever those are.

Let's talk about the "B" word, bankruptcy.

The folks in Jefferson County are negotiating with creditors.

How do they deal with that negotiation when it gets tough?

Well, Jefferson County brings in Kenneth Klee, an experienced, credentialed, superlative bankruptcy lawyer, to talk.

And talk's cheap, except when you hire an experienced, credentialed, superlative bankruptcy lawyer.

But if talking with Kenneth Klee at $1,000 per hour is helpful in making the biggest Chapter 9 Proceeding in history disappear before it happens, that's probably a pretty good investment.

Have you ever wondered which, among the millions of bankruptcy cases filed in the United States, were the Top Ten Bankruptcy Cases?

Me, neither!

But The Hollywood Reporter has kindly listed the biggest and the baddest of the Chapter 11 Cases, and I was a little surprised by their Top Ten Bankruptcy List.

Note: when big bankruptcy cases get filed, people lose their jobs. There will be a huge increase in self-employed people in the United States until this depression goes away, and until the real levels of unemployment drop below 16%.

Now, I've been a self-employed ditchdigger, and I liked that far less than being a bankruptcy lawyer.

But second to being a bankruptcy lawyer is being a self-employed author. My guess is that many people in the United States will become e-authors and make millions of dollars in the eeezie-peezee world of e-books, now that my buddy Rick Cook has let that cat out of the bag.

And no, I don't get a piece of the action when he sells his new e-book entitled "Shift Happens".

But I may make him buy lunch!

In June, a disappointing 18,000 private sector jobs were created in the United States.

In the entire United States.

More than half of those were created in Wisconsin.

So whatever they're doing in Wisconsin, other states need to start doing that.

Got the idea?

Apparently, some states have decided that the way to prepare for a possible default on the U.S. Credit Line is simple: borrow more and borrow now, to avoid the rush!

And that just shows you: I couldn't make this stuff up!

The Law Of Unintended Consequences is one of my favorites; although I'm also fond of 11 USC 362.

So one unintended side-effect of the announcement of the proposed liquidation of the remaining 399 Borders in the United States was that the gift cards sold by Borders are being used like crazy, because folks believe that they won't have value in the future.

Note to Amazon: if I were you, I'd make a deal to honor Borders Gift Cards. It would make you look like a hero, and once the hubbub died down, the redemption percentage would die down, as it always does with gift cards.

Just a thought!

p.s. a lot of people (including one Arizona Bankruptcy Attorney with a beard) purchased Borders Memberships just prior to the Chapter 11 Filing; some smart bookstore should honor those, too, because they might just pick up some sad bibliophiles on the rebound, looking for a home!

I feel sorry for President Alexander Lukashenko of Belarus, who plans to punish his citizens to prosperity.

He is obviously sincere in his desire to improve the economy of his country; he wants to avoid a state bankruptcy, after all.

And the beatings will continue until moral improves, right?

This is only one illustration of the way that State-dominated economies work poorly; in an economy where people are driven by a profit motive, business owners only work half-days.

Either one of the two 12-hour shifts.

Their choice!

p.s. you think you've got a lousy job; think about working in a country where the President releases the hounds to track down slackers!

For all bibliophiles, the passing of an empire of books is a sad thing.

Borders was a great place to hang our and browse books and music, and the local Borders at 24th Street and Camelback in Phoenix, and it had a very nice staff.

And that staff, along with the other 10,700 remaining employees of Borders at the remaining 399 stores across the country will not get a storybook ending, and live happily every after. Because Borders will be liquidating; the Stalking Horse didn't stalk very well, apparently.

Those employees now get to look for a job in an economy where unemployment, by some measures, is 16%.

And those are lousy odds.

And you might think that a Phoenix Bankruptcy Lawyer would love to see unemployment rising and bankruptcy cases to the right and left.

You'd be wrong.

And even creditors are unhappy with the Borders Liquidation; they don't like the hurried and confusing quality of it.

I agree; I prefer orderly and leisurely liquidations myself!

I recently read a story about a good-citizen company closing its doors, and a lot of folks losing their jobs, leaving a cleanup for municipalities.

I'm always sad when I read this kind of story; and I'm reading it more and more often these days.

And what happens when a business closes? Well, the people who used to have jobs can't pay their debts, and can't go to local restaurants; and more businesses close.

Debt flows downhill.

There is a vigorous program of enforcement concerning bankruptcy fraud these days.

I didn't realize exactly how vigorous until I read about Brent A. Farris.

He was convicted of bankruptcy fraud, and then fled the country rather than serve his sentence.

So how hard would they search for somebody convicted of a bankruptcy crime?

Pretty darn hard! Take a look at this paragraph from STLToday.com:

U.S. marshals spent five years tracking Farris through roughly 14 countries, prosecutors said. He used a fake British passport at times. He was arrested in Italy in 2009 but released on house arrest while the U.S. tried to extradite him and he took off again, they said. His time on the lam finally ended last year in Guadalajara, Mexico, after American law enforcement alerted the Mexican authorities to his presence, the U.S. attorney's office said.

A lot of writers and a lot of politicians have tossed out a lot of words telling the world that Greece will not default, and that everything is business as usual, notwithstanding a downgrading in Greece's credit rating that is one step short of "run for the hills"!

But I've gotten to watch creditors and debtors spar for about thirty years, and I don't care whether it's a country, a fortune 500 Company, or an individual; the principles are quite similar.

A Very Smart Creditor (tm) will always give the I'm Definitely Going to Default Debtor (tm) a workout package of some sort at the front end of the deal, because the VSC has seen this story before, and knows how it's going to end.

It may even look like the IDGTDD is getting a good deal; that's actually a required part of the trap.

And the workout agreement normally has cyanide hidden in the fine print.

In specific, a VSC will demand, in exchange for a minor concession or three, a bundle of new collateral to secure the loan, and a payment schedule that cannot be met, along with all sort of other hidden traps.

And then, when the default occurs, the VSC will simply step in, point out the default, and scoop up all the collateral (which will normally be everything in sight, and everything under the bed).

So should Greece have taken the bailouts, with the terms dictated by VSCs?

Well, I have an opinion, but he who lives longest sees the most.

My opinion is that Greece, for the good of its citizens, should have defaulted early and often, and then tossed its free-spending politicians overboard like the clear and present danger they present.

But let's watch, and see how badly this particular Greek Tragedy ends.

But as Luke Skywalker says, "I have a bad feeling about this!"

Bankruptcy, remember, is almost a cluster of different areas of law, with some trickle down and some trickle up in terms of case law and specialized vocabulary. A consumer Chapter 7 Bankruptcy is not the same sort of animal as a Chapter 11 Bankruptcy. Not at all.

Some bankruptcy phrases, like "drop dead date" (which does not involve taking a zombie to a dinner and movie), are used in discussions of all sorts of bankruptcy cases, from Chapter 7 to Chapter 11 to Chapter 13; heck, even Chapter 12!

"Stalking horse" is a phrase used in connection with sales in bankruptcy cases; the purpose of a "stalking horse" buyer is to test the sales waters in a bankruptcy case, and hopefully to bring a higher and better bid to the table. A stalking horse buyer may also have incentives to go through the process, such as a "breakup fee".

Blockbuster is in a shaky Chapter 11 right now; and a "white knight" potential buyer was brought to the table, but creditors are arm-wrestling with the issue of who should be the stalking horse.

Ultimately, this looks like a bad year to be selling physical books; e-books are now bigger moneymakers, and are selling more dollar volume than physical books.

I got to watch the same technology fandango from the perspective of a client who owned a phonograph-record-pressing plant.

That industry went under with virtually no advance warning.

Books may well have a slightly longer glide path.

I like to blog, and I was curious about WordPress as a platform.

It intimidated me at first, but after I played with it a little, I decided that I sort of like it!

Take a look at my Bankruptcy Crossroads Blog, and let me know what you think!

Has anybody else been watching the Greek Tragedy play out?

In Act I, the politicians in Greece kept giving away free goodies to buy votes, and the country therefore started borrowing heavily to pay for the promises that politicians had made. In Act II, the debt became so huge that the country didn't have the credit to keep borrowing at the same rate, so it had to beg for bailouts, to prevent a "default" to the lenders. The terms of the second bailout were horrific, sort of like a consumer debtor trying to buy a car with a few judgments on his credit report.

We are about to get to watch Act III of the Greek Tragedy, where Greece defaults, and the country is ripped apart by other countries as though Greece was a serving of Osso Bucco.

It's painful to watch, just like watching a train wreck; if you see somebody thrown through a window, you know that's gonna hurt.

And with Greece having begged for a second bailout, and having been bullied into accepting terms for that bailout that are normally only forced on countries that lose a war, you know that the ordinary people in Greece are going to suffer.

When they get thrown through that window.

And the politicians keep saying that everything is fine, nothing to see here, keep moving, and it's just business as usual.

Is there a lesson for the United States in the free-spending like a drunken sailor story of Greece?

Naaaaah. After all, what could we learn from a Greek Tragedy?

I just read a scary article by a guy who doesn't seem to like anybody in Washington on either side of the aisle.

Maybe the scary article about the economy is correct, maybe it's not.

Doesn't matter today or tomorrow.

Might make a lot of difference in three months, or six months.

The premise of the article is that the United States has borrowed as much as other countries have borrowed, and that the United States is essentially as bad off as Greece, which is certainly going to default, even if it gets the next "bailout".

The part of the scary article that got my attention, however, was the amount of debt now being carried by every single family in the United States.

Here's the paragraph that really scared me:

* Funded Debt: Each individual in the US has been put into debt by government borrowing to the amount of $44,000. Each household, on the same basis, owes $97,000. A family of four, $176,000. * Total Liabilities: Each individual's share of total government liabilities is $364,000. Each household owes $800,000. A family of four, $1,456,000.

Nicole Santa Cruz has written a nice article for the L.A. Times about the possible sale of Crystal Cathedral to the Catholic Church.

It reminds me of the scene in "The Quiet Man" where all the Catholics in town went to the local Protestant Church, and were told by their Priest to "cheer like Protestants".

According to Paul Sperry at Investor's News Daily, Eric Holder and the Justice Department is conducting investigations and levying fines against banks that are deemed racist in their policies, based on inadequate loans to low income minorities.

Prosecutions have generated more than $20,000,000 in loan set-asides and other subsidies from banks in out-of-court settlements.

Some banks have been asked to relax their mortgage underwriting and lending standards for low income minorities, as a part of the crackdown on allegedly racist policies.

But the most interesting paragraph in the article is this one: "In several cases, the government has ordered bank defendants to post in all their branches and marketing materials a notice informing minority customers that they cannot be turned down for credit because they receive public aid, such as unemployment benefits, welfare payments or food stamps."

That suggests to me that banks are being placed in a can't-win situation; either they comply under the threat of being deemed racist, or they make bad loans, and are taken over by the FDIC when bad loans default and they become insolvent.

All in all, it's an interesting program by the Justice Department, and its long-term consequences will be just as interesting to watch.

Small businesses have always been "the engine of U.S. jobs growth".

But that engine is stalled on the tracks, and we can expect no relief there for the remarkably high rates of unemployment in the United States today, according to this article in Reuters by Partricia Zengerie, which discusses a poll taken of small businesses taken by the U.S. Chamber of Commerce.

And that is a very bad thing.

Because without more jobs, there will be no increases in spending by the citizens of the United States.

And without spending (and remember, they gotta have money to spend, right?), this recession has no end in sight.

And no matter that I'm an Arizona Bankruptcy Lawyer, that makes me sad.

p.s. the real jobless rate is far higher than the official jobless rate, as this article from MSN Money by Mary Engal explains.

And while the "U-6" measure of unemployment shows joblessness at 16.9%, the actual, factual number is still higher.

But you knew that, just by talking to your friends and relatives on Facebook, right? Oh, and if you "like" my facebook page, it makes my day.

So like it if you like, because that makes me happy!

And somebody ought to be happy, even if we have depression-level unemployment!

Many people can't make up their minds whether they should file a bankruptcy, but they can't make payments on their credit cards and pay for their mortgages, so they stop making payments on the credit cards (because, after all, the roof over your head is important when the weather starts hitting 117 degrees!).

Or they get fired, can't pay their credit cards, but won't qualify for relief under Chapter 7 of the Bankruptcy Code and the Means Test, because the Means Test is a six-month rolling look-back.

In both cases, people are curious about the date when they'll get sued by credit card companies and banks.

The answer is: it depends.

Some people go years without being sued, and some are sued three months after they stop making payments.

The reason is that internal lender policies determine when a credit card company will sue you, and those internal policies are subject to change over time.

Some companies are very quick on the trigger, and some are pretty relaxed and easy-going.

Frankly, it always surprises me when credit card companies sue, because that virtually guarantees that the defendant is going to file a bankruptcy.

And since the credit card company has to pay a hefty filing fee for the privilege of suing in an Arizona Court, it seems counterproductive to me for a credit card company to be quick on the trigger.

But some are, and some are not, and some are fast in one case, and slow in another.

Bear in mind that the statute of limitations is pretty substantial for unsecured credit card debt in Arizona, so that the plan of out-waiting a creditor is generally not a smart idea.

And when a credit card goes stale, the bank will generally sell the debt to somebody further down the food chain for pennies on the dollar, and they retail the bundle of debt further down the food chain, and eventually suits are filed by somebody.

And if they aren't filed quickly, they frequently get filed just prior to the lapse of the statute of limitations, because by then high interest rates and penalties, and fees on the fees on the fees, have transformed the ten thousand dollar debt into a seventy-five thousand dollar debt, and it makes more sense to sue on that amount, in any case.

But don't wait until you're sued to talk to me; and certainly don't wait until you're being garnished!

When should you talk to me?

On the first day you even consider taking money out of your retirement funds to pay your unsecured debt.

Seriously.

Most individuals don't need to file bankruptcy because they spent too much on the good life.

I know that for a simple reason; I've been a bankruptcy specialist in Arizona for about thirty years, and I've talked to thousands of individuals and business owners about insolvency.

Frankly, the usual reason that people get to file bankruptcy in the United States is bad luck, and bad judgment (which means working with the best information you have at the time, and then discovering that the information was wrong!).

For instance, if you have a business, and the city decides to do construction work on the street leading into your business, you may well not have a business anymore. But you still have your Small Business Administration debt, and that's secured on your house in most cases, so there's probably a bankruptcy in your future.

Or suppose you simply stop being able to work. If you had a perfectly manageable debt level, and you're out of work for chemotherapy, surgery, and radiation treatment, and then for a recurrence, you probably have a bankruptcy in your future.

Note: as I usually tell people, DO NOT use your otherwise exempt 401(k) or IRA to make minimum payments on your credit card debt until they are gone, and then wait until you are sued and garnished to talk to me! It makes me nuts when nice, smart, capable people write me and say, "I'm being garnished and I think it might be time to consider my options."

The time to consider options is at the moment that you start thinking about dipping into your 401(k) or IRA for any reason!

Back on track.

The obvious reasons that people now are filing bankruptcy cases is simple desperation and need. If you're getting garnished by a judgment creditor, that 25% of your net adds up fast; and since most people have a debt and expense structure that requires the use of all their net paycheck, when people are garnished, they have a lot of trouble avoiding a bankruptcy.

Or if your job has been outsourced, you may well get to file a bankruptcy. Or if your employer has "rightsized", you may get to file a bankruptcy. Or if your house gets blown away by a big wind, and you don't have big wind insurance, you may get to file a bankruptcy.

Now, some young people sometimes get into trouble because they have been sold the idea that they need or are entitled to a particular kind of lifestyle, and then they go on to obtain that sort of lifestyle, based on their belief that they can safely use credit, because their earnings will go up over their careers.

And many of them simply miscalculate how quickly their incomes will increase.

Or they get caught with their wallets down because of an unexpected expense, miss one credit card payment by a minute or two, and then notice that their interest rate has gone up to 30%!

And that their credit card bills are now all at 30%, even though they only missed one payment with one credit card, and that only by two minutes (note: this actually happens).

Normally, for individuals, luck plays a big part in the decision to file a bankruptcy, and bad planning can have an effect as well.

For older folks, the "moment of clarity" bankruptcy will occur when they get out their pocket calculators and figure out that their retirement income is going to be two thousand dollars a month, and that their minimum credit card payments are twenty-five hundred a month.

As I've pointed out in the past, bankruptcy is often a pre-retirement financial planning step that must occur to make retirement survivable.

The saddest bankruptcy cases I see are kids with big credit card debt and gigantic student loans, which very seldom get scraped off in bankruptcy. Lately I suspect that a lot of vulnerable young kids are being taken for a ride by their University, which gets paid very, very big bucks, leaving the kid with a Doctorate in Swahili Grammar, and a quarter of a million in student loans, and no possible jobs except flipping burgers.

So over-borrowing and overspending can both lead to the door of a bankruptcy lawyer.

Why am I talking today about overspending?

Well, a lot of bad decisions don't look like bad decisions at the front end, or even for a long time.

But then, the bill comes due, and things happen. Bad things.

That happens almost without exception to celebrities who get very rich very young; when you're young and rich, you think you earned it, and you think you deserve it, and you think you'll keep making those multi-millions forever, so you might as well spend some for fun.

Hence, celebrity bankruptcy cases, and sometimes celebrity bankruptcy fraud.

The reason I'm worried about the national economy right now is that it looks to me a little like a nice couple with a very large credit card debt (because the Federal Government is borrowing 40 cents out of every dollar it spends), and everything is just fine, as long as the interest rate is low and the credit card limits are gigantic, and we have some minimum of manufacturing that still happens in the United States.

But this article scared me; it suggested that if interest rates go up, the national economy will collapse like a house of cards.

And even though I'm a bankruptcy lawyer, I don't want to see that; nobody wants to see that, right?

p.s. It's instructive to watch what happens to a country that borrows and spends more than it makes; Greece is currently about to experience what is lovingly called an "austerity" program, which will be followed by a default.

My take is that being dictated terms by lenders for a "national bailout to prevent a default" is about as much fun as having your country occupied by a hostile army.

But watch Greece, and see how much the folks there are going to enjoy their "austerity" program; putting it another way, the politicians in Greece spent borrowed money like water to buy votes, and the citizens of Greece are going to be living on grass clippings for a decade to pay the bill. And then there's the "asset sales" part of the "bailout".

Greece should have defaulted, and should have declared bankruptcy and started over again; at least, the citizens of Greece would have been better off with that game plan.

The Justice Department of the United States has stopped opposing same-sex couples filing joint bankruptcy petitions.

The world is changing in a lot of ways that I like, and a lot of ways that I don't like.

I love it that everybody in sight can connect with everybody else on the Internet, and I don't like it that inflation and unemployment and outsourcing continue to drive consumer bankruptcy and business bankruptcy cases in Arizona, and everyplace else.

But I love this: while the Dodgers may be in a Chapter 11 Bankruptcy, with their eventual fate hanging on the gavel of a Maryland Bankruptcy Judge, the Dodgers still thought it was a good idea to have "Blogger's Night", where Dodgers fans who blog about them get to watch the team play, and meet the team.

Frankly, that strikes me as a very good management decision.

While Gutenberg made it possible to record all the information discovered by mankind, bloggers, along with search engines, make it possible to find all that information, and to understand it!

And previously, publishers were a necessary part of the equation, but not since e-books overtook physical books in the publishing world.

Amazon deserves a round of applause for that development.

Because there are few areas that unemployment hasn't hit hard in the United States, and job statistics aren't just disappointing; they're tragic.

But one area where people can make jobs for themselves, after they invent themselves into experts by blogging, is writing e-books and selling them on Amazon.

According to a buddy of mine, who is the author of 17 published works, Amazon pays authors far more per book sale than traditional publishers.

So some folks, after their bankruptcy cases, will get to write the Great American Novel, and become as rich as J.K. Rowling!

So technology has created at least one bright spot in an awful job market, and it's a bright spot that doesn't even require kissing a publisher to get published!

p.s. a buddy of mine, Rick Cook, will be publishing his new e-book in a few days. The working title is "Shift Happens". When it comes out, I'll buy a copy and tell you to buy it. Why? Well, he has always done a great job of predicting the future, and that's a valuable slice of knowledge to have in these troubled economic times!

There are a lot of Dodgers fans in the United States, and every single one of them has an opinion.

Most of the people who are writing about the Dodgers story side with Major League Baseball and Bud Selig.

And that's probably pretty smart for people who care about continued access to baseball information generally!

But I always have a soft spot in my heart for the underdog; and in this case, that underdog is Frank McCourt.

Frank spent lavishly, and engineered a deal with Fox Sports that would fund the Dodgers for years, and would also pay off his former wife in his divorce case.

And he's being criticized heavily for plugging in payments to his former wife; but does anybody think that during a heavily contested divorce, the value of the team would not be an issue? Or that it's wrong to make alimony and support payments when a marriage is over?

At least as I see it, Frank McCourt is a resourceful guy who found a way to solve for multiple equations simultaneously; he found a way to fund the team for almost twenty years with a multi-billion dollar contract, and to get a relatively quick settlement in what could have been the celebrity divorce of the century.

Alternatively, he could have found a neat way to snooker his wife out of any payments whatsoever; I personally think he was on the right track, and that he did a good job of finding a way to make everybody except Bud Selig happy, and to keep paychecks moving in the direction of the players.

Now, the usual outcome when somebody ticks off Bud Selig is that they get squashed like a bug, because Major League Baseball has Major League Power built into its contracts.

On the other hand, a U.S. Bankruptcy Judge has remarkable powers built into the gavel, because that Judge is tasked with a daunting job; finding a way to help make a broken business work right, under the direction of the Debtor and Debtor-in-Possession.

And once again, it looks to me as though Frank McCourt made a smart play in a difficult situation; a Bankruptcy Judge, as a general rule, keeps the Responsible Party in place during the reorganization process.

Not always; but normally, a little thing like an "ipso facto clause", which is a paragraph saying that in the event of a bankruptcy filing, this, that, and the other will take place, is simply disregarded by Bankruptcy Judges.

After all, if ipso facto clauses worked perfectly, they would be in every contract, and all Chapter 11 Cases would be doomed from the start.

But now depositions are being scheduled in the Dodgers Chapter 11 Case (and I think they're probably 2004 examinations instead of actual depositions, but I've been wrong before; a Rule 2004 Exam is far broader in area of search than a deposition, and is the correct tool of choice for a fishing expedition by bankruptcy lawyers).

Now, I have buddies who are hard-core litigators, and if they were handling the case, I would expect the depositions or Rule 2004 Exams to be filmed, so that they can be used to affect public sentiment.

And the counter-move would be an attempt to have the video depositions sealed.

The nice thing about life is that the longer you live, the more you see.

Various countries have gotten great press for economic development over the years.

Since I'm more Irish than not, I was happy when Ireland was the "Celtic Tiger" of Europe.

Now, of course, the Irish are doing what they've done for centuries; being forced to leave the old sod and travel in search of jobs.

The Irish seem to do very, very well in both business and politics. Everywhere but Ireland.

Another country that has gotten remarkable levels of publicity for its dramatic economic growth is China.

And, like the Soviet Union before it, China is apparently about to demonstrate exactly how well a Communist Government can manage an economy from the top down.

And this article from Bernama discusses the specter of bankruptcy cases from one end of China to another.

It will be interesting to see how that plays out.

There is a concept in economics called "elasticity".

For instance, if the price of drinking water goes up, the consumption of drinking water will stay about the same, since the demand for drinking water is highly "inelastic".

On the other hand, the demand for many products and services is highly "elastic". Think about it for a minute: if your hair-cutter started charging ten times as much as she does now, would you get as many haircuts?

Now let's look at the demand for holiday travel. Is that more like drinking water (which you gotta have, after all) or more like haircuts (which are far less life and death sorts of issues, unless you live in AZ and need to get out of the 117 degree heat!)?

So if the cost of holiday travel goes up, will we see less of it?

Absolutely! And we can check our reasoning in the real world, and we'll see that there is less holiday travel when the price of gas is higher.

Now, the price of gas is somewhat interesting in the economic universe, because it drives higher prices for everything.

And it, along with excessive printing of money, is part of the reason for the stealth inflation that's starting to sap your wallet.

But you knew that, right?

And will higher gas prices and stealth inflation work to force more hard-working Americans to file bankruptcy?

Uh. Lemmie think about that.