04 March 2014

Law's Lawlessness Prevails

Nothing profound notwithstanding my pretentious title. "Law" in this post is the surname of one Stephen Law, a Chapter 7 bankruptcy debtor who gets to keep his California homestead in spite of an extraordinary abuse of the bankruptcy system.

Law sought discharge of his debts in a Chapter 7 bankruptcy. Nothing unusual in that. What was unusual was the lengths to which he went to defraud the bankruptcy trustee and the court and thus to preserve the $75,000 homestead exemption provided by bankruptcy law. All told, it cost the bankruptcy trustee over $500,000 to ferret out the Stephen Law's misconduct.

I won't bore folks with the details of the case, you can read them in the unanimous opinion of the Supreme Court here. In short, the Court held that the Bankruptcy Code prohibits a "surcharge" against a debtor's exempt property and none of the debtor's bad acts justify ignoring the law.

The Court's opinion makes one thing clear: a court's desire to do equity--the right thing--cannot be accomplished in the face of what the law--enacted by Congress--permits. A point that I would hope the Court would apply to its own reasoning when confronting the difficult "social issues" on its docket.

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