Filing for bankruptcy is not a simple process, and most people hire experienced bankruptcy attorneys to help them. However, you are not required to have a lawyer and may file for bankruptcy without legal representation. Be warned, proceeding without a lawyer is not a good idea. You should talk to an attorney about your situation. You should have a lawyer help you file for bankruptcy. These proceedings are known for being complicated, and it is very easy to make a mistake on your own. Certain mistakes could lead to a total dismissal of your case, and you will not be able to take advantage of the benefits of bankruptcy, such as having debts discharged. An attorney can help you make sure your bankruptcy petition is accurate and complete to avoid any errors that could cost you everything. Ask our New Jersey bankruptcy lawyers for a free, private case assessment by calling Young, Marr, Mallis & Associates at (609) 755-3115. Do I Need a Lawyer to File for Bankruptcy in New Jersey? While bankruptcy petitioners may file their cases without a lawyer, doing so is unwise. There are too many things that could go wrong, and the average person likely does not have the skills or experience needed to navigate complex bankruptcy laws and hearings. Filing for Bankruptcy Pro Se When a person files for bankruptcy on their own without a lawyer, it is called filing pro se. You have the right to represent yourself in almost all legal proceedings, including bankruptcy cases, and you can do so if you truly wish. However, filing pro se is usually not a good idea. Only those with experience in bankruptcy law and legal procedures should consider filing their case pro se. Is it a Good Idea to File for Bankruptcy without a Lawyer? It is not a good idea to file for bankruptcy without help from a lawyer. The process is far more complex than most people realize, and too many things could go wrong. Your bankruptcy petition must include very specific information about your finances. Not only does the court need a full list of all your assets, but your current financial situation will determine whether you are even eligible for bankruptcy. When Should I Hire a Bankruptcy Lawyer? You should hire a bankruptcy attorney before you file anything with the bankruptcy court. If you file your petition on your own, it may be possible to hire a lawyer later, but it is best to have a lawyer on your side before you file anything. Your initial petition is crucial and will set the tone for the remainder of your case. Our New Jersey bankruptcy lawyers must be sure to include all your relevant financial and banking information, including various assets or properties you own that could be liquidated. You may also protect certain assets by claiming certain bankruptcy exemptions in your initial petition. Many people are unaware that exemptions even exist, but a lawyer should know how to claim them to protect your property and assets. Possible Complications When Filing for Bankruptcy Without a Lawyer Again, filing for bankruptcy is complicated. There are numerous laws and legal procedures to navigate, and mistakes can be all too easy to make. Some mistakes could cost you everything, which is why you should hire a bankruptcy lawyer before filing anything. Disclosing Your Assets A crucial element of filing for bankruptcy is disclosing your assets. This requires that we provide a full explanation of all your financial assets, including bank accounts, properties, investments, and any other accounts or property. These disclosures must be full and complete. Failing to disclose certain assets may be considered fraud. Even if the failure is only an error, it could set your case back and cost you a lot of time. You might even face sanctions from the court. A lawyer can help you make sure your disclosures are complete and accurate so everything goes smoothly. Legal Errors or Mistakes Mistakes can lead to the dismissal of your case. For example, petitioners who file without a lawyer might accidentally forget to include certain creditors in the case, fail to disclose certain assets, or attempt to hide assets, not realizing that their actions are highly illegal. An attorney knows how to avoid mistakes and, if they do occur, how to correct them before they become a serious problem. Navigating Complex Bankruptcy Laws Filing for bankruptcy is much more than submitting some paperwork and showing up to court. There are important decisions to make and numerous hearings to attend. You must navigate complex legal procedures while understanding how to use the bankruptcy system to your advantage. Obviously, this is incredibly difficult, and a petitioner should not proceed without help from an experienced lawyer. FA Qs About Filing for Bankruptcy Without a Lawyer in New Jersey Am I Allowed to File for Bankruptcy Without a Lawyer in New Jersey? Yes. You are allowed to file for bankruptcy without a lawyer, known as filing pro se, but doing so is not advisable. Filing for bankruptcy is a complex process, and simple mistakes could lead to major consequences. Are There Any Good Reasons to File for Bankruptcy Without an Attorney? No. Many petitioners want to make the bankruptcy process more affordable by foregoing a lawyer and saving money on legal fees. While this is understandable, it is still not a good idea. Your attorney should be able to reach a fee agreement you can afford so you can get legal assistance. Should I Hire a Lawyer Before Filing for Bankruptcy? Yes. You should have a lawyer helping you from the very beginning. Hiring a lawyer after your case has already begin may make the case more difficult for your attorney, thereby complicating your case. How Can a Lawyer Help Me Through the Bankruptcy Process? Your attorney can help you prepare your initial petition, which must contain crucial information about your finances, creditors, and assets. If any of this information is incorrect or incomplete, the entire case could be dismissed. Your attorney can help you make sure all paperwork and documentation are accurate and complete, and that your case moves as smoothly as possible through the courts. What Happens if I Make a Serious Mistake in My Bankruptcy Case Without a Lawyer? You will be held responsible for any errors or mistakes in your bankruptcy case, and the court will not go easy on you because you do not have a lawyer. Your case could be dismissed because of serious mistakes, and you will not be afforded the relief of having any debts discharged. Contact Our New Jersey Bankruptcy Lawyers for Support Today Ask our Cherry Hill, NJ bankruptcy lawyers for a free, private case assessment by calling Young, Marr, Mallis & Associates at (609) 755-3115.

Bankruptcy has an immediate effect on a debtor’s credit score. The exact drop in points depends on how high their credit score was before they fell behind on debt and filed for bankruptcy. If you have a higher credit score before bankruptcy, over 700, the drop in points may be more significant than if you had a lower credit score, under 600, as the change should be proportional. A Chapter 7 case may have harsher credit score consequences than a Chapter 13 case. Our lawyers can help minimize the effects of bankruptcy on your credit score when handling your case and set you up for future success in improving your credit score after bankruptcy. You can call Young, Marr, Mallis & Associates at (215) 701-6519 in Pennsylvania or (609) 755-3115 in New Jersey for your free and confidential case review from our bankruptcy lawyers. What Happens if You File for Bankruptcy with a Low Credit Score? The hit your credit score takes when you file for bankruptcy is unavoidable, and so is how long you have to wait until the bankruptcy case is removed from your credit report. Immediate Drop in Credit Score Filing for bankruptcy has an immediate effect on the debtor’s credit score, even if it was already low. The actual change in credit score may be less severe if it was already low before you filed, such as under 600 points. The impact on your credit score is almost immediate after we file the bankruptcy petition, and it doesn’t wait to take effect at the end of your case. Place on Credit Report The bankruptcy case gets added to your credit report almost immediately as well. Regardless of what your credit was before you filed, the case could stay on your report for 7 to 10 years from the filing date, depending on the specific chapter you filed. What Happens if You File for Bankruptcy with a High Credit Score? Believe it or not, filing for bankruptcy before your credit worsens even further from missed payments and incurred debts can have drawbacks, as filing for bankruptcy with a high credit score has more consequences than filing with a low credit score. It’s important to weigh these considerations with our lawyers before filing a bankruptcy petition. If you have a high credit score when you file for bankruptcy, around 700 or above, you will experience a more significant drop than if you had a lower credit score, likely exceeding 200 points. The drop will be proportional to the total loss to your credit, which is more drastic if you had a positive credit history up until that point. There are no other major differences between filing for bankruptcy with a low or high credit score. That said, low or high credit scores can be indicative of other attributes that affect your bankruptcy case, such as your income and the chapter you can file, the type of debts you have, and the amount of debt you have. Do Chapter 7 and Chapter 13 Bankruptcy Affect Your Credit Score Differently? The specific bankruptcy chapter you end up filing could affect your credit score differently and determine how long the bankruptcy case remains visible on your credit report. Initial Score Impact Chapter 7 bankruptcies may trigger a more substantial drop in credit score than Chapter 13 bankruptcies. A Chapter 7 case is quicker because it involves asset liquidation and yields a fast debt discharge, so it affects your credit score more than Chapter 13, during which debtors consolidate and repay debts over time. Duration on Credit Report A Chapter 7 bankruptcy case may stay on your credit report for 10 years, while a Chapter 13 case may stay there for 7, regardless of how high your credit score was before the bankruptcy case. Time Until Improvement Although a Chapter 7 case stays on your credit report for longer, you may be able to start rebuilding your credit sooner. These cases typically take 4 to 6 months, while Chapter 13 cases can take 3 to 5 years. Perception from Lenders Chapter 7 and Chapter 13 bankruptcies on credit reports are typically perceived differently by creditors and lenders afterward. Chapter 7 filers may receive a more substantial discharge, which can be concerning to future creditors. On the other hand, seeing that you repaid all debts during a Chapter 13 case and followed the repayment plan exactly can give future creditors the confidence they need to open an account with you. How Can You Minimize the Impact on Your Credit Score When Filing for Bankruptcy? We can work to minimize the long-term impact on your credit from bankruptcy by setting up a repayment plan you can follow and providing you with useful money management tips. Follow Repayment Plan Stop bankruptcy from affecting your credit score even more than it already has by making timely payments during a repayment plan for Chapter 13. In addition to following the repayment plan, you must also stay up to date with all current bills so you don’t incur more debt or further harm your credit. We can organize a repayment plan that’s considerate of your current income and expenses, including debts you owe. That way, you are more likely to follow the repayment plan and not fall further behind. Monitor Credit Reports Monitoring credit reports during bankruptcy claims and ensuring they update debts as they are paid and settled is important. That confirms that you have settled the debt and do not currently owe the creditor anything. The debt may remain visible on your credit score, but it will not be reported as unpaid. Set Yourself Up for Future Success Set yourself up for future success by taking the mandatory credit counseling courses for debtors before filing for bankruptcy. With our help, make a financial plan you can stick to that considers all your sources of income, expenses, and potential costs. How Can You Rebuild Your Credit After Bankruptcy? Rebuilding your credit after bankruptcy is possible, and may happen sooner than you thought possible if you take the right steps. Don’t Incur Additional Debts To actively rebuild your credit after bankruptcy, you cannot incur additional debts. Getting into debt again soon after your bankruptcy case will further lower your credit score. If you have to file for bankruptcy again soon after your initial case, you will experience another significant drop. A previous bankruptcy case can affect your eligibility for the automatic stay that stops creditors from harassing you for repayment during the case, and add stress to the entire process. Get a Secured Credit Card A secured credit card is a great tool for rebuilding credit after bankruptcy. These credit cards require a deposit, and this deposit determines the credit card limit. Limiting your use of available credit each month and making payments on time can help you rebuild your credit even faster after bankruptcy. No credit is just as negative as bad credit, so do not be afraid to open a new line of credit after bankruptcy; just make sure you do it responsibly. Become an Authorized User Becoming an authorized user on someone else’s credit card, like a spouse or parent, helps you rebuild your credit when you cannot get approved for a credit card on your own after bankruptcy or when interest rates are too high. If the primary cardholder pays the credit card bill on time and consistently, that positively affects your credit as an authorized user. Implement Money Management Skills Implement the money management skills you learned from credit counseling courses and our bankruptcy lawyers during your bankruptcy case so that your credit only increases after bankruptcy and doesn’t worsen further. We can help you set up a budget that works for your family and lifestyle, helping you avoid getting into debt and facing bankruptcy again anytime soon. What Impacts Your Credit Score? Plenty of factors come together to determine your credit score, and learning more about them sets you on the right path toward rebuilding your credit after bankruptcy. Payment History Making timely payments contributes to a positive credit score. Frequently missing payments lowers your credit score and could put you into debt, making filing for bankruptcy almost unavoidable. Amounts Owed Your use of credit cards, along with your credit limits and the debts you owe, also affects your overall credit score. Lower utilization ratios are ideal for building credit. Maxing out credit cards and not making payment deadlines or failing to satisfy other debts seriously jeopardizes your credit score before you even file for bankruptcy. Length of Credit History A longer credit history contributes to a better credit score. If you only recently established your first line of credit, your credit score might be lower than if you had had accounts longer, even if you have met all payment dates so far. Regularly use accounts to create a solid credit history. Credit Mix Having a variety of credit accounts on your credit report also positively affects your credit score. A mix of credit cards and loans only makes your credit score higher if you pay them on time. Having too many lines of credit without meeting payment requirements can seriously harm your credit. It can be hard to have a mix of accounts after bankruptcy, as you might not get approved for loans for some time. New Credit Inquiries Every time you try to open a new credit card or another account, a hard inquiry is made on your credit report. This alone can affect your credit score, typically by about 5 to 10 points. Even a slight drop like this can take months of timely payments and regular utilization to erase. Bankruptcies Bankruptcy cases significantly affect credit scores, often by 100 points or more. Even after the bankruptcy case is over, it remains listed on your credit report and can be seen by future creditors or lenders for 7 to 10 years. Prior bankruptcies can affect your ability to get approved for new credit cards, mortgages, and other loans. For some, bankruptcy is the only option to settle debts. Rebuilding your credit is possible, so don’t let the drop in your credit score stop you from filing for bankruptcy if you are struggling financially. FA Qs About Your Credit Score and Bankruptcy Can Your Credit Score Affect Your Ability to File for Bankruptcy? Your credit score never affects your ability to file for bankruptcy. Bankruptcy affects a credit score, and the extent of the impact depends on the score’s standing at the time of filing. Does Your Credit Score Dictate the Bankruptcy Chapter You Can File? Credit score doesn’t dictate which bankruptcy chapter you can or should file; whether Chapter 7 or 13 better suits your situation depends on your income, assets, and the type of debt you have. People with lower incomes don’t automatically have lower credit scores, and vice versa. Can You Remove Bankruptcy from Your Credit Report Sooner? You cannot remove a bankruptcy case from your credit report earlier than the mandatory 7 or 10 years it must remain there, unless it is inaccurate. How Important is Improving Your Credit Score After Bankruptcy? Improving your credit score after bankruptcy is very important, especially if your credit score dropped substantially and you previously had a positive standing. How Quickly Can You Improve Your Credit Score After Bankruptcy? It may take a year or longer to see improvements to your credit score after your bankruptcy case ends. Establishing positive credit habits and money management skills can help you increase your credit score more quickly. Let Us Help with Your Bankruptcy Case For help with your case from our chapter 7 bankruptcy lawyers, call Young, Marr, Mallis & Associates at (215) 701-6519 in Pennsylvania or (609) 755-3115 in New Jersey.

Law Review (Note): Elizabeth Tsai, The Taxing Ambiguity: Defining "Return" in Bankruptcy Dischargeability Cases Ed Boltz Tue, 03/31/2026 - 16:31 Available at: https://engagedscholarship.csuohio.edu/cgi/viewcontent.cgi?article=4364&context=clevstlrev Abstract: This Note examines the circuit split over the dischargeability of tax debts tied to late-filed returns, which has led to inconsistent bankruptcy outcomes and inequitable treatment of debtors across jurisdictions. Some courts, adopting the strict “one-day-late” rule, hold that any tax return filed even a single day past its deadline is not a “return” for bankruptcy discharge purposes, permanently barring relief. Others apply a more flexible standard grounded in the Beard test, considering a debtor’s good-faith compliance efforts. This inconsistency contradicts the fresh start principle of bankruptcy law, disproportionately harms low-income debtors, and fails to serve the government’s tax collection interests. This Note argues that Congress should amend 11 U.S.C. § 523(a)(1)(B) to codify the Beard test and restore the effectiveness of the two-year rule, ensuring that bankruptcy law does not impose lifelong financial penalties for minor procedural missteps. Alternatively, the Supreme Court should establish a uniform standard, or the IRS should issue administrative guidance clarifying that a late-filed return remains valid for tax assessment and discharge purposes. A clear, consistent, and fair approach is necessary to resolve this issue and restore uniformity, predictability, and economic rationality to tax dischargeability in bankruptcy. The Taxing Ambiguity: When Is a “Return” Not a Return? Elizabeth Tsai’s recent note in the Cleveland State Law Review tackles one of the most persistent interpretive problems created by the 2005 amendments to the Bankruptcy Code: whether a late-filed tax return can ever qualify as a “return” for purposes of discharging tax debt under 11 U.S.C. § 523(a)(1)(B). The problem arises from the BAPCPA addition of the so-called “hanging paragraph,” which defines a “return” as one that satisfies “applicable filing requirements.” Courts have divided sharply on whether those requirements include timeliness. The result is a deep circuit split that leaves debtors’ ability to discharge tax debt largely dependent on geography. The Competing Approaches The Strict “One-Day-Late” Rule Several circuits have adopted a strict interpretation holding that any late return is not a return at all for bankruptcy discharge purposes. Those courts reason that: “Applicable filing requirements” include the deadline, and A return filed after that deadline fails the statutory definition. This approach is reflected in decisions such as: Fahey v. Massachusetts Department of Revenue (1st Cir.) In re McCoy (5th Cir.) In re Mallo (10th Cir.) Under this rule, missing the tax filing deadline by even one day permanently bars discharge of the associated tax debt. Critics point out the obvious statutory problem: if no late return is ever a “return,” then the Bankruptcy Code’s two-year rule for late-filed returns becomes meaningless. The Beard Test Approach Other circuits take a far more practical approach, applying the long-standing Beard test to determine whether a document qualifies as a return. Under Beard, a return must: Purport to be a return Be signed under penalty of perjury Contain sufficient information to calculate the tax Represent an honest and reasonable attempt to comply with tax law. Courts using this approach focus on substance rather than timing. Late returns may still qualify as returns so long as they represent a genuine effort to comply with tax law. The Fourth Circuit: A Middle Ground Favorable to Debtors For debtors and practitioners in North Carolina and the rest of the Fourth Circuit, the news is somewhat better. The Fourth Circuit has not adopted the harsh “one-day-late” rule. Instead, courts in this circuit generally analyze late-filed returns using the Beard framework, asking whether the filing represents an honest and reasonable attempt to comply with tax law. The leading Fourth Circuit decision is Moroney v. United States, which held that a filing made only after the IRS had already assessed the tax liability did not qualify as a return because it did not represent a genuine attempt to comply with the tax laws. While that case predates BAPCPA, courts in the Fourth Circuit continue to rely on its reasoning when analyzing late-filed returns. The practical result is that late filing alone does not automatically defeat discharge. Instead, courts generally examine questions such as: Was the return filed before the IRS prepared a Substitute for Return (SFR)? Did the filing provide the IRS with useful information to assess the tax? Did the debtor make a good-faith attempt to comply with tax obligations? If those questions are answered favorably, a late return may still qualify as a return, and the tax may be dischargeable if the other timing rules (such as the three-year and two-year rules) are satisfied. But if the debtor files only after the IRS has already completed an SFR and assessed the tax, courts in the Fourth Circuit often conclude that the filing was not a genuine attempt to comply with tax law. Why This Split Matters Tsai’s article emphasizes that this circuit split produces dramatically different outcomes for identical debtors. A taxpayer who files late returns and later seeks bankruptcy relief might: Receive a discharge in the Eighth Circuit, Possibly receive one in the Fourth Circuit, but Face permanent nondischargeability in the First or Fifth Circuits. That geographic disparity undermines one of the central goals of federal bankruptcy law: uniformity. Policy Concerns Raised by the Article The article highlights several policy problems created by the strict “one-day-late” rule. 1. It disproportionately harms vulnerable debtors Late tax filings are frequently associated with: job loss illness financial instability lack of access to professional tax assistance. Those are precisely the circumstances that lead many individuals into bankruptcy in the first place. Turning a missed deadline into a lifetime nondischargeable debt does little to advance the goals of either tax administration or bankruptcy law. 2. It discourages voluntary compliance The strict rule also produces a strange incentive. If filing late provides no benefit in bankruptcy, a taxpayer may conclude that filing late is pointless. That result is the opposite of what tax policy normally seeks to encourage. 3. It does little to increase tax collection Late filing accounts for only a small portion of the federal tax gap, meaning the strict rule produces minimal additional revenue for the IRS. Instead, it mainly generates: additional litigation inconsistent outcomes administrative costs. Proposed Solutions Tsai proposes three possible ways to resolve the circuit split. Congressional action The most direct fix would be for Congress to amend § 523(a)(1)(B) to: clarify that timeliness is not required for a filing to qualify as a return, and codify the Beard test. That approach would restore the traditional understanding of late-filed returns and give real meaning to the Code’s two-year rule. Supreme Court intervention The Supreme Court could also resolve the split by interpreting the phrase “applicable filing requirements.” However, the Court has repeatedly declined to address the issue despite the acknowledged circuit conflict. IRS administrative guidance Finally, the IRS could issue guidance clarifying that late returns remain valid returns for bankruptcy purposes. While less definitive than legislation or a Supreme Court ruling, such guidance could reduce litigation and promote uniformity. Commentary: A Statutory Problem Hiding in Plain Sight For consumer bankruptcy practitioners, Tsai’s article highlights one of the lingering problems created by BAPCPA’s drafting. The strict “one-day-late” rule is difficult to reconcile with the statute for several reasons. First, it effectively eliminates the two-year rule for late returns. If a late return is never a “return,” the statute’s explicit reference to late returns becomes meaningless. Second, it produces arbitrary geographic outcomes that undermine the uniformity of federal bankruptcy law. Third, it punishes the wrong debtors—those who eventually file returns and attempt to correct their mistakes. The Fourth Circuit’s more flexible approach—while not perfect—at least recognizes that bankruptcy law should distinguish between taxpayers who never comply and those who eventually do. Until Congress or the Supreme Court resolves the issue, however, the dischargeability of tax debts tied to late-filed returns will remain one of the most unpredictable corners of consumer bankruptcy law—and one where geography may determine whether a debtor truly receives the fresh start the Bankruptcy Code promises.-- To read a copy of the transcript, please see: Blog comments Attachment Document the_taxing_ambiguity_defining_return_in_bankruptcy_dischargeab.pdf (571.43 KB) Category Law Reviews & Studies

Law Review: Hampson, Christopher D., Bankruptcy Abstention (February 08, 2026) Ed Boltz Mon, 03/30/2026 - 15:08 Available at:  https://ssrn.com/abstract=6198338  Abstract: Courts have been finding ways to avoid hearing bankruptcy cases for a long time.  This practice distinguishes bankruptcy from other types of federal cases.  The federal district courts operate under the twin principles that they are courts of limited jurisdiction and have a “virtually unflagging” obligation to exercise it.  But those twin principles are inverted in bankruptcy.  That is because bankruptcy courts do more than just resolve disputes; they solve problems. Bankruptcy jurisdiction is expansive and dramatic.  When a debtor commences a bankruptcy case, the bankruptcy court has jurisdiction not only over the case itself and proceedings “arising in” the case, but also a broad swath of cases “related to” the bankruptcy proceedings.  Yet, unlike their district court cousins, bankruptcy courts have much broader authority to dismiss or abstain from hearing cases before them, as well as to reshape the contours of a bankruptcy case by lifting the stay or by allowing custodians to maintain control of property of the estate. Bankruptcy courts wield that authority in a host of pragmatic, equitable, and surprising ways: pulling back when the case lacks a bankruptcy purpose, policing against a range of forum-shopping practices, abstaining when other insolvency proceedings are underway, and (most strikingly) stepping back when debtors and creditors are engaged in informal, out-of-court workouts.  This Article refers to all these abstention or abstention-adjacent decisions as “bankruptcy abstention,” a mix of permissive and mandatory rules that provide contours to the jurisdiction of the bankruptcy courts by limning out bankruptcy’s “negative spaces.” This Article maps out three situations when the bankruptcy courts pull back, explores what this unusual practice tells us about bankruptcy as an area of law, suggests how bankruptcy abstention might be refined, and proposes some lessons about the nature of courts along the way.  While federalism principles can explain much of bankruptcy abstention, bankruptcy courts also pull back from re-adjudicating out-of-court workouts that they deem fair and efficient — even when the matters have not yet seen the inside of a courtroom.  Bankruptcy courts also pull back when they perceive that the tools at their disposal are a poor fit for the problem they are being asked to solve.  Bankruptcy abstention thus goes beyond federalism principles and demonstrates the character of the bankruptcy courts as courts of equity — courts that nurture what Alexander Bickel called the “passive virtues.”  The Article suggests that we can rethink some of bankruptcy’s most contentious doctrines through that lens, coins the phrase “bankruptcy ripeness,” and provides new insight into the debate over bankruptcy exceptionalism.  This reframing can, in turn, suggest guidance to attorneys, judges, and policymakers for how best to fine-tune the bankruptcy system — as well as provide lessons for other courts of equity in the American legal system.  Finally, the Article proposes that bankruptcy abstention represents a new battlefield for old debates about bankruptcy theory and suggests that bankruptcy scholars think of institutionalism as a third way of theorizing bankruptcy law.   Summary: Christopher Hampson’s article, “Bankruptcy Abstention,” explores a paradox that anyone practicing in bankruptcy court quickly learns: bankruptcy courts possess some of the broadest jurisdiction in the federal system, yet they also exercise extraordinary discretion to decline hearing cases altogether. Unlike ordinary federal courts—where judges have a “virtually unflagging obligation” to exercise jurisdiction—bankruptcy courts routinely dismiss, abstain, lift the stay, or otherwise step back when they believe bankruptcy is the wrong forum or the wrong time. Hampson argues that this pattern reflects the distinctive character of bankruptcy courts. They are not merely adjudicating disputes between parties; they are problem-solving courts, and when bankruptcy is not the right tool for the problem, judges often decline to proceed. The article identifies three primary situations where bankruptcy courts “pull back.” 1. When the Case Lacks a Bankruptcy Purpose Bankruptcy is designed to address two basic problems: debtors who cannot pay, or debtors who will not pay. When neither condition exists, courts may conclude that bankruptcy is being used for something else—often tactical litigation advantage. For example, courts have increasingly scrutinized filings by solvent debtors, particularly in large corporate restructurings. The Third Circuit’s decision in In re LTL Management illustrates the point. There, Johnson & Johnson attempted a “Texas Two-Step” restructuring, placing mass-tort liabilities into a subsidiary that then filed bankruptcy. The court dismissed the case, holding that bankruptcy requires real and immediate financial distress, not simply a strategic attempt to manage litigation. Hampson suggests that courts might better frame these cases not as bad-faith filings under §1112, but as abstention decisions under §305, which explicitly allows dismissal when the interests of creditors and the debtor would be better served outside bankruptcy. 2. When Bankruptcy Cannot Solve the Problem (Futility) Bankruptcy courts also step aside when reorganization is impossible or pointless. If a debtor has: no viable business, no meaningful assets, or no realistic prospect of confirming a plan, the court may dismiss the case rather than supervise a doomed restructuring. Futility can also arise at the asset level. When collateral is fully encumbered and not necessary for reorganization, the Bankruptcy Code requires lifting the automatic stay to allow foreclosure. When enough of the debtor’s assets fall into that category, continuing the case makes little sense. In short, if bankruptcy cannot produce a better outcome than state law remedies, the court may simply decline to host the process. 3. When Bankruptcy Is Being Used for Forum Shopping Another recurring theme is forum shopping. Courts may abstain when bankruptcy is used to evade: state court litigation, regulatory enforcement, multidistrict litigation, or other insolvency proceedings such as receiverships or assignments for the benefit of creditors. In those situations, bankruptcy judges sometimes conclude that the filing is less about restructuring debt and more about changing the playing field. 4. When the Parties Are Already Working It Out Perhaps the most surprising category arises when creditors and debtors are successfully negotiating outside bankruptcy. Courts have occasionally abstained when: a consensual workout is underway, and bankruptcy would only disrupt an efficient private restructuring. The idea is simple: if the parties are solving the problem themselves, there may be no need for the court’s intervention. Commentary Hampson’s article highlights something practitioners often sense intuitively but rarely articulate: bankruptcy courts regulate not only what happens inside bankruptcy, but also when bankruptcy should not happen at all. Several observations stand out. 1. Bankruptcy Judges Act Like Institutional Gatekeepers Unlike ordinary federal courts, bankruptcy judges routinely ask a threshold question: Is bankruptcy actually the right forum for this dispute? If the answer is no, the court may dismiss the case, abstain, lift the stay, or simply allow another forum to proceed. That flexibility reflects the hybrid nature of bankruptcy courts as both statutory courts and courts of equity. 2. Abstention Is the “Negative Space” of Bankruptcy Law Most scholarship focuses on the tools bankruptcy courts use: the automatic stay cramdown avoidance powers discharge. Hampson instead focuses on what courts do when they decline to use those tools. Those abstention decisions often shape the bankruptcy system just as much as the cases that proceed. 3. The Debate Over “Financial Distress” Is Just Beginning The most contentious modern battleground involves solvent debtor filings, particularly in mass-tort restructurings. The Third Circuit’s decision in LTL Management imposed a financial-distress requirement that does not appear explicitly in the Bankruptcy Code. Meanwhile, the Fourth Circuit recently rejected a constitutional insolvency requirement in the Bestwall asbestos case—though the issue may not be settled. Expect this debate to continue. 4. Consumer Bankruptcy Raises Different Issues Hampson focuses primarily on business bankruptcies, and that limitation is important. Consumer bankruptcy rarely presents the same abstention concerns because individuals generally cannot resolve their debts through: receiverships, assignments for the benefit of creditors, or out-of-court workouts. For most consumers, bankruptcy remains the only practical path to a discharge. Bottom Line Hampson’s article reminds us that bankruptcy courts wield not only powerful restructuring tools but also powerful brakes. They intervene when bankruptcy is necessary to resolve financial distress. But when the case is unnecessary, premature, or tactical, bankruptcy courts may simply step aside. In that sense, the real lesson of bankruptcy abstention may be this: Bankruptcy courts do not exist merely to decide cases—they exist to decide when bankruptcy itself makes sense. To read a copy of the transcript, please see: Blog comments Attachment Document bankruptcy_abstention.pdf (907.25 KB) Category Law Reviews & Studies

 Shenwick & Associates Achieves Favorable Settlement in In re Celsius Preference Avoidance Action — Default Judgment VacatedAs regular readers of this blog are aware, Shenwick & Associates has developed a recognized legal specialty in cryptocurrency-related matters, including the defense of preference avoidance actions arising out of the In re Celsius Network LLC bankruptcy proceedings.To date, our firm has successfully resolved numerous Celsius preference avoidance actions on favorable terms for defendants named in adversary proceedings. We are pleased to report a recent matter that underscores the importance of prompt legal intervention, even where a defendant's procedural posture has been significantly compromised.BackgroundOur firm was recently retained by a Celsius adversary proceeding defendant domiciled in Europe who had been sued for in excess of $660,000. Prior to retaining counsel, our client failed to respond to multiple communications from Celsius and did not file a timely Answer to the Complaint. As a result, a Default Judgment was entered against him in both the United States and in the relevant European jurisdiction.Our Representation and ResultFollowing entry and service of the Default Judgment, our client retained James Shenwick, Esq. to seek vacatur of the Default Judgment and to negotiate a resolution of the underlying claim. Our firm promptly moved to vacate the Default Judgment, filed a responsive Answer to the Complaint, and engaged in substantive settlement negotiations with opposing counsel.We are pleased to announce that the matter was resolved for approximately 8% of the original claim amount — a result that represents an extraordinary outcome given the procedural posture of the case at the time of our retention. Notably, the client was also able to fund the settlement using cryptocurrency, providing additional flexibility in satisfying the agreed-upon terms.Contact Shenwick & AssociatesIf you have been named as a defendant in a Celsius preference avoidance action — whether you have already received a Default Judgment or have simply been served with a Complaint — we strongly urge you to contact our office promptly. Delay can have significant legal and financial consequences.James Shenwick, Esq.Shenwick & Associates📞 917-363-3391✉️ jshenwick@gmail.comTo schedule a telephone consultation, please click the link below:🔗 Schedule a Call with James Shenwick, Esq.Please click the link to schedule a telephone call with me.https://calendly.com/james-shenwick/15Shenwick & Associates counsels individuals and businesses confronting significant debt obligations, as well as creditors navigating bankruptcy proceedings.

4th Cir.: Tederick v. LoanCare, LLC- Consumer Protection Claims Under WVCCPA Are Strict Liability — Intent Not Required Ed Boltz Fri, 03/27/2026 - 14:14 Summary: In Tederick v. LoanCare, LLC, the Fourth Circuit vacated a summary judgment ruling that had dismissed a consumer class action against mortgage servicer LoanCare under the West Virginia Consumer Credit and Protection Act (WVCCPA). The appellate court held that the statute imposes strict liability, meaning that a borrower does not need to prove the servicer intended to violate the law. The decision sends the case back to the Eastern District of Virginia for further proceedings — and it provides an important clarification of how broadly consumer-protection statutes should be interpreted. The Facts: A Familiar Mortgage Servicing Problem Gary and Lisa Tederick refinanced their West Virginia home in 2004 and made regular mortgage payments for years. Like many conscientious borrowers, they often sent extra principal payments along with their monthly payment. Their note required that: payments be applied first to interest, then principal; but prepayments reduce principal once the borrower was current. Between 2005 and 2020, the Tedericks made roughly 180 combined payments that included both the scheduled payment and additional principal. But the servicers — including LoanCare — allegedly misapplied the prepayments, failing to reduce principal when they should have. The result: the borrowers claim they were charged excess interest for years. After attempts to correct the problem failed, the Tedericks paid off the loan in 2020 and then filed a putative class action alleging violations of the WVCCPA. The District Court: “Being Wrong Isn’t Enough” The district court granted summary judgment for LoanCare. Its reasoning was straightforward: Even if LoanCare misapplied the payments, the court believed the WVCCPA required proof that the servicer intentionally used fraudulent or deceptive conduct to collect a debt. Since the record showed, at most, a billing error, the court concluded the statute was not violated. In short, the district court treated the statute as if it required proof of intent to deceive. The Fourth Circuit: That’s Not What the Statute Says The Fourth Circuit disagreed — emphatically. Looking at the language of W. Va. Code §§ 46A-2-127 and 46A-2-128, the court concluded the statute does not require proof of intent. Instead, the provisions prohibit: false representations about the amount or status of a debt, and collecting interest or fees not authorized by agreement or law. Nothing in the statutory text requires that the debt collector intended the violation. Accordingly, the court held: The provisions are strict liability statutes requiring only proof that the violation occurred. The district court’s insertion of an intent requirement was therefore legal error. Legislative Purpose: Protect Consumers, Not Debt Collectors The Fourth Circuit also emphasized the remedial purpose of the WVCCPA. West Virginia’s high court has repeatedly held that the statute must be liberally construed to protect consumers from unfair and deceptive practices. If courts required proof of intent, the panel noted, the statute would lose much of its force. Indeed, the legislature included intent requirements elsewhere in the Act when it wanted them — but not in these provisions. That textual difference mattered. LoanCare’s Curious Appellate Strategy One of the more striking aspects of the opinion is the Fourth Circuit’s pointed commentary on LoanCare’s litigation posture. Before the district court, LoanCare argued vigorously that the statute required intent. On appeal, however, the company attempted to abandon that argument entirely and defend the judgment on different grounds. The panel called this move “perplexing,” noting that LoanCare appeared to have effectively “thrown the district judge overboard.” The Fourth Circuit refused to play along. What Happens Next The Fourth Circuit declined to resolve two additional issues raised by LoanCare: Whether the servicer actually misapplied the payments, and Whether LoanCare might be protected by the bona fide error defense. Because those questions were not resolved below, the case returns to the district court for further proceedings. Why This Case Matters This opinion reinforces several themes that appear again and again in consumer-finance litigation. 1. Consumer protection statutes often impose strict liability Just like the FDCPA, many state statutes are written so that a violation is enough — intent is irrelevant. Servicers and collectors cannot defend violations simply by claiming the error was accidental. 2. Mortgage servicing errors can become systemic The facts here are painfully familiar: borrower sends extra principal servicer misapplies payment interest continues to accrue borrower overpays for years Those “simple billing errors” can quietly generate large amounts of extra interest. 3. The bona fide error defense still matters Strict liability does not mean automatic liability. Debt collectors can still escape liability if they prove: the violation was unintentional, and they maintained procedures reasonably adapted to prevent it. But importantly, that is an affirmative defense — not an element the consumer must prove. Bankruptcy Angle: Why Debtors’ Lawyers Should Care Although this case arises outside bankruptcy, the reasoning will resonate with consumer bankruptcy practitioners. Mortgage servicers frequently appear in bankruptcy cases with payment histories riddled with the same kinds of accounting issues: misapplied principal payments improperly assessed interest or fees incorrect payoff calculations When those errors spill into Rule 3002.1 disputes, stay violations, or adversary proceedings, the same principle often applies: The servicer’s intent usually does not matter. If the numbers are wrong — and the borrower paid too much — liability can follow. Bottom Line The Fourth Circuit’s decision in Tederick v. LoanCare restores the straightforward rule the statute intended: If a debt collector charges interest or misrepresents the amount of a debt, it may violate the WVCCPA even if the mistake was unintentional. For consumers — and their lawyers — that is a significant clarification. For servicers, it is a reminder that “billing errors” can carry real legal consequences. To read a copy of the transcript, please see: Blog comments Attachment Document tederick_v._loancare.pdf (293.52 KB) Category 4th Circuit Court of Appeals

Law Review (Economics): Goss, Jacob and Mangum, Daniel- Liberty Street Economics- Sports Betting Is Everywhere, Especially on Credit Reports Ed Boltz Thu, 03/26/2026 - 14:33 Available at: https://libertystreeteconomics.newyorkfed.org/2026/03/sports-betting-is-everywhere-especially-on-credit-reports/ Summary (Liberty Street Economics + NY Fed Staff Report) The Federal Reserve’s analysis confirms what many consumer bankruptcy attorneys have been seeing anecdotally: legalized sports betting is not just entertainment—it is increasingly showing up as measurable financial distress. Start with the scale. Since Murphy v. NCAA, more than 30 states have legalized mobile sports betting, generating over $500 billion in wagers. Legalization causes sportsbook spending to increase roughly tenfold, driven not by existing bettors gambling more, but by new participants entering the market. But the most important—and troubling—finding is what happens next: Only ~3% of the population takes up betting after legalization, but Delinquencies increase across the entire population, by about 0.3 percentage points, and Among the actual bettors, the implied increase in delinquency is roughly 10 percentage points—essentially doubling baseline distress. And this is not confined neatly within state lines. Because betting requires only physical presence (not residency), there are significant cross-border spillovers: Nearby “illegal” counties experience about 15% of the increase in betting activity, and Nearly 60% of the increase in delinquency seen in legal states. In other words: the financial harm spreads more efficiently than the betting itself. The credit impacts are not evenly distributed. The data show that: Younger borrowers (under 40) drive most of the deterioration With notable increases in credit card and auto loan delinquencies Credit scores decline modestly, but delinquency rises more meaningfully over time The Liberty Street piece distills this bluntly: sports betting is now “everywhere,” and increasingly, it is “on credit reports.” Commentary: If this feels familiar, it should. Bankruptcy lawyers have seen this movie before—just with different props: Payday loans in the 2000s Title lending and subprime auto in the 2010s And now, sports betting apps with push notifications and instant deposits The difference this time is friction. Or rather, the complete lack of it. You no longer need to drive to a casino, walk past a row of blinking machines, and make a conscious decision to gamble. Instead: Your phone buzzes You tap You deposit (often on credit) And you chase losses in real time That is not just gambling—it is high-frequency, algorithmically nudged financial behavior. And the data confirms what behavioral economics would predict: a small percentage of users drive outsized harm, but the system-wide impact shows up in delinquency, not winnings. What This Means for Bankruptcy Filings Expect this to become a quiet but meaningful driver of filings, particularly in Chapter 13: Credit Card Load-Up + Cash Advance Cycling Many debtors will fund betting through revolving credit, leading to rapid utilization spikes and eventual default.   Auto Loan Defaults (especially subprime) The data already shows rising auto delinquencies. That is a pipeline straight into repossession and subsequent bankruptcy.   Younger Debtors Entering the System Earlier The under-40 cohort is disproportionately affected—meaning earlier financial collapse and longer lifetime credit impairment.   “Unexplained” Budget Failures in Chapter 13 Trustees and practitioners will increasingly encounter plans that fail not because of income loss, but because of ongoing gambling leakage.   Potential Litigation Angles Unfair/deceptive practices (targeted marketing, inducements) Credit extensions tied to gambling platforms Data-driven nudging that may begin to resemble predatory lending dynamics How the Bankruptcy System Should Prepare This is where things get practical—and where the system is currently behind. 1. Intake and Screening Must Evolve We need to start asking directly: “Do you use sports betting apps?” “How often?” “How are you funding it?” Because otherwise, this shows up later as “mysterious budget shortfalls.” 2. Trustee and Court Awareness Chapter 13 trustees should be alert to: Repeated post-petition overdrafts Unexplained disposable income gaps Payment instability tied to seasonal betting cycles (NFL season spikes are real, per the data) 3. Treatment: This Is Not Just ‘Bad Choices’ Gambling disorder is a recognized behavioral addiction. That means: Referral pathways to gambling counseling (analogous to credit counseling) Integration with mental health and addiction treatment Possibly even conditions in plans where appropriate (carefully, and with due regard for feasibility) 4. Means Test and Disposable Income Questions There is an unresolved tension here: Are gambling losses “reasonably necessary expenses”? (No.) But what about treatment costs? (Much stronger argument under § 707(b)(2)(A)(ii) and § 1325(b)) Expect litigation eventually on how to treat both. 5. Policy Level: The Externality Problem The Fed paper highlights a classic issue: States that don’t legalize still bear the bankruptcy and credit fallout, but get none of the tax revenue. That is a recipe for: Continued expansion of legalization Without corresponding investment in consumer protection or treatment infrastructure Final Thought The most striking statistic is not the tenfold increase in betting. It is this: a 3% participation increase produces a system-wide deterioration in credit performance. That is the hallmark of a product that: Concentrates harm Spreads consequences And hides in plain sight—until it shows up in bankruptcy schedules Bankruptcy practitioners should treat this not as a curiosity, but as the next wave of consumer financial distress—one that is faster, more digital, and more psychologically engineered than anything that came before. To read a copy of the transcript, please see: Blog comments Attachment Document sports_betting_is_everywhere_especially_on_credit_reports_-_liberty_street_economics.pdf (1.52 MB) Document sports_betting_across_borders_spatial_spillovers_credit_distress_and_fiscal_externalities.pdf (9.39 MB) Category Law Reviews & Studies

E.D.N.C.: Terrance v. Coastal Federal Credit Union- Affirms $5,000 Sanction for Stay Violation – But Limits Recovery to the Debtor Actually Targeted Ed Boltz Thu, 03/26/2026 - 14:18 Summary: In Terrance v. Coastal Federal Credit Union, the U.S. District Court for the Eastern District of North Carolina affirmed a bankruptcy court decision imposing $5,000 in sanctions for a willful violation of the automatic stay, while rejecting several broader arguments raised by the pro se debtors on appeal. The decision provides a useful reminder of two points frequently litigated in stay-violation cases: Who is entitled to damages under §362(k), and How much procedural help courts must give pro se litigants. The Facts: Bankruptcy Filed — But the Calls Kept Coming Jaden and Jesse Terrance filed a joint Chapter 7 petition on April 8, 2025. The Coastal Federal Credit Union credit card debt at issue, however, was owed only by Jaden Terrance, not by Jesse. Although Coastal quickly received notice of the bankruptcy, a glitch in newly implemented collection software failed to properly flag certain Visa accounts. As a result: Coastal sent two emails, placed 16 collection calls, and reported the account as “30 days past due” to a credit bureau after the bankruptcy filing. The calls stopped only after the debtor finally connected with a Coastal employee and informed them directly of the bankruptcy. At the sanctions hearing, Jaden Terrance testified that the repeated calls triggered significant psychological distress tied to PTSD and depression, and that the stress caused her to miss administering a medication to her spouse, Jesse, who suffers from hereditary angioedema, resulting in a serious medical episode. The bankruptcy court found the violation willful and awarded $5,000 in damages, but declined to award punitive damages. The debtors appealed. The District Court: Affirmed Across the Board Judge Louise Flanagan affirmed the bankruptcy court’s ruling in full. 1. Only the Targeted Debtor Can Recover Stay Damages The most significant legal issue concerned whether Jesse Terrance could recover damages even though the debt belonged solely to Jaden. The district court held no. Although a joint bankruptcy petition was filed, the Fourth Circuit treats joint filings as administratively combined but legally separate estates. Because Coastal attempted to collect only from the debtor whose name was on the account, only that debtor could claim a stay violation. The court rejected the argument that a spouse harmed by the violation could recover damages based on foreseeability or household impact. In short: Filing a joint petition does not expand §362(k) to cover non-obligor spouses who were not the target of the collection activity. 2. Courts Do Not Have to Act as Lawyers for Pro Se Debtors The Terrances also argued the bankruptcy court should have admitted exhibits for them or instructed them more clearly on how to prove damages. The district court rejected that as well. While courts must give pro se litigants some leeway, they are not required to act as advocates. The bankruptcy judge explained that the documents attached to the motion were not yet in evidence, and it remained the debtors’ responsibility to formally introduce them. The court noted that the bankruptcy judge nevertheless considered testimony describing the documents, which mitigated any prejudice. 3. No ADA or Due Process Violation The debtors also argued the bankruptcy court should have paused the hearing or provided accommodations when Jaden Terrance became emotional during testimony due to PTSD. The district court disagreed. The transcript showed the judge allowed time for her to compose herself, permitted Jesse Terrance to finish the closing statement, and otherwise gave the debtors a full opportunity to present their case. That satisfied both due process and the ADA’s requirement of reasonable modification. 4. $5,000 Was Within the Court’s Discretion The bankruptcy court found that the calls and emails caused real emotional distress beyond ordinary bankruptcy stress, particularly given the debtor’s medical history and the consequences for the household. Still, punitive damages were denied. The reason: the violations stemmed from a software error in a newly implemented system, which Coastal corrected immediately once the problem was discovered. Under Fourth Circuit precedent, that did not rise to the level of reprehensible conduct warranting punishment. Commentary Two aspects of this case are worth noting for consumer bankruptcy practitioners. 1. The Decision Reinforces a Narrow Reading of §362(k) The Terrances attempted to push a creative theory: that a spouse harmed by the stress and consequences of a stay violation should also be able to recover damages. From a policy perspective, the argument has some appeal. Bankruptcy stress rarely affects only one person in a household. But the court applied the Fourth Circuit’s traditional rule: the automatic stay protects the debtor against collection on that debtor’s obligations, not the household generally. Unless the creditor’s conduct is directed at the second spouse, there is no independent stay violation as to that person. 2. Even “Accidental” Stay Violations Can Be Expensive Coastal’s defense boiled down to: “Our new collections software malfunctioned.” That explanation avoided punitive damages — but not liability. Once a creditor receives notice of bankruptcy, any intentional collection act with knowledge of the stay is “willful,” even if caused by internal mistakes. Sixteen calls and two emails were enough to produce a $5,000 sanction, despite the creditor stopping immediately once the problem was discovered. That’s a useful reminder to creditors implementing new technology: automation errors are still your responsibility. The Bottom Line The district court’s decision leaves the bankruptcy court’s ruling intact: Willful stay violation: Yes Damages awarded: $5,000 Punitive damages: No Recovery by non-obligor spouse: Not allowed For practitioners, Terrance underscores the continuing strength of the automatic stay — but also the limits on who can claim damages when that stay is violated. To read a copy of the transcript, please see: Blog comments Attachment Document terrance_v._coastal_federal_credit_union.pdf (199.82 KB) Category Eastern District

Put off the division of community property in a marital dissolution at your peril. Hesitate and you risk all of the community property being swept up in a bankruptcy by the other spouse. And you’ll have little control where community property assets fall. Community property is all in The threat begins with the bankruptcy law […] The post Delay Division of Community Property At Peril of Bankruptcy appeared first on Bankruptcy Mastery.

Avoiding bankruptcy malpractice is a learned skill and necessary for professional survival. If word of mouth from happy clients is the world’s best advertising for a bankruptcy lawyer, loud complaints from unhappy clients in the internet age is professional poison. So, for both client and lawyer future wellbeing, it’s worth considering how to avoid bankruptcy […] The post How to avoid bankruptcy blunders appeared first on Bankruptcy Mastery.