Many clients contact us after they have defaulted on their SBA EIDL loan and it is transferred to the Department of Treasury (“Treasury” ) or Treasury Offset Program (TOP) for collection.  Seven payments must have been missed for the loan to be transferred to Treasury and when the loan is transferred, a 30% penalty is added to the loan balance.What will occur, and what can a client do when the loan is sent to Treasury by the SBA?I Borrowers can seek a “recall” back from Treasury to the SBA in limited circumstances. A. Procedural/notice defects: If the borrower never received the required 60‑day notice from SBA before TOP referral (e.g., bad address, no notice in portal), you may be able to argue the referral was improper and request recall based on lack of proper notice. Also if you made your payments or were in default for fewer that 7 months you may have grounds to recall the loan. B. Hardship: In some cases, documented hardship (permanent disability, closure of the business, bankruptcy, disaster, or offset of income that would create an inability to meet basic living expenses) can be used to request recall or, at minimum, a suspension or limitation of offsets.C. Intent and ability to cure: If the borrower can promptly cure arrears and credibly stay current going forward, SBA may agree to pull the loan back for servicing rather than keep it at Treasury.In our experience, recall is very hard to do and we will not handle those cases for clients. II What can Treasury do to collect the defaulted loan?Once the debt is at Treasury (usually via the Treasury Offset Program, or “TOP”), the government adds a 30% penalty  fee to  the outstanding balance increasing the amount due.Treasury or TOP can offset federal payments, including federal income tax refunds, some state tax refunds (in participating states), and certain federal payments such as 15% of  Social Security benefits payable to an individual borrower or a guarantor of a defaulted SBA loan. Those businesses that do work for the Federal government, may see a portion of the receivables due from the Federal Government taken by TOP to repay the defaulted loan. Treasury can administratively garnish wages from an individual borrower or guarantor without first obtaining a civil judgment, subject to statutory notice and hearing requirements.The outstanding debt can be reported to credit bureaus, negatively affecting personal and/or business credit.Treasury can refer the matter to private collection agencies and, in certain cases, to the Department of Justice for litigation to reduce the debt to judgment and pursue enforcement remedies (e.g., execution, liens, etc.).Where there is a personal guaranty for the defaulted loan (COVID EID Ls over $200,000.00), the government can pursue the guarantor and reach personal assets, subject to usual exemptions and procedural protections.III. What can a  borrower do after the defaulted loan has been referred to Treasury?Negotiate with Treasury (or its contractors)If recall is not viable, your main tools are negotiation and structured resolution under Treasury’s collection framework. Forms will need to be filled out providing detailed financial information to the Treasury or the collection agencies. Installment agreements: Treasury (or its collection contractor) may accept a monthly payment arrangement based on verified financial information, sometimes in conjunction with partial resumption or limitation of offsets.Lump-sum compromise/Settlement: Treasury and DOJ have compromise authority for federal debts; in practice, compromises generally require showing inability to pay in full, limited assets, and that the compromise yields more than enforced collection is likely to produce.Suspension or modification of offsets: For debtors in financial hardship, TOP has procedures to challenge the offset or request suspension/reduction, typically via written objection and documentation (income/expense, medical issues, etc.).IV. Bankruptcy: In an appropriate case, a business, individual borrower or guarantor may want to file bankruptcy to stay collection activity, discharge the debt or seek repayment thru a Bankruptcy plan, approved by the Bankruptcy Court. V. Use of hardship and “uncollectibility” statusWhere the debtor is effectively judgment‑proof one can argue for “currently not collectible” status with limited or no active collection measures, based on age, disability, income below certain thresholds, or absence of non‑exempt assets.Borrowers or their advisors who have questions about defaulted SBA EIDL Loans and their transfer to the Department of Treasury should contact Jim Shenwick, Esq.Jim Shenwick, Esq  917 363 3391  jshenwick@gmail.com Please click the link to schedule a telephone call with me. https://calendly.com/james-shenwick/15minWe help individuals & businesses with too much debt!

Law Review: ​Drumbl, Michelle Lyon, Poverty, Fresh Starts, and the Social Safety Net (December 12, 2025). 98 Temple Law Review 57 (2025) Ed Boltz Thu, 02/12/2026 - 15:43 Available at SSRN: https://ssrn.com/abstract=6076686 Abstract: For decades low-income families have relied on the filing of individual income tax returns to claim critical social welfare benefits in the form of refundable tax credits, most notably the Earned Income Tax Credit and the Child Tax Credit. But what happens to those families when the social safety net is not enough to meet their financial obligations, and they must seek a fresh start by filing for bankruptcy? Summary: Michelle Lyon Drumbl’s article—Poverty, Fresh Starts, and the Social Safety Net—is one of those rare pieces that bridges tax law, bankruptcy law, and anti-poverty policy in a way that actually matters to real people (and to the consumer lawyers who represent them). At its core, Drumbl asks a deceptively simple question: If Congress designed refundable tax credits as part of the modern social safety net, why do bankruptcy systems so often treat them like disposable “estate assets” instead of lifelines? What the Article Does Well Reframes refundable tax credits as welfare—without the stigma. Drumbl carefully shows how the EITC and CTC function in practice like social benefits, even though they arrive through the tax system rather than a welfare office. She explains that this design choice—using the IRS rather than a social services agency—reduced stigma, lowered administrative costs, and made benefits feel “earned” rather than charitable. That matters enormously when bankruptcy judges are later asked whether these funds are “public assistance.” Explains why timing creates bankruptcy traps. A recurring theme is that the very features that make the EITC and CTC effective—lump-sum delivery and annual filing—also make them vulnerable in Chapter 7. If a debtor files bankruptcy before the refund hits the bank account, trustees often treat it as estate property, even when it is clearly intended to pay for rent, utilities, car repairs, or medical bills. Shows how outcomes depend almost entirely on geography. Drumbl maps the national landscape into four basic state approaches: States that explicitly exempt EITC (and sometimes CTC) in their exemption statutes; States that protect “public assistance” broadly enough to cover EITC; States that protect only state or local assistance (not federal benefits); and States that provide no protection at all. The takeaway is brutal: two equally poor debtors can have opposite results based solely on their zip code. Highlights how courts often want to help—but say their hands are tied. Drumbl surveys case law showing that bankruptcy judges are frequently sympathetic to debtors who need their refunds for basic survival—but still feel bound by narrow statutory language. The refrain is familiar to any consumer practitioner: “This is a problem for the legislature, not the court.” Uses COVID relief as a revealing case study. Drumbl notes that Congress temporarily excluded COVID recovery rebates from the bankruptcy estate entirely under 11 U.S.C. § 541(b)(11). That move implicitly recognized what advocates have long argued: some money should never be up for grabs by a Chapter 7 trustee. Ironically, Congress did not clearly extend that same protection to the expanded 2021 Child Tax Credit, leading to messy litigation and inconsistent results. Why In re Quevedo Matters (and why it should embarrass North Carolina) I have previously written about In re Quevedo (M.D.N.C.), and Drumbl’s framework makes that case even more stark. Quevedo is a textbook example of how the poorest debtors are often treated the worst in bankruptcy. In that case, a low-income debtor’s EITC refund was sliced up between the trustee and the debtor, even though the money was plainly needed for basic household support. The court treated the refund less like “family subsistence” and more like a piggy bank to be raided for unsecured creditors. Under Drumbl’s analysis, Quevedo sits squarely in the category of cases where: The credit is functionally public assistance, The debtor’s need is obvious, The judge is not hostile, Yet the statute still permits—and arguably compels—harsh treatment. That is not a “hard case making bad law.” It is a bad statutory framework producing predictable injustice. Contrast this with a debtor living just across the border in Virginia,  where the entire amount would have been protected. Quevedo illustrates exactly what Drumbl warns about: bankruptcy law has not caught up with the reality that refundable tax credits are now central to the social safety net. Commentary:  Where We Should Go From Here (Legislative Fixes) Drumbl’s most important contribution is not just diagnosis—it’s prescription: 1. A Federal Fix (the cleanest solution) Ideally, Congress should: Exclude EITC and refundable CTC from the bankruptcy estate entirely, similar to what it did for COVID rebates;  Create a uniform federal exemption specifically protecting these benefits in bankruptcy; and Excluding this amount from the calculation of Current Monthly Income under 11 U.S.C. §101(10A)(B)(ii). That would eliminate the arbitrary state-by-state lottery that currently determines whether poor families keep their safety net. Realistically, however, Congress moves slowly—if at all—on consumer bankruptcy issues. That makes state reform critically important. 2. A North Carolina Fix (the most practical near-term path) A proposed amendment to N.C.G.S. § 1C-1601(a)(12) is exactly the kind of targeted, sensible reform Drumbl’s article implicitly calls for. Under this proposal,  the exemptions in North Carolina would be amended to provide : “Alimony, support, separate maintenance, and child support payments or funds, and public benefits that have been received or to which the debtor is entitled, to the extent the payments or funds are reasonably necessary for the support of the debtor or any dependent of the debtor.” This is a smart move for several reasons: It clearly covers EITC and refundable CTC. By explicitly including “public benefits…to which the debtor is entitled,” this would remove the semantic gamesmanship trustees often use to argue that EITC is “just a tax refund.” It builds in a reasonableness standard. The “reasonably necessary for support” language aligns with long-standing exemption principles and prevents abuse while still protecting vulnerable families. It treats tax-based benefits like child support. That is normatively correct. If we exempt child support because it keeps children housed and fed, we should do the same for EITC—which often serves the identical purpose. It would prevent another Quevedo. Under this proposed language, a debtor like Quevedo would have a far stronger argument that her refund was untouchable. 3. Why this reform matters beyond bankruptcy Drumbl’s article—and the unfortunate result in Quevedo —together reveal something bigger: Bankruptcy is increasingly becoming the place where the social safety net is either reinforced or dismantled. If trustees can seize EITC refunds: Families miss rent Utilities get cut off Cars don’t get repaired Medical bills go unpaid Children suffer That is not what a “fresh start” is supposed to look like. This proposed amendment to exemptions would align North Carolina with the growing national recognition that refundable tax credits are not windfalls—they are survival money. Bottom line: Drumbl’s article provides the intellectual architecture; Quevedo provides the moral urgency; and the proposed statutory fix provides the practical path forward. If North Carolina wants to be a state that truly gives low-income debtors a fresh start—rather than a last haircut—it should adopt this amendment to § 1C-1601(a)(12). Anything less leaves us with a system where the poorest families continue to subsidize their creditors with the very funds Congress meant to keep them afloat,  turning the EITC into yet another form of corporate welfare. To read a copy of the transcript, please see: Blog comments Attachment Document poverty_fresh_starts_and_the_social_safety_net.pdf (538.28 KB) Category Law Reviews & Studies

Law Review: Gouzoules, Alexander, The Bankruptcy Judge and the Generalist Tradition (January 26, 2026). University of Missouri School of Law Legal Studies Research Paper No. 2026-09, 51:3 BYU Law Review 743 (2026), Ed Boltz Wed, 02/11/2026 - 14:57 Available at: https://ssrn.com/abstract=6135608 Abstract: The prevailing academic consensus is that bankruptcy judges are specialists presiding over specialized courts. This Article contends that this description is incomplete and, in some respects, inaccurate. Drawing on scholarly models of judicial specialization and historical surveys of the field, this Article contends that bankruptcy judges reflect a hybrid design choice: procedural specialization combined with substantive generalism. This model delivers many of the observed benefits of judicial specialization (including efficiency and technical competence) while preserving the cross-pollination of ideas and other benefits associated with the generalist tradition of American judging. This Article also reflects on contemporary developments—most notably the rise of the “complex case panel” that attracts a disproportionate number of large public company reorganizations. This trend has resulted in a handful of bankruptcy judges serving as de facto reorganization specialists. In doing so, it has disrupted the generalist design of the bankruptcy courts by increasing case concentration and attendant risks, including tunnel vision. By recharacterizing the bankruptcy judges as generalists as well as specialists, this Article offers a fresh lens for evaluating decision makers in the field. It also contributes to the broader literature on judicial specialization. Previous accounts have emphasized that particular institutions exist along a continuum between true generalism and focused specialization. Through a focus on the bankruptcy field, this Article suggests that procedural and substantive expertise represent separate and potentially independent dimensions of specialization. Summary: Alexander Gouzoules’ “The Bankruptcy Judge and the Generalist Tradition” is a quietly subversive article. It challenges a premise that bankruptcy lawyers, judges, and academics often take for granted: that bankruptcy judges are specialists in the same sense as tax judges, patent judges, or administrative law judges. Gouzoules’ central claim is more nuanced—and far more faithful to the lived reality of bankruptcy practice. Bankruptcy judges, he argues, are procedural specialists but substantive generalists, occupying a hybrid role that preserves the generalist tradition of American judging while delivering the efficiency and competence that specialization can bring . This is not just a semantic exercise. Gouzoules shows that how we conceptualize bankruptcy judges has real consequences for institutional design, prestige, legitimacy, and—ultimately—outcomes. The Core Insight: Procedural Specialization, Substantive Generalism Gouzoules’ key move is to separate procedure from substance, something much of the judicial-specialization literature fails to do. Bankruptcy judges undeniably specialize—but what they specialize in is process: the automatic stay, claims allowance, plan confirmation mechanics, valuation, mediation pressure, and the collective-action machinery of insolvency. On substance, however, bankruptcy judges are forced—by statute and design—to be generalists. A single docket can require facility with: state property law (Butner), tort law, contract law, labor law, environmental law, constitutional law, consumer protection statutes, and domestic relations spillover issues. In this sense, bankruptcy judging looks far closer to Article III generalism than is commonly acknowledged. Bankruptcy courts do not replace nonbankruptcy law; they apply it through a specialized procedural lens. That distinction matters. A Direct Contrast with Pardo: Permanence vs. Judicial Identity This framing sits in productive tension with Rafael Pardo’s “Specialization and the Permanence of Federal Bankruptcy Law”. Pardo’s focus is institutional and doctrinal: specialization as a mechanism for entrenchment—how bankruptcy law becomes sticky, insulated, and resistant to external legal change. His concern is that specialization hardens bankruptcy into a self-referential system. Gouzoules, by contrast, is asking a different (and complementary) question: What kind of judge is a bankruptcy judge supposed to be? Pardo worries about specialization as permanence. Gouzoules defends generalism as a design choice, one that has historically prevented bankruptcy from collapsing into a technocratic silo. Read together, the two pieces form a warning label and a blueprint. Pardo tells us what can go wrong when bankruptcy becomes too insular; Gouzoules explains why the system was originally structured to resist exactly that outcome. Corporate Chapter 11 vs. Consumer Bankruptcy: The Ugly Split Where Gouzoules’ article becomes most unsettling—and most relevant for consumer lawyers—is his discussion of modern case concentration, especially in large Chapter 11s. He notes that: a small number of judges now function as de facto reorganization specialists, particularly through complex-case panels and venue concentration, and this development actively undermines the generalist design of the bankruptcy courts. But the corporate side is only half the story. On the consumer side, the specialization/generalism divide takes on a darker tone. Gouzoules explicitly refers to consumer debtors as “a long stigmatized group”, and his framework helps explain why the treatment of consumer cases in “high prestige” districts is so troubling. In places like Delaware: consumer cases are often segregated to one or two judges, while other judges remain “pure,” high-status Chapter 11 specialists, creating a two-tier judiciary within the same court. That segregation is not neutral. It carries unmistakable institutional and cultural signals—about prestige, about value, and, unavoidably, about race and class. Consumer bankruptcy becomes the judicial equivalent of the service elevator: necessary, but carefully kept out of sight. This is specialization not as efficiency, but as containment. Why This Matters for Consumer Bankruptcy For consumer practitioners, Gouzoules’ article is quietly validating. It provides a theoretical foundation for something consumer lawyers have long known instinctively: consumer bankruptcy is not “simpler” law, it is broader law, applied under intense procedural pressure, and it demands judges who are genuinely comfortable as legal generalists. Segregating consumer cases does not just stigmatize debtors; it distorts judging. It encourages tunnel vision, reduces cross-pollination of ideas, and reinforces the false hierarchy that treats corporate distress as sophisticated and consumer distress as routine. Ironically, Gouzoules’ analysis suggests that consumer cases may be more faithful to the generalist tradition than elite Chapter 11 practice. Bottom Line Gouzoules reframes bankruptcy judging in a way that should make both corporate and consumer lawyers uncomfortable—but for different reasons. Bankruptcy judges were never meant to be cloistered specialists. They were designed to be generalist judges operating inside a specialized procedural system. When districts segregate consumer cases or funnel mega-cases to a handful of prestige judges, they are not perfecting the system—they are breaking it. In that sense, this article pairs perfectly with Pardo’s cautionary account. One shows how specialization hardens law; the other shows how it reshapes judges. Together, they underscore a simple but powerful lesson: bankruptcy works best when it resists the temptation to become too pure, too elite, or too specialized—for anyone. And while there is certainly no appetite in Congress or the rest of the quavering federal judiciary,  this points to yet another reason (along with Alexander Hamilton's still pertinent arguments in Federalist No. 78 regarding the "steady, upright, and impartial administration of the laws")  for lifetime tenure for bankruptcy judges as well.   With proper attribution,  please share.   To read a copy of the transcript, please see: Blog comments Attachment Document the_bankruptcy_judge_and_the_generalist_tradition.pdf (810.1 KB) Category Law Reviews & Studies

Legislation: Bankruptcy Administration Improvement Act of 2025 — Summary and Commentary Ed Boltz Mon, 02/09/2026 - 17:47 Bankruptcy Administration Improvement Act of 2025 — Summary and Commentary I. Big Picture The Bankruptcy Administration Improvement Act of 2025 does three principal things: Doubles the “no-asset” Chapter 7 trustee fee from $60 to $120 per case; Rebalances how filing and quarterly fees are allocated to fund the U.S. Trustee System; and Extends temporary bankruptcy judgeships created in 2020 from 5 years to 10 years. Congress presents the Act as necessary to keep the bankruptcy system self-funding, stabilize staffing, and preserve judicial capacity in both consumer and business cases. II. Chapter 7 Trustee Compensation — and the Indexing Lesson What changed The Act amends 11 U.S.C. § 330(b)(1) to raise the trustee’s base payment from $45 to $105, resulting in $120 total per no-asset case. Congress expressly relied on the Consumer Price Index to justify the increase, noting that $60 in 1994 would equal over $125 today in real purchasing power. The Act also directs how the remaining Chapter 7 filing fee is divided among the Treasury, deficit-reduction fund, and the U.S. Trustee System Fund. Why this matters beyond trustees Congress’s willingness to use inflation data to modernize trustee pay exposes a deeper inconsistency in bankruptcy policy: we index compensation, but we leave debtor protections frozen. If appropriate economic indexes are good enough to adjust trustee compensation, they are also good enough to modernize state exemptions that determine whether debtors can actually keep a home, a car, or basic property after filing. III. Fee structure and U.S. Trustee funding The Act converts certain percentage allocations to fixed dollar allocations to the U.S. Trustee System Fund and extends key deposit provisions through 2031. It also diverts $5.4 million per year (FY 2026–2031) from Chapter 11 quarterly fees to the general Treasury, with the remainder flowing to the UST Fund. Policy takeaway: Congress sought stability for the UST Program without raising consumer filing fees—a result that aligns closely with NACBA’s long-standing position. IV. What higher trustee pay should mean going forward With compensation now increased—explicitly justified by economic indexing—Chapter 7 trustees, the U.S. Trustee Program, and Bankruptcy Administrators should: Continue to scrutinize marginal “small-asset” cases where the only real beneficiaries are the trustee and trustee’s counsel, while the debtor loses property that produces little or no net benefit for creditors. Support (or at least stop opposing) exemption modernization, particularly in states where limits are badly outdated. Priority states for reform North Carolina: Replace or substantially raise the $35,000 homestead cap and tie future increases to an appropriate housing or cost-of-living index. Pennsylvania: Modernize homestead and personal-property exemptions that remain among the weakest in the country. New Jersey and Virginia: Update shelter and vehicle protections to reflect contemporary markets. If we are comfortable indexing trustee pay to economic reality, we should be equally comfortable indexing debtor protections to the same reality.   IV.  Exemption Reform — The Indexing Logic That Should Run Both Ways Congress’s decision to rely on the Consumer Price Index to justify doubling the Chapter 7 “no-asset” trustee fee carries implications that extend well beyond trustee compensation. By acknowledging that static dollar amounts become unfair and dysfunctional over time, Congress implicitly accepted a basic principle of bankruptcy policy: key dollar thresholds in the system should track real economic conditions rather than remain frozen for decades. That principle has long been applied—at least in part—to fees, budgets, and compensation within the bankruptcy infrastructure. What has been conspicuously absent is a comparable commitment to keeping consumer exemptions aligned with modern economic reality. Yet exemptions are just as central to the functioning of the system as trustee pay: they define whether an “honest but unfortunate” debtor actually receives a meaningful fresh start or instead emerges from bankruptcy worse off than before. If appropriate economic and housing-cost indexes are good enough to modernize what the system pays to administer cases, they are also good enough to modernize what debtors are allowed to keep when they file. Rather than arguing over a single metric like CPI, legislatures should commit to using appropriate, transparent financial and housing-price indexes so that exemptions rise with market conditions instead of quietly eroding over time. North Carolina as the case study North Carolina sharpens the contrast between frozen statutory exemptions and a housing market that has changed dramatically. The North Carolina homestead exemption in N.C.G.S. § 1C-1601 was last increased in 2009 and remains capped at $35,000. In 2009, the median sales price of an existing single-family home in North Carolina was about $155,000. Against that benchmark, a $35,000 homestead protected roughly 22% of the median home’s value. Today, however, the statewide median home price is approximately $385,000–$400,000. To protect the same share of housing value that the exemption covered in 2009 (about 22%), North Carolina’s homestead exemption would need to be roughly $85,000 today. Instead, the statute still protects less than 10% of a typical home’s value. This is not merely an inflation story; it is a story about policy neglect. By failing to index exemptions to any sensible measure of housing costs, North Carolina has allowed the practical value of its homestead protection to shrink to a fraction of what it once was—precisely the kind of outcome that undermines the fresh-start promise of bankruptcy. The National Consumer Law Center’s Exemptions Report Card (a press release regarding North Carolina is attached) has repeatedly flagged this weakness, and the market data make clear why reform is overdue. VI. Extension of temporary bankruptcy judgeships The Act amends the Bankruptcy Administration Improvement Act of 2020 (28 U.S.C. § 152 note) to extend multiple temporary bankruptcy judgeships from 5 years to 10 years, along with a related extension under the Bankruptcy Judgeship Act of 2017.  In North Carolina,  this appears to mean that the temporary judgeship in the Middle District has been extended. Why this matters for consumers: More judges = fewer backlogs, quicker hearings, and less procedural friction for Chapter 7 and 13 debtors who already face resource constraints.  This should also maintain the depth of the bankruptcy bench,  particularly in a time where the number of cases is rising. VII.   Here is your revised section, expanded to weave in ESCRA and the Student Loan Bankruptcy Improvement Act while keeping your original structure and policy thrust: What This Act Signals About Broader Bankruptcy Legislation Although the Bankruptcy Administration Improvement Act of 2025 is sensible and welcome on its own terms, it also represents a missed opportunity. Congress could have used this same vehicle to reinstate the higher debt limits for Chapter 13—and, for those who care about small-business reorganization, the parallel increase for Subchapter V—that expired in 2024. Those temporarily increased limits had real-world consequences. They made Chapter 13 available to many middle-income families who otherwise get pushed into Chapter 7, and they meaningfully expanded access to Subchapter V for small businesses that needed a workable reorganization tool. Their lapse has already begun to squeeze debtors out of reorganizational relief and back into liquidation frameworks that often serve neither debtors nor creditors particularly well. Still, the fact that Congress was able to move a bipartisan, technical bankruptcy bill—raising Chapter 7 trustee compensation, stabilizing U.S. Trustee funding, and preserving judicial capacity—demonstrates that there remains substantial, cross-party support for pragmatic bankruptcy legislation when issues are framed as system-improvement rather than ideological fights. That bipartisan opening is also visible in other consumer-focused bills now moving through Congress: The Ending Scam Credit Repair Act (ESCRA) (H.R. 306), introduced by Representatives McBride (D-DE) and Young Kim (R-CA), would protect consumers by barring credit-repair organizations from charging fees until six months after they have proven that a consumer’s credit score has actually improved, while increasing civil penalties for violations. Equally important for our bar, the bill would clearly and explicitly confirm that consumer bankruptcy attorneys may continue to provide lawful advice, counsel, and assistance to their clients—recognizing that bankruptcy lawyers are part of the solution for financially distressed families, not part of the problem. The Student Loan Bankruptcy Improvement Act of 2025 (H.R. 4444), introduced by Representative Luis Correa, would remove the word “undue” from the hardship standard in § 523(a)(8), making it meaningfully easier for courts to grant student-loan relief in appropriate cases and better aligning the statute with the traditional fresh-start principles of bankruptcy. Taken together with the trustee-fee legislation, these proposals suggest that Congress is again willing to engage in practical, bipartisan reform at the intersection of consumer protection and bankruptcy law. There is therefore good reason to hope that: the Chapter 13 debt-limit increase, and the parallel Subchapter V expansion can again gain traction and begin moving through Congress, either as standalone measures or as part of other legislation. In short, while this Act strengthens the administrative infrastructure of the bankruptcy system, it should also be read as a reminder that Congress—and state legislatures—can act in this space. That momentum should be harnessed not only to restore modern, realistic debt limits, but also to reform bankruptcy exemptions so that they expand, rather than contract, access to a meaningful fresh start and to provide greater protections and relief for student borrowers and consumers facing credit repair scams. To read a copy of the transcript, please see: Blog comments Attachment Document bankruptcy_administration_improvement_act_of_2025.pdf (203.72 KB) Document pr_nfs_-_north_carolina.docx (11.59 KB) Category North Carolina Exemptions Legislative History

Law Review: Casey, Anthony and Lotts, Emma, Finding Debtor's Counsel (November 01, 2025). Ed Boltz Mon, 02/09/2026 - 15:49 Available at: https://ssrn.com/abstract=6124067   Abstract: In this Essay, the authors explore the question of how to assess the independence of debtor’s counsel in Chapter 11. The question has arisen in recent high-profile bankruptcy cases, attracting renewed attention from commentators. The authors examine these cases and revisit the unique role that debtor’s counsel serves. From this analysis, a few guiding principles emerge for determining independence and managing conflicts that may arise. First, consistent with the rules outside of bankruptcy, sophisticated parties are capable of waiving conflicts and should be free to do so when their interests alone are affected by the conflict. Second, the possibility of conflicts—both real and apparent—is much higher for debtor’s counsel than for attorneys in other roles. This creates a challenge for courts, which must address both the real conflicts and the weaponization of apparent conflicts to shift leverage. Conscious of this, courts should rely, whenever possible, on intermediate remedies—such as conflicts counsel and ethical firewalls—to address allegations that debtor’s counsel is not independent. Finally, one should be careful to separate the analysis of the independence of a debtor’s managers (including its directors and officers) from that of its counsel. With this framework in mind, notwithstanding several criticisms from commentators, most of the outcomes in recent cases are easy to explain and reconcile. Commentary: Finding Debtor’s Counsel offers a clear-eyed and practical account of why conflicts are endemic in Chapter 11 and why courts should favor calibrated remedies—waivers, conflicts counsel, ethical walls—over the blunt instrument of disqualification. The authors’ throughline is institutional humility: in a debtor-in-possession system built on negotiated allocation among competing constituencies, courts should be wary of letting conflict allegations become leverage tools that destroy estate value rather than protect it . But the article also underscores how sharply consumer bankruptcy diverges—and why that divergence deserves far more scholarly attention. In Chapters 7 and 13, Congress has made an explicit normative choice that debtor’s counsel is supposed to represent the debtor’s interests, even when doing so yields no benefit to the estate. Section 11 U.S.C. § 330(a)(4)(B) codifies that choice, authorizing compensation based on benefit and necessity to the debtor, without regard to estate enhancement. That is not an ethical loophole; it is the policy. (In an indirect and backhanded manner,  so does Lamie v. US Trustee, which, by limiting such compensation  from the bankruptcy estate, the independence of the debtor's attorney is also preserved.) Consumer debtor’s counsel is not a neutral allocator among creditors, but a necessary counterweight in a system where trustees and creditors otherwise dominate. This contrast matters because consumer bankruptcy is not a sideshow—it is the overwhelmingly predominant form of bankruptcy relief in the United States, and thus the real bankruptcy system. Chapter 11 may generate headlines and law review ink (and adoration from tenure committees), but it is a statistical blip compared to the millions of consumer cases that define access to the fresh start. If Chapter 11 scholarship has matured into a nuanced discussion of conflicts, waivers, and institutional design, consumer bankruptcy scholarship should receive the same sustained attention. Further work—ideally by these authors and others—examining the ethics, incentives, and statutory choices governing consumer debtor representation would be a welcome and necessary next step. Understanding how and why Congress affirmatively empowered debtor-centered advocacy in consumer cases is essential, not only to avoid misapplying Chapter 11 instincts where they do not belong, but to ensure that the bankruptcy system actually functions for the people it serves most often. With proper attribution,  please share. To read a copy of the transcript, please see: Blog comments Attachment Document finding_debtors_counsel.pdf (485.22 KB) Category Law Reviews & Studies

Many clients have contacted Shenwick & Associates asking whether it is safe to ship goods to Saks following its Chapter 11 bankruptcy filing.The real concern is whether vendors will be paid for goods shipped after the bankruptcy filing.In most Chapter 11 cases, the answer is yes—shipping goods post-petition is generally safe, particularly where the debtor has obtained Debtor-in-Possession (DIP) financing.Here are the key considerations:Post-petition shipments receive priority payment status. Vendors who supply goods after the bankruptcy filing typically hold administrative expense claims under Bankruptcy Code §503(b)(1)(A). These claims must generally be paid in full as a condition to confirming a Chapter 11 plan under §1129(a)(9), giving them priority over pre-petition unsecured claims.DIP financing supports ongoing operations. DIP financing provides liquidity so the debtor can continue operations and pay ordinary-course expenses, including post-petition vendor invoices. Courts often authorize payment of undisputed post-petition invoices in the ordinary course.Chapter 11 encourages vendors to continue shipping. The purpose of Chapter 11 is to allow a debtor to reorganize while continuing business operations. The Bankruptcy Code structure incentivizes vendors to continue supplying goods so the business can survive.Continuing shipments may preserve business relationships. Vendors who continue supplying merchandise maintain relationships with buyers and may offset losses from pre-petition shipments through continued profitable sales. Vendors who refuse to ship risk losing shelf space to competitors.Vendors are not required to ship post-petition. The Bankruptcy Code does not obligate vendors to continue selling goods after the filing; the decision remains a business judgment.Payment is not absolutely guaranteed. While administrative claims are entitled to priority, risk remains if the case later converts to liquidation and administrative expenses exceed available assets.Critical Vendor or “Doctrine of Necessity” relief may be available. Vendors supplying unique or essential goods may seek treatment as a Critical Vendor, allowing payment of certain pre-petition amounts if the court finds such payments necessary to preserve operations. While beneficial, this status is not required for vendors to safely ship post-petition goods.In most circumstances, vendors can safely continue shipping goods to a Chapter 11 debtor like Saks, especially where DIP financing is in place.Vendors or advisors with questions regarding shipping goods or protecting claims in the Saks bankruptcy are welcome to contact us.Jim Shenwick, EsqShenwick & Associates917-363-3391jshenwick@gmail.comPlease click the link to schedule a telephone call with me.https://calendly.com/james-shenwick/15Please click the link to schedule a telephone call with me. https://calendly.com/james-shenwick/15min

Law Review: Daniel III, Josiah M.- Determining the Historiographical Problem of Municipal Bankruptcy: Enactment and Amendment of Chapter IX, 1933-1979 (December 30, 2025). Ed Boltz Fri, 02/06/2026 - 15:45 Available at: https://ssrn.com/abstract=5253527 or http://dx.doi.org/10.2139/ssrn.5253527 Abstract: This article determines the historiographical problem of municipal bankruptcy law, 1933-1979. First, it identifies the problem. So far, the story has belonged to scholars of the law-and-economics school, but economic theorizing is unhelpful, and the L&E authors' version is inadequately researched and factually incorrect. Instead this article submits the historical method as superior methodology for unearthing and understanding the genesis of municipal bankruptcy. Second, the article solves the problem by providing the first archivally researched history of that origin and early development. Congressman Hatton Sumners, Judiciary Committee chair, was the key actor. The legislative process was a laboratory for new forms of relief under the Constitution's Bankruptcy Clause, seeking to relieve the insolvency experienced during the Depression by irrigation districts in Texas, new towns in Florida, and across the nation all types of political subdivisions that could not collect their taxes and pay their municipal bonds. State governments were helpless. The Constitution’s Contract Clause forbade “impairing the Obligation of Contracts,” and voluntary restructuring agreements were frustrated by the “holdout problem.” From multiple models, it was the device of composition with creditors that succeeded. Congress from 1933 to 1937 amended the Bankruptcy Act of 1898 by enacting the First and Second Municipal Bankruptcy Acts—known as Chapter IX—based on composition. L&E scholars credit this to a freshman Florida congressman, Mark Wilcox, who worked in conjunction with a bondholders’ group. But it was Sumners who determined that the composition model was not only constitutional but also politically most feasible. Sumners navigated through opposition that insisted “bankruptcy” required turnover of the debtor’s assets in exchange for a discharge of debt and that such legislation would destroy the municipal credit market. Municipal bankruptcy did leave all properties in the debtor’s hands and beyond bankruptcy court jurisdiction, and it did grant a discharge. The credit market survived. Further, relevantly to an issue in mass-tort chapter 11 bankruptcy today, Sumners crafted the first, and still the only, statutory injunctive relief applicable in the bankruptcy case of a non-individual entity for the protection of nondebtor third parties—here, all officers and inhabitants of a municipal debtor—against  collection efforts by a debtor's claimants. Once municipal bankruptcy became a New Deal agenda item, Franklin Roosevelt helped push the legislation to enactment in spring 1934. The Supreme Court invalidated the first act in the 1936 Ashton case, but Justice Cardozo dissented and outlined small changes that Sumners and Congress utilized in enacting the second act in 1937. Then Sumners led the oral arguments in 1938’s Bekins case that sustained it. Municipal bankruptcy law succeeded in effectuating municipal-bond restructurings, and its essence lives in today’s Bankruptcy Code as Chapter 9, providing discharge of unpayable debt and more commonly furnishing the platform upon which towns and taxing districts negotiate such deals. Chapter IX worked in the past, and Chapter 9 works today. Sumners, not Wilcox, was primarily responsible for the legislation. Nothing was assured; the story demonstrates change over time, with Sumners the key actor. And the project of finding and interpreting the genesis of municipal bankruptcy is one for legal history, not for L&E   Summary: This paper, by Josiah M. Daniels, III,   is a deeply researched legal history of the enactment and evolution of municipal bankruptcy—originally Chapter IX (1933–1979), now Chapter 9—arguing that its origins have been misunderstood by modern “law and economics” scholars. Drawing on archival sources rather than abstract theory, the author shows that municipal bankruptcy was born out of the Great Depression’s wave of local-government insolvencies, particularly special taxing districts and small municipalities overwhelmed by bond debt and crippled by the holdout problem. Congress, led principally by Texas Congressman Hatton Sumners, crafted municipal bankruptcy not as a creditor-control regime, but as a constitutionally sensitive, debtor-protective composition process designed to preserve local sovereignty while enabling realistic debt adjustment. The Supreme Court’s initial rejection (Ashton) and later approval (Bekins) reflect this careful balance between federal bankruptcy power and state sovereignty. The paper sharply criticizes later scholarship that retrofits creditor-bargain theory onto Chapter 9 by misreading or oversimplifying this history, calling that approach “forensic” rather than historical. Commentary (ncbankruptcyexpert.com style) This is one of those articles that quietly—but firmly—reminds us that bankruptcy law did not drop from the sky fully formed by economic theorists with spreadsheets and utility curves. It was built, piece by piece, by legislators confronting human, institutional, and political failure. The most important lesson for consumer bankruptcy reform is this: bankruptcy succeeds when it is designed as a pressure-release valve, not a moral judgment or a collection enhancement tool. Chapter IX was not created to maximize creditor recoveries. It was created to solve collective action problems, stop destructive litigation, and allow insolvent debtors—here, municipalities—to continue functioning. That same DNA runs through the best parts of modern consumer bankruptcy. There are several takeaways worth underscoring: History matters more than theory. Just as Chapter 9 was never meant to be a creditor-control regime, consumer bankruptcy was never meant to be a pure debt-collection device. Efforts to “reform” consumer bankruptcy by importing creditor-bargain logic or market-discipline rhetoric repeat the same category error this article exposes in the municipal context. The holdout problem is the real villain. Whether it’s bondholders in the 1930s or aggressive unsecured creditors, servicers, or debt buyers today, bankruptcy law exists because individual enforcement breaks systems. Any consumer bankruptcy reform that strengthens individual creditor leverage while weakening collective relief is moving backwards. Debtor dignity and institutional survival matter. Municipal bankruptcy was structured to preserve democratic governance and local autonomy. Consumer bankruptcy, at its best, preserves similarly preserves autonomy and also household stability, employment, housing, and family systems. Reforms that treat consumer debtors as failed market actors rather than citizens facing systemic stress miss the point entirely. Constitutional humility is a feature, not a bug. Sumners’ careful navigation of federalism constraints should be a model for modern reformers. Over-aggressive tinkering—whether by courts or Congress—often reflects impatience with limits that are actually doing important work. If there is a cautionary note here for today’s consumer-bankruptcy reform movement, it is this: do not let elegant theories overwrite messy reality. The system works best when it is grounded in lived experience, political feasibility, and a clear-eyed understanding of why bankruptcy law exists in the first place—not to punish failure, but to manage it humanely and efficiently. In short, if we want to reform consumer bankruptcy, we should spend less time asking what creditors would have bargained for in a hypothetical world, and more time asking what history teaches us about what actually works when real people, real institutions, and real crises collide. With proper attribution, please share. To read a copy of the transcript, please see: Blog comments Attachment Document determining_the_historiographical_problem_of_municipal_bankruptcy_enactment_and_amendment_of_chapter_ix_1933-1979.pdf (1023.78 KB) Category Law Reviews & Studies

Bankr. M.D.N.C.: Reid v. Rodriguez- Bankruptcy Court Kicks State-Law Landlord/Tenant Fight Back to State Court due to Mandatory Abstention Ed Boltz Thu, 02/05/2026 - 16:09 Summary: In Reid v. Rodriguez , the Bankruptcy Court for the Middle District of North Carolina dismissed, without prejudice, a pro se Chapter 7 debtor’s adversary proceeding against her landlord, holding that mandatory abstention under 28 U.S.C. § 1334(c)(2) applied—and that even if it did not, permissive abstention clearly would. The debtor, Sharon Annette Reid, filed a Chapter 7 case and then commenced an adversary proceeding asserting purely state-law claims against her landlord for breach of the implied warranty of habitability and unfair or deceptive trade practices. Those same claims were already being litigated in North Carolina state court as part of a summary ejectment action, including on appeal. The landlord moved to dismiss and/or abstain. The debtor did not respond. Judge Kahn walked carefully through the six-factor test for mandatory abstention, concluding that all six were satisfied: the motion was timely; the claims were exclusively state-law claims; the adversary was, at most, “related to” the bankruptcy case; there was no independent basis for federal jurisdiction; the state-court action was already pending when the bankruptcy was filed; and the matter could be timely adjudicated in state court—especially given that it was already further along than the adversary proceeding. Critically, this was a no-asset Chapter 7 case, the trustee had filed a report of no distribution, and the debtor had claimed the potential recovery as exempt. Once exemptions become final, the Court noted, the litigation would have no conceivable impact on estate administration. On those facts, abstention was mandatory. And even if it weren’t, the Court held that every relevant factor favored permissive abstention, including comity, judicial economy, avoidance of forum shopping, and the lack of any bankruptcy issue to decide. The adversary proceeding was therefore dismissed without prejudice, leaving the parties to litigate in state court. Commentary: This is a clean, disciplined abstention opinion—and a good reminder that bankruptcy court is not a general-purpose small-claims or landlord-tenant court, even when a debtor is pro se. A few practical takeaways stand out. First, courts mean it when they say that “related to” jurisdiction has limits. Once a Chapter 7 case is clearly a no-asset case, the trustee has walked away, and any recovery is fully exempt, bankruptcy jurisdiction becomes thin to nonexistent. At that point, the case is no longer about administering an estate—it’s just a state-law dispute wearing a bankruptcy costume. Second, this opinion underscores the importance of procedural posture. The state-court case was already pending—and already further along—when the adversary was filed. Bankruptcy courts are understandably reluctant to let parties relitigate or “appeal-by-adversary-proceeding” unfavorable state-court outcomes. Third, although the Court properly construes pro se pleadings liberally, that leniency does not extend to ignoring jurisdictional limits. Bankruptcy courts have an independent obligation to police their own subject-matter jurisdiction, and abstention doctrine is one of the primary tools for doing so. Fourth—and this matters for consumer practitioners advising clients—there is a recurring misconception that filing an adversary proceeding somehow gives state-law claims more leverage or visibility. In many Chapter 7 cases, the opposite is true. Filing an adversary can slow things down, increase costs, and ultimately send the client right back to state court anyway. Finally, this decision fits comfortably within a broader pattern: when bankruptcy adds nothing of substance to the resolution of a dispute—and especially when it risks forum shopping—courts will step aside. Mandatory abstention is not exotic or rare; it is a routine, predictable outcome when all six statutory elements are met. Bottom line: if it walks like a state-law case and quacks like a state-law case, bankruptcy court is not obligated—nor inclined—to keep it. To read a copy of the transcript, please see: Blog comments Attachment Document reid_v._rodriguez.pdf (587.19 KB) Category Middle District

Bankr. M.D.N.C.: In re Reid — Willful Stay Violations, Real Harm, and an Anemic Damages Award Ed Boltz Wed, 02/04/2026 - 14:53 Summary: In In re Reid, the Bankruptcy Court for the Middle District of North Carolina found that Modern Rent to Own willfully violated the automatic stay through a sustained campaign of post-petition collection calls and texts directed at a Chapter 7 debtor who was proceeding pro se. The factual record was not close: more than 100 voicemail calls and over 50 text messages, continuing after repeated actual notice of the bankruptcy filing, and accompanied by statements that collection would continue regardless. The Court had little difficulty finding a willful violation of § 362(a) and entitlement to relief under § 362(k). The facts matter. Ms. Reid testified—credibly and unrebutted because Modern Rent to Own couldn't have been bothered to send an attorney to represent it—that the barrage of calls left her voicemail unusable, caused her to miss medical communications, and directly interfered with her ability to obtain childcare work that depends on phone notifications. The Court accepted that these harms were real and caused by the stay violations. Still, because Ms. Reid could not precisely quantify her damages, the Court awarded $1.00 in nominal compensatory damages and $5,000 in punitive damages. Pro se posture cuts both ways The Court explicitly acknowledged that Ms. Reid’s pro se status contributed to the difficulty in quantifying actual damages. That acknowledgment is important—but it also highlights a recurring, uncomfortable pattern: damages for stay violations often seem lower when the debtor is represented by counsel, as if courts assume that having a lawyer somehow cushions or mitigates the real-world impact of illegal collection activity. That assumption is hard to square with reality. Harassment is harassment whether or not a debtor has counsel on speed dial, and the automatic stay protects people, not just legal theories. The Lyle comparison problem The Court relied heavily on In re Lyle (E.D.N.C.), where $100 per call for 540 illegal calls yielded $54,000 in punitive damages. Yet here—despite evidence of over 150 separate communications (calls plus texts)—the punitive award was capped at $5,000. The Court characterized this as a “moderate” award sufficient for deterrence, but the comparison raises eyebrows. If $100 per call was appropriate in Lyle, why is a fraction of that amount sufficient here, particularly where the conduct persisted after repeated notice and the creditor did not even appear to defend itself? Statutory damages as a missed benchmark Bankruptcy courts often say they are not bound by other consumer protection statutes when fashioning § 362(k) remedies. That may be true—but they can still look to those statutes for guidance. At a minimum, statutory damages frameworks provide a reality check for deterrence. North Carolina’s UDTPA (N.C.G.S. § 75) allows up to $4,000 per violation in statutory damages. The Telephone Consumer Protection Act (TCPA) provides $500 per improper call or text, escalating to $1,500 per violation for knowing or willful offenses, with no overall cap Under the TCPA alone, 150 willful violations × $1500 = $225,000 in statutory damages—an amount Ms. Reid could still plausibly pursue in a supplemental federal action. Against that backdrop, a $5,000 punitive award for serial, knowing stay violations looks less like deterrence and more like a cost of doing business. “But that could bankrupt the creditor…” The predictable response is that larger awards could devastate a small creditor like Modern Rent to Own (or its owner and manager personally). That concern rings hollow in bankruptcy court. Courts routinely grant creditors relief from the automatic stay—with devastating consequences to debtors—for far more innocent conduct, such as missing payments. If bankruptcy courts are comfortable imposing life-altering consequences on consumers for defaults, they should be equally comfortable imposing meaningful consequences on creditors who deliberately ignore federal law.  Instead,  a $5,001  award is, as Jamie Dimon once explained to Sen. Elizabeth Warren saying "So hit me with a fine. We can afford it" , instead just a minor cost of doing business (illegally). A reporting obligation worth remembering Finally, this is exactly the sort of case that should not disappear into the electronic ether. 28 U.S.C. § 159(c)(3) requires clerks to report “cases in which creditors were fined for misconduct and any amount of punitive damages awarded by the court for creditor misconduct.” That obligation is too often overlooked. This decision belongs on that list—not just for transparency, but to reinforce that the automatic stay is not optional and for the possibility (however infinitesimal) that Congress will realize the frequency and scope of illegal behaviors by creditors is much worse than the misdeeds of debtors. Bottom line: In re Reid gets the law right on liability but undershoots on remedies. If punitive damages are meant to deter, courts should be willing to look beyond internal bankruptcy comparisons and take seriously the statutory damage regimes that Congress and state legislatures have already deemed appropriate for this very kind of conduct.   To read a copy of the transcript, please see: Blog comments Attachment Document in_re_reid.pdf (703.87 KB) Category Middle District

Law Review: Littwin, Angela and Adams, Adrienne and Kennedy, Angie, Ineffective Legal Relief for Coerced Debt: The Failure of Divorce and Debtor-Creditor Law to Address Debt Created by Domestic Violence (December 01, 2025). Ed Boltz Tue, 02/03/2026 - 15:54 Available at: https://ssrn.com/abstract=6023874 or http://dx.doi.org/10.2139/ssrn.6023874   Abstract: Coerced debt occurs when the abusive partner in a relationship characterized by domestic violence (DV) uses fraud, coercion, or manipulation to incur debt in the DV survivor’s name. For example, abusers may fraudulently open credit cards in their partners’ names or coerce their partners into refinancing their homes. Prior research has shown that coerced debt may be a common problem that negatively impacts DV survivors’ lives by damaging credit scores and imposing barriers to leaving abusive relationships. This manuscript presents data from the first in-depth study of coerced debt, Debt as a Control Tactic in Abusive Marriages, funded by the National Science Foundation.1 Our research team interviewed 116 recently-divorced women with coerced debt. A key research aim was to evaluate the effectiveness of legal relief for coerced debt. We analyzed participants’ experiences with divorce and studied three options under debtor-creditor law: unauthorized use in the Truth in Lending Act, the Texas statute of limitations, and bankruptcy. We found these options for legal relief for coerced debt to be highly ineffective. The failure of existing legal remedies underscores the importance of ongoing advocacy for legal reform. This article—Ineffective Legal Relief for Coerced Debt: The Failure of Divorce and Debtor-Creditor Law to Address Debt Created by Domestic Violence—by Littwin, Adams, and Kennedy, reports on a National Science Foundation–funded study examining how coerced debt is created and, more importantly, how poorly the legal system responds to it. The study interviewed 116 women who had recently divorced abusive husbands and identified over $12.5 million in coerced debt, with a median of roughly $22,000 per participant. The authors then examined whether commonly assumed remedies actually help: Divorce law fails because family courts cannot bind creditors. Even when divorce decrees “assign” debt to the abuser, survivors remain contractually liable. Indemnification provisions offer cold comfort, often increasing post-divorce conflict and risk. Unauthorized use doctrines under the Truth in Lending Act help only a small fraction of debts, particularly because creditors often demand police reports—something many survivors reasonably fear. Statutes of limitation are almost entirely illusory as relief. Bankruptcy, while theoretically powerful, is often inaccessible due to cost and remains unacceptable to many survivors despite awareness of its existence. Using a framework of availability, accessibility, and acceptability, the authors find that fewer than one in ten coerced debts could realistically be resolved through existing debtor-creditor law. The article ends with a call for reform, including broader recognition of coerced debt and stronger statutory protections. Commentary: This is an important paper, and not just for academics. It should be required reading for domestic-violence advocates and divorce attorneys—and, frankly, for bankruptcy lawyers who don’t routinely think about IPV and coercion. One of the article’s most striking findings is not simply that legal remedies fail, but why they fail. Survivors often do not pursue relief because the systems meant to help them are expensive, frightening, culturally incompetent, or actively dangerous. That rings true. But there is another layer here that deserves more attention: there is a deep and persistent ignorance about bankruptcy among the very professionals most likely to encounter coerced debt first. That ignorance exists not only among laypeople—who understandably don’t know what they don’t know—but also among DV advocates and divorce lawyers. Many harbor a reflexive aversion to bankruptcy, viewing it as a moral failure, a last resort, or something that will “ruin” a survivor’s life. Some divorce attorneys are also understandably concerned that a bankruptcy might discharge unpaid attorney’s fees. The result is that bankruptcy is often never seriously discussed, even when it is the most effective—and sometimes the only—tool available. I saw a version of this long before I ever became a bankruptcy lawyer. In 1998, fresh out of law school, I worked on an acrimonious divorce where the only contested issue was about $20,000 in joint credit-card debt. No assets. No children. Each party ultimately spent more than $3,000 in legal fees fighting over which of them would be “responsible” for debts that the credit-card companies were never going to release either of them from anyway. Even back then, they could have filed a joint bankruptcy for under $1,000 total and moved on with their lives. Instead, they paid lawyers to argue over a legal fiction. Multiply that dynamic by coercive control, fear of retaliation, and financial abuse, and you begin to see how perverse the system becomes. Divorce Courts, Contracts, and Bankruptcy’s Missing Seat at the Table The authors correctly note that divorce courts cannot shift contractual liability from an abused debtor to an abuser without running headlong into constitutional problems—namely, interference with private contracts. At best, courts can order indemnification. At worst, they do nothing. Bankruptcy, however, sits in a different constitutional posture. Congress can impair contracts, and it has done so for over two centuries. Used thoughtfully and in coordination with divorce proceedings, bankruptcy could solve problems that family courts simply cannot. That said, there is a real tension here. Actually shifting liability to an abuser—outside of bankruptcy—may increase the risk of further abuse and may also deplete the abuser’s resources, impairing child support or alimony. A more realistic (if underexplored) option may be placing the abuser into an involuntary bankruptcy, liquidating non-exempt assets to pay creditors, and discharging the remaining debts for both parties. It’s not a silver bullet, but it is at least a tool worth discussing—something divorce courts and DV advocates rarely do. North Carolina Law: Existing Tools and Promising Reform North Carolina debtors already have some protection. The North Carolina Identity Theft Protection Act, N.C.G.S. § 75-60 et seq., can apply to certain coerced debts, though it is far from comprehensive. More promising is the proposed Coerced Debt Relief Act, S. 650 (2025–2026), introduced by Mujtaba A. Mohammed. That bill would directly recognize coerced debt and provide clearer remedies. It closely tracks the National Consumer Law Center Model State Coerced Debt Law, which should be the baseline for reform nationwide. Bankruptcy, Student Loans, Vehicle Cram-Down and Missed Opportunities The paper’s discussion of bankruptcy is careful but incomplete. In evaluating student loan discharge, the authors do not meaningfully account for the Department of Justice’s Student Loan Adversary Proceeding (SLAP) guidance. As other scholars—including Pang and Iuliano—have shown, that guidance has substantially increased the likelihood of discharge, albeit with additional legal costs. Facts demonstrating abuse, long-term impacts of that abuse, and coercion in taking on student loans would carry significant weight under the DOJ SLAP framework—and likely even with the most recalcitrant bankruptcy judges. Similarly, the authors correctly note that BAPCPA curtailed vehicle cram-downs in Chapter 13. But the infamous  “Hanging Paragraph” in § 1325(a)(5)(*) applies only to motor vehicles “acquired for the personal use of the debtor” within 910 days. A serious argument can be made that a vehicle acquired through coercive debt—even one driven by the survivor—was in reality acquired by, through and for the abuser. That argument has not been tested nearly enough. Awareness Is Up. Acceptability Is Not. One underappreciated finding in the study is that over 90% of participants were at least aware of bankruptcy as a concept. That is a quiet triumph of access to justice—and yes, a vindication of consumer bankruptcy attorneys whose advertising is often sneered at by “tall-building” lawyers, judges, and academics. But awareness is not acceptability. Bankruptcy remained “not at all acceptable” to a majority of participants. That gap can be closed—but only if DV advocates, divorce lawyers, and bankruptcy attorneys start talking to each other, cross-training, and presenting bankruptcy not as failure, but as relief. Lastly,  while certainly accurate that access to legal solutions for coerced debt are often limited by the expense of attorneys fees (which in the consumer bankruptcy attorneys are nonetheless far, far more reasonable than nearly any other type of lawyer- as evidence by the fact that white shoe law firms never take on consumer cases),  more  thought and effort needs to be expended on finding solutions for this conundrum.  This includes options for low-cost attorney fee only Chapter 13 cases  (as allowed in the MDNC)  or ideas,  such as being considered by the National Bankruptcy Conference and Rep. J.  Luis Correa (D-CA),  for attorney fees to be paid after the filing of a Chapter 7 under court supervision (those two options are,  in essence,  identical),  ideas for increasing access to justice while maintaining the high quality of representation (since creditors and abusers aren't ever going to ease up) is vital. Until then, coerced debt will remain what this article so clearly shows it to be: another weapon of abuse, enabled by a fragmented and deeply siloed, limited and inaccessible legal system.     With proper attribution,  please share. To read a copy of the transcript, please see: Blog comments Attachment Document ineffective_legal_relief_for_coerced_debt_the_failure_of_divorce_and_debtor-creditor_law_to_address_debt_created_by_domestic_violence.pdf (1.09 MB) Category Law Reviews & Studies