For some people, bankruptcy is an unforgiving process. There are strict rules about what can and cannot be included in a petition, and there are strict written and unwritten rules about what you do after you have filed. It seems unfair, for example, that the government can take your tax return after you have filed (under certain circumstances; see our April 6, 2015, post for details).
The U.S. Supreme Court has handed down a decision that will, according to bankruptcy professionals, settle a long-standing question about conversions and undistributed funds. We wrote about the case when the court agreed to hear it in January (see our Jan. 10, 2015, post).
If nothing else, the case we have been talking about should convince everyone that bankruptcy is not a do-it-yourself proposition. One state's law may not only differ from bankruptcy laws in other states, but it may differ from the federal Bankruptcy Code as well. Worse yet, states may adhere to federal laws on some parts of bankruptcy but not on others.
We are picking up the discussion, from our April 30 post, about life insurance payouts and Chapter 7 bankruptcy. The subject came up in a case not from Illinois but from Idaho, a case that shows just how complicated, confusing and, at times, unfair the law can be. Illinois and Idaho are not too far apart in terms of bankruptcy laws: Both require debtors to follow the state's, not the federal government's, exemption scheme.
Sometimes, a person will end up facing financial difficulties that put them at risk of defaulting on student loans they hold. As we touched on in a previous post, here in Illinois, student loan defaults can be particularly impactful on individuals whose work requires them to hold a professional license. This is because, under current state law, a person who defaults on their student loans could end up having professional licenses they hold suspended or revoked in connection to the default.