Bankruptcy

Strategic Defaults on Mortgages: We're From the Government and We're Here to Help...No, wait!

By Joseph McDaniel, Esq.

Sorta.

When a command economy is in charge of things, it responds slowly and awkwardly to events and needs to grab other people's money on a regular and increasing basis to function: recall the Soviet Union, for instance.

Here in the United States, we won the Cold War for one simple reason: they had a top-down command system, and we had a bottom-up market system. We produced our way to victory in the Cold War.

That was then, and this is now.

So even though the United States is today the bastion of liberty and wealth for the rest of the world, increasingly large portions of the economy are coming under the control of a top-down command system, including the medical-care and insurance segments of the economy.

A market system ultimately produces the most wealth and the most happiness for the largest number of people for a simple reason: resources go where they make people the happiest. We know that because when people vote with their wallets, like they do, they'll buy the things that makes them happy, and make decisions not to buy the other stuff.

A government that makes decisions based on the lobbyist with the biggest contribution or the best photo-opportunity will not result in the most happiness for the most people.

Why am I so sure that a free-market economy works to make people richer and happier? Well, Cubans keep trying to make in into the United States; U.S. citizens, in general, don't want to make it into Cuba, unless they smell opportunity for real estate development or cigar production and sale.

Now, almost by definition, politicians are lousy businessmen, because they aren't businessmen at all.

And since Rome, giving stuff to some people, when you took it away from somebody else on some theory or another, has been a great way to buy votes.

However, if you promise to give away money you haven't swiped from somebody else yet, that may make you, you know, insolvent.

See California and Illinois, which have promised to give gigantic amounts of money to retirees from money it didn't have.

And those states are now looking down the barrel of insolvency because of terrible decisions made by politicians, who were throwing promises of retirement money at people in order to buy votes.

Individuals in a free market are supposed to make decisions to maximize their own economic positions. It's part of the structure of a free market economy.

And at this point, the Federal Government of the United States is making a fair amount of noise about punishing people who have made rational economic decisions to walk away from homes that have become black holes in their wallets.

And if, as I expect, the Federal Government bails out both California and Illinois for making decisions to give away money that they didn't have, and punishes individuals for making good economic decisions, that will give rise to one inescapable conclusion.

That the Federal Government likes bad economic decisions, and dislikes rational economic decisions.

And if that scares you as much as it scares me, well, you must be paying attention!

And one issue as a practice pointer is the following: will a Federally-obtained deficiency judgment be subject to a discharge in a bankruptcy?

Well, as of today, I would expect it to be.

But that's for today.

So now I can see one more possible reason to file a bankruptcy sooner rather than later.

NOTHING HERE CONSTITUTES LEGAL ADVICE RE A CHAPTER 7, CHAPTER 13, CHAPTER 11, OR CHAPTER 12. FIND AN ARIZONA BANKRUPTCY LAWYER WHO IS BOARD CERTIFIED IN BANKRUPTCY LAW, AV RATED, AVVO 10 RATED, ON SUPERLAWYERS, OR JUST VERY EXPERIENCED AND A FORMER CHAIR OF SOME BANKRUPTCY SECTION OR COMMITTEE. NOTHING HERE MAY BE USED AS LEGAL ADVICE IN CONNECTION WITH ANY BANKRUPTCY, WHETHER THAT BANKRUPTCY IS IN PHOENIX, GLENDALE, TEMPE, MESA, SCOTTSDALE, OR ANYWHERE ELSE.

Full post as published by Arizona Bankruptcy Attorney Blog on June 26, 2010 (boomark / email).