Tag Archives: Assets

Should the Federal Government Sell Assets to Pay Off the National Debt?


As of the writing of this article our national debt is approximately $17.94 trillion dollars. This number does not include debt owed by states, counties or municipalities that have issued bonds year after year to pay for local and state programs. Scared yet? The national debt owed by the federal government only is approximately $56,600 per person living in the United States assuming there are about 317 million people living in the United States. Did you know you owed that much debt? Of course not all of the 317 million people living in the United States pays taxes though, so each taxpayer owes about $65,500 when taking into account the more than 43 million Americans that do not pay any taxes; and the number is rising. The point here is to compare the United States federal government to a business or individual that carries a large amount of debt as compared to its yearly income, expenses and assets to try and answer the question, “Should the government sell assets to pay off the national debt?”

Should the Federal Government Sell Assets to Pay Off the National Debt?

Should the Federal Government Sell Assets to Pay Off the National Debt?

Is the United States in danger of defaulting on its debt?

The answer is a most decidedly no. There is always other people’s money (taxpayers) to pay taxes to increase tax revenue. Anyone who believes the United States is in danger of default is mistaken. But how much debt does our government have as compared to income? For starters we need to look at the gross domestic product (GDP) and not the gross national product. It is my opinion that the gross domestic product is more comparable to our daily life and how we earn money and spend it. Think of the GDP for the United States as your yearly income for your household. The United States Department of Commerce estimates the GDP for 2014 is about $17.40 trillion. So we as a nation have $17.94 trillion in debt and bring in $17.40 trillion in income each year. Do you believe an individual living in the United States can make monthly payments on $17,000 in debts while earning only $17,000 a year? I can tell you absolutely no. So our national debt is now as of 2014 a little over 100% of the GDP. For a comparison, according to TradingEconomics.com, in 2008 our national debt was 64% of the GDP. In comparison then, in 2008 our example person earning $17,000 a year only had about $10,800 in total debts. It still seems high, but more manageable? The main difference between our government and the person earning $17,000 a year is the government can just borrow money indefinitely as Congress raises the debt limits. An individual at some point will not be extended any more credit and if their income does not increase it is only a matter of time before they are choosing whether to eat or pay monthly debt payments. Also as our national economy grows our government should be able to continue to make the payments for the national debt. The problem is the amount of interest we pay as taxpayers is eating into the taxes that should be spent to maintain and improve our national infrastructure and services to taxpayers. The deferred maintenance that is obvious across our country is a staggering amount of money. We as a nation are seemingly just treading water. How long until we drown?

Can the federal government sell assets?

Absolutely yes. The best example that may hit home for you is when the government closed many military bases across the United States in the 1990’s. More or less any land or asset that is determined to be not needed by the government or better suited for private use can be offered for sale to private entities. You may also have read about government auctions of government assets and are considered surplus in your local paper or on the internet. There are of course laws against selling land or asets to certain organizations that may threaten national security. The unfortunate events of 9/11 have made the laws even more restrictive. It is possible to sell U.S. owned assets and there seems to be little time spent determining what public assets are suitable for private use to raise money to ease the burden on taxpayers by paying down the national debt.

How do individual and businesses evaluate and treat their assets?

As a bankruptcy attorney, I have probably been personally involved in over 2,000 bankruptcy cases as either the attorney of record, helped administer the bankruptcy case or supervised the attorney of record that filed the case. I can tell you individuals and businesses are on top of how they use their assets. Most people and businesses that file for bankruptcy protection have already liquidated their assets that have any value. That includes jewelry, household goods, supplies, inventory and even their clothing. Some are successful in paying off enough of their debts to reduce the monthly payments so that bankruptcy is no longer needed, but many unfortunately are just giving up assets that can be protected. Many of our clients before seeking the advice of a bankruptcy lawyer have taken early withdrawals from their retirement accounts to try and pay their monthly expenses without paying the penalties for the early withdrawal. At the end of the year they have a tax bill that they cannot afford to pay the government and less or no money for retirement left. Is our government doing everything possible to maximize the use of public assets to reduce the national debt and reduce the monthly payment and consequently the interest payments taxpayers have to shoulder year after year?

What is the value of our federal government’s assets?

The easy answer is a lot more than you think. According to Business.time.com and author Christopher Matthews, our federal government has over eight times our national debt in assets.
• More than 900,000 separate real assets covering more than 3 billion sq. ft.
• Mineral rights, on and offshore, covering 2.515 billion acres of land, more than the total surface land in Canada
• 45,190 underutilized buildings, the operating costs of which are $1.66 billion annually
• Oil and gas resources on and offshore worth $128 trillion, roughly eight times the national debt of the country

So let us again compare our example person making $17,000 a year with $17,000 in debts. Our example person now has about $136,000 in assets at their disposal. What a difference that makes in evaluating the financial health of our example person. By any account they are doing well financially even though their debt to income ratio is not very good. How long do you think it would take our example person to sell $17,000 worth of assets to pay off their debts and be left with $119,000 in assets and a yearly income of $17,000? I cannot think of an individual or business that would not wipe out their debts in a brushstroke if they had eight times the amount of their debts in assets.

So should the federal government sell off assets to pay off the national debt? Yes, that would be nice, but who has $17 trillion to buy the assets?

https://www.cbo.gov/publication/49450 (Budget Deficit)
http://business.time.com/2013/02/05/the-federal-governments-128-trillion-stockpile-the-answer-to-our-debt-problems/ (Federal Government Assets)
http://taxfoundation.org/article/number-americans-paying-zero-federal-income-tax-grows-434-million (Number of Americans Paying Zero Income Tax)
https://www.cia.gov/library/publications/the-world-factbook/fields/2186.html (Public debt (% of GDP)
http://www.tradingeconomics.com/united-states/government-debt-to-gdp (GDP compared to National Debt)

Assets of the Bankruptcy Estate and Preservation or Use While the Case is Open


When filing for bankruptcy protection all assets must be listed the bankruptcy petition schedules. This includes the amount of money the filer has in their bank accounts at the time the bankruptcy petition is filed. What if the bankruptcy filer wrote checks for their mortgage, car payment and cell phone before the bankruptcy petition was filed and the checks did not clear the bank account at the time the bankruptcy petition was filed? Does the amount listed in Schedule B for the balance of the bank accounts need to include the amount of the checks written but not cleared?

The answer is the amount listed in Schedule B should be the balance of the bank accounts at the time of filing. That is it. No deduction should be made for checks written but not cleared. In the Northern District of California many Chapter 7 trustees request bankruptcy attorneys provide their clients bank account statements that include the date the case was filed. The bankruptcy code does not specifically require this information be provided to the trustee, but there is a duty to cooperate with the trustee and they could easily obtain this information in a Fed. R. Bankr. P. 2004 examination. If the balance at the time of filing is significantly different in the bank account statement then what is listed in Schedule B you will have a problem. If there is no remaining exemption to protect the difference the trustee can request turnover of the unprotected funds.

What took place in a recently published 9th Circuit Court of Appeals case touches on this issue and whether a debtor must turnover property of the estate that is in their possession only at the time the motion for turnover is filed. Not what is originally listed in their bankruptcy schedules at the time the petition was filed. Please see, D.C. No. 2:10-cv-11726-ECR-GWF. In the Henson bankruptcy case, Ms. Henson had about $6,300 in her bank accounts at the time the case was filed with about $800 being protected by the applicable bankruptcy exemptions. So about $5,500 was not exempt and part of the bankruptcy estate for the benefit of creditors. Ms. Henson wrote a number of checks prior the petition being filed and transferred $3,239 to her bankruptcy lawyers account. Trustee Shapiro therefore filed a motion for Henson and her attorney to turnover the unexempt funds. At the time trustee Shapiro filed the motion for Henson to turnover the money she no longer had possessed it.

Assets of the Bankruptcy Estate and Preservation or Use While the Case is Open

Assets of the Bankruptcy Estate and Preservation or Use While the Case is Open

The Ninth Circuit Court of Appeals determined that a trustee’s turnover power pursuant to the plain language of Section 542(a) of the Bankruptcy Code is not restricted to property of the estate at the time the motion for turnover is filed. Section 542(a) provides that, “An entity . . . in possession, custody, or control, during the case, of property of the estate, or exempt property, shall deliver to the trustee, and account for, such property or the value of such property, unless such property is of inconsequential value or benefit to the estate.” During the case means the entire case and the statute states a trustee can seek turnover from a party that has or had possession of the asset. That is really pretty broad language. The 9th Circuit Court of Appeals continues by pointing out Section 542(a) also provides the trustee can request turnover of the value of such property. So the party that is being asked to turnover the property does not necessarily have to be in possession of the property any longer. The 8th Circuit does require that a party being requested to turnover property of the estate must have possession, custody, or control of the property at the time the motion for turnover is filed. This issue may go Supreme Court of the United States given this split in application of Section 542(a). For now, if a debtor is in possession of assets of the bankruptcy estate that are not exempt, then the debtor should probably take care to preserve those assets until the case is closed or the court enters an order compelling the trustee to abandon all assets of the bankruptcy estate.

Assets and Bankruptcy


There is a lot of confusion about assets and bankruptcy. Believe it or not most people that choose to file for bankruptcy protection keep all of their stuff. They even keep their house and cars. California has generous exemptions that protect the stuff you own and allow you to keep it. If filing bankruptcy left you barefoot and without a car how can you start over?

Houses and Bankruptcy

If you own a home and are current on the payments you can file a Chapter 7 bankruptcy case and get rid of all your unsecured debts like credit cards, personal loans or medical debts. This is assuming you qualify to file a Chapter 7 case based upon your income, expenses and assets. What if your house has some equity? This means the house is worth more than what you owe. California allows you to protect up to $75,000 in equity if singe and $100,000 if married. If you are disabled or older than 65 years old you can keep $175,000 of the equity. You also need to include the cost of sale of the house and if there are any capital gains taxes you will have to pay when selling the house. So if the amount of your first mortgage, plus the applicable exemption, plus the cost of sale and plus any capital gains tax is the same or more than your house is worth there is no value to the bankruptcy estate or your creditors. You keep the house. Make sure you speak with an experienced bankruptcy attorney in your area. Especially since home values are increasing in most California communities. If you are behind on your mortgage payments then you need to take a look at filing a Chapter 13 bankruptcy case to save your home.

Cars and Bankruptcy

If your car or cars are paid in full whether we can protect the vehicles depends upon their value. California just increased the vehicle exemption amount to $5,100 to be applied to one car. California also has the wildcard exemption which totals $26,425. So in theory you could have two or more vehicles worth a total of $31,525 and still keep them. Keep in mind if you are still making payments you need to deduct the amount you still owe on the loan from the value to figure out how much your vehicle is worth. If you do have payments still you just need to keep them current. If you are behind on your car payments or want to lower your monthly car payment you should look into filing a Chapter 13 bankruptcy case. Speak with a bankruptcy lawyer in your area about how Chapter 13 can lower your vehicle loan amount and percentage rate.

Your Other Stuff

For the most part all of your used household goods are not worth much. Once you purchase most things the value decreases rapidly. The exception is jewelry and other collectibles. You may need to have your jewelry appraised to make sure it can be protected. The jewelry exemption under the California 703 exemptions is $1,525 and under the 704 exemptions $7,625.