Wednesday, August 11th, 2010
Social Security is at a critical tipping point—the system is paying out more dollars than it’s taking in, a recent article from CNN.com indicates. Obviously, that’s not good news for the long-term health of Social Security, or those depending on it.
The State of Social Security
The Social Security system, designed as a state-run support fund for working Americans as part of the New Deal, works on a fairly simple principle: people pay a certain amount of money into the Social Security coffers whenever they’re employed, and if and when they need more money than they’re making (based on government standards), they can collect money from those coffers.
Currently, Social Security benefits include:
- Payments to the retired and disabled;
- Payments to the unemployed;
- Funds for medical care for the aged and poor;
- Financial assistance for needy families; and
- Funds for children in need.
But, according to sources, both 2010 and 2011 will see the Social Security system pay more in benefit to needy Americans than it collects in taxes, meaning that the fund will diminish. That trend should reverse itself for a few years, but most experts apparently expect that the fund will be exhausted (that is, able to pay out only 76 percent of benefits) by 2037.
Blame the Economy
So what pushed the Social Security fund into the red? Sources note that the rough economy has played a significant role:
- High unemployment: The steady 9.5 percent jobless rate means that fewer Americans than usual are paying into the Social Security fund, which translates to less money coming into the system. Meanwhile, more people than usual are drawing unemployment benefits, which strains the system.
- Early retirement: With work difficult to find, many older Americans are opting for early retirement. This means they’re pulling money from the Social Security fund earlier than they would have normally. While early retirees are eligible for smaller payments than those who wait until their full retirement age, this still means that the system is paying out more money and taking less in.
- Government borrowing: Since the Social Security system was reformed in the early 1980s, the federal government has reportedly borrowed significant amounts of money from the trust with promises of repayment—which has yet to materialize.
So what does this mean for you? For many years now, experts have emphasized that the average American should not depend on Social Security alone to finance their retirement years. The dire state of the nation’s retirement fund reinforces that point and underlines the importance of having a personal retirement savings and/or investment fund.
Additional Resources
Social Security: Understanding the Benefits
Posted in Bankruptcy and the Economy, Social Security, government, unemployment | Comments Off
Thursday, May 6th, 2010
Last month, my friend and colleague, Charleston bankruptcy attorney Russ Demott published an interesting article on his web site entitled "Fired for Filing Bankrutcy? No way!" This article was written by Elyria, Ohio bankruptcy lawyer Bill Balena, who notes that the Bankruptcy Code specifically forbids "employee discrimination" based on a bankruptcy filing if:
- You are, or have gone through a bankruptcy proceeding
- You are insolvent either before filing a bankruptcy or while your petition is pending;
- You have not paid a dischargeable debt
Let's take a closer look at what the Code actually says. Pay particular attention to the different language that applies to government employers vs. private employers.
Section 525 of the Bankruptcy Code contains the following language:
As to governmental units:
[with limited exceptions] a governmental unit may not deny, revoke, suspend, or refuse to renew a license, permit, charter, franchise, or other similar grant to, condition such a grant to, discriminate with respect to such a grant against, deny employment to, terminate the employment of, or discriminate with respect to employment against, a person that is or has been a debtor under this title or a bankrupt or a debtor under the Bankruptcy Act, or another person with whom such bankrupt or debtor has been associated, solely because such bankrupt or debtor is or has been a debtor under this title or a bankrupt or debtor under the Bankruptcy Act, has been insolvent before the commencement of the case under this title, or during the case but before the debtor is granted or denied a discharge, or has not paid a debt that is dischargeable in the case under this title or that was discharged under the Bankruptcy Act.
As to private employers:
No private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor under this title, a debtor or bankrupt under the Bankruptcy Act, or an individual associated with such debtor or bankrupt, solely because such debtor or bankrupt—
(1) is or has been a debtor under this title or a debtor or bankrupt under the Bankruptcy Act;
(2) has been insolvent before the commencement of a case under this title or during the case but before the grant or denial of a discharge; or
(3) has not paid a debt that is dischargeable in a case under this title or that was discharged under the Bankruptcy Act.
As you can see, the restrictions on discrimination are not identical.
Specifically the limitation on governmental action against insolvent or bankrupt employees or job applicants includes the following prohibitions:
- deny employment to
- terminate the employment of
- discriminate with respect to employment against
By contrast the limitations on private employers against insolvent or bankruptcy employees includes the following prohibitions:
- terminate the employment of
- discriminate with respect to employment against
Now I have not litigated this issue – but I think that a private employer could make a strong argument that the Bankruptcy Code does not forbid denying employment to an insolvent or bankruptcy individual who is applying for a job.
Further, as Mr. Balena points out, if you are applying for a job as an "at will" employee, a prospective employer does not have to explain why he is not hiring you – it can be for any reason. I can't imagine that too many employers would specifically put into writing that you are not being hired because of your credit issues.
In my view, within the context of private employment, Section 525 protections have much more relevance to an employee who already has a job as opposed to a job applicant. Further, I think that Section 525 is somewhat of a toothless tiger in that few employers would specifically identify a bankruptcy as the sole reason for termination (note the language "solely because").
As a practical matter, I cannot recall the last time I observed or even heard of a bankruptcy debtor facing termination or a refusal to hire because of a bankruptcy filing. The sheer numbers of bankruptcy filings in the Northern District of Georgia, for example, are such that almost every company of any size has had one or more employees go through the bankruptcy process. Still, I counsel my clients that Section 525 offers very little in the way of real protection and that there is some risk, even if it is small, that their bankruptcy filing could have a negative impact on employment.
Posted in 525, Attorney, Bankruptcy, Consumer Protection, General consumer bankruptcy info, an, article, bankrupt, charleston, demott, deny, discriminate, discrimination, employees, employers, employers section, employers and bankruptcy filings, employment, government, identical specifically, includes, insolvent, interesting, job termination and bankruptcy filing, limitation, private, prohibitions, published, respect, russ, section 525 of bankruptcy code, terminate, the, vs | Comments Off
