In the case of Law v. Siegel (2013), Stephen Law declared bankruptcy and claimed a homestead exemption on his house in California, which would protect $75,000 of its value from creditors. The trustee overseeing the bankruptcy, Alfred Siegel, argued that Law had fabricated a second mortgage to shield more of his home's value than allowed by law. After years of litigation costing nearly half a million dollars paid out from the estate’s assets, courts agreed with Siegel and granted him permission to surcharge Law’s homestead exemption - essentially taking away this protection - to recoup these costs. However, when brought before the Supreme Court it was ruled unanimously that federal bankruptcy law does not allow such action; even if debtors behave badly by lying or hiding assets as alleged here. Justice Antonin Scalia wrote for the court stating that while they do not condone debtor misconduct like Mr.Law's alleged behavior but there are other penalties available including criminal prosecution.

In the dissenting opinion for Law v. Siegel, Justice Scalia argued that the majority's decision was a departure from established bankruptcy law principles and an overreach of judicial power. He contended that while it may seem unfair to allow debtors like Law to benefit from their fraudulent behavior, this is a matter for Congress to address through legislation rather than courts through interpretation. According to him, there were other remedies available under existing laws such as denying discharge or imposing sanctions which could have been used against Law instead of depriving him of his homestead exemption without statutory basis. He also criticized the majority's reliance on "inherent powers" as being too vague and potentially dangerous because it gives judges unlimited discretion in deciding what constitutes appropriate punishment in each case.