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Bankruptcy

Monday, August 3, 2015

The No-Party Clause and Other Bumps in the Road

The No-Party Clause and Other Bumps in the Road

Everyone has questions from time to time about how to handle knotty problems that threaten to make life miserable. I get phone calls or emails from many of these people who hope that I can provide answers, or refer them on to someone who can. Some are minor issues or sad ones – and some of them are very serious. They cover a vast range of troubles that could happen to any of us. Here are a few recent questions that came up:

Question: Two friends and I get along really well, so we signed a lease on a house together. My friends threw a big party while I was out of town a couple of weeks ago, and neighbors called the police to break it up. Now the landlord has sent a letter telling us all to move out because the lease says no noisy parties are allowed. I am furious. I don’t want to move. I wasn’t even here for the party, so it wasn’t my fault. How can I get the landlord to let me stay, even if the others have to leave?


Answer:  You probably can’t convince him to continue your lease. When the 3 of you leased the property together, you gave up your separate rights and became a single renter. The rights and responsibilities of each one of you are shared by all 3 of you. You may not have been personally involved in the party, but you are just as responsible for it as the other 2 are. The landlord has every right to evict all of you for breaking the terms of the lease.

Question: What should I do if I get a call from a collection agency and know I don’t owe them any money?


Answer: First, do not ignore the call. Immediately, request verification of the debt in writing. Under California and federal Fair Debt Collection Practices Act rules, you must usually do so within 30 days of receiving the first notification of the debt. When you receive the validation, determine whether it is correct, and that you truly do not owe that debt. Pull together whatever proof or substantiation you can and promptly send that back to the collection agency.

Second, if the collector refuses to acknowledge your response or withdraw the claim that you owe money, protect yourself by doing the following:

1.      Check your credit report to see if the debt has been reported to any of the
         3 credit reporting agencies. If it has, file a dispute of the claim with each
         of those agencies.
2.      If the collector threatens or harasses you, file a complaint with the
         California Attorney General’s office and the federal Consumer Financial
         Protection Bureau.
3.      If the collector files suit against you to make you pay the debt, do not
         ignore the notice of hearing. You have a very short period of time to
         respond. If you don’t file a protest, you will need to appear at the hearing,
         or it is very likely the court will rule that you owe the debt.

Finally, if you must go to court, consult an attorney to make sure you have as
much proof for your position as possible, and that you understand your legal
rights under the circumstances.

Question: What can I do to make the Homeowners Association respond to my requests for repairs to my condo and our common areas? They don’t answer my calls, and they don’t tell us when the board meets, so I can’t go to meetings to talk to them.

Answer:  California has strong HOA laws that clearly spell out how these organizations
and boards of directors must operate. Each homeowner must be provided with a
copy of the covenants, conditions and restrictions (CC&Rs), bylaws and other
information when the home is purchased; and the HOA must keep these up to date at least annually. Also, an annual budget and outside audit of HOA finances must be provided to each homeowner.

A management company who handles day-to-day HOA affairs is responsible
directly to the board of directors, who are themselves elected by the
homeowners. Notice of meetings and meeting minutes must be provided. You
have the right to inspect and copy association books and records.

Most requests to the management company and the board must be in writing.
This may be one reason your calls are being ignored. Write to the manager and
the board requesting copies of meeting minutes for the past year, and meeting
schedules for the remainder of this year. In a separate letter, identify the
problems you are having in your condo and the common areas, and how you expect them to be resolved. If there is no response, attend the next board meeting, and be prepared to present your concerns in a very brief and concise way. Board meetings must allow time for homeowner participation, but the time is usually limited to 3 or 4 minutes per person.

In the meantime, discuss the situation with as many of your other HOA members
as possible. If you are having trouble with the manager and the board, it is very
likely your neighbors are too. An action plan to get the HOA’s attention is often
successful when they see an uprising in their future.

If none of the above works, and repair and other problems affect daily living,
consult an attorney who is experienced with HOA issues to help decide if legal
action is needed.


Wednesday, June 10, 2015

All About Joint Tenancy - Are You and Your Partner at Risk?

Should your home, bank accounts or other property be held in joint tenancy with your partner or other family member? Many people comment to me that they don’t need an estate planning attorney because they own all their property as Joint Tenants with Rights of Survivorship. If they die, the property will automatically belong to the other joint tenant. No need for a Will or a Trust. No need for Probate. No need for an attorney’s services. 

Unfortunately, life is rarely that simple. There are numerous pitfalls in joint tenancy: 

         *   Joint property is exposed to the liabilities of either or both owners. If one

              owner gets a judgment against him or her, the entire property may be taken         

              to satisfy that judgment. If one is a doctor, lawyer or sole proprietor of a business

              in a highly litigious field, or if one is found at fault in an accident, or if one owner

              has a tax lien placed against the property, this may be the worst way to hold title.

          *  Joint owners lose individual control over the property. For example, with real

              property, one owner has no right to act alone in selling, making improvements,

              or refinancing the property.

          *  If one joint owner becomes mentally incapacitated, the property is in legal limbo.

              The owner can no longer convey legal title or sign ownership papers. This can

              prevent property such as a home from being sold or rented. It usually requires

              the healthy owner to go through a lengthy and expensive conservatorship

              process in Probate Court.

          *  When property passes to another owner through joint tenancy, that property

              is left outright, meaning there are no strings attached. The danger is that the

              surviving owner can then leave that asset to his new partner, or anyone else he

             chooses, and the first owner’s share of the estate never makes it to his own

             heirs. The last owner to die wins everything.

         *  When the first owner doesn’t do any estate planning, usually the second owner

             doesn’t either. Although probate may be avoided at the first one’s death, it will

             not be avoided upon the second owner’s death. In the event of simultaneous

             death, all assets held in joint tenancy must go through probate since both owners

             of record are no longer living.

         *  Even if the joint tenants do have Wills or Trusts, the surviving partner will receive

             the deceased joint tenant’s interest in the property, regardless of what that

             owner’s Will or Trust says. Wills and Trusts have no control over jointly owned

             property.

          *  Finally, transferring property into joint tenancy may have tax consequences. If

              you place another person on your bank account or a deed as a joint tenant, you

              have just given that person a gift. If the value is less than your annual gift

              exemption of $14,000.00, there may be no problem. If it exceeds that figure, you

              must file a gift tax return with the IRS. You may or may not owe taxes on the gift,

              depending upon your financial situation.

 

I hope you will give the joint tenancy risks careful consideration before you try to use it as a do-it-yourself estate planning tool. For very small estates such as those having only moderate sums in a bank account and no real property, joint tenancy can work to avoid probate and smooth the transition when a joint owner passes on. For most other estates, there are various planning tools that reduce or eliminate the risks of joint tenancy, and make far more sense.

Careful estate planning and correct property titling are especially important for same-sex couples. For partners who are not married or registered as domestic partners, it is essential to maintain as much individual control over property as possible. Couples can own homes together; have joint and individual bank and investment accounts; and own other property that they share equally, without the pitfalls of joint tenancy.

Many of my clients are same-sex couples who own various assets together. Often, we find that individual Revocable Living Trusts are the best way to maintain their property and allow each partner maximum flexibility and control over their shares. Each one creates the necessary documents to control how assets will be managed if incapacity or death should occur, and this allows each partner to pass his share on to whomever he names in the Trust. Each one has a plan that covers many of the risks in life, and gives partners greater peace of mind about the future.


Wednesday, May 20, 2015

Are You "Judgment Proof" After You Retire?

The bankruptcy rate for Americans over age 55 is soaring. This age group now accounts for over 20% of all bankruptcies filed. Some analysts estimate that for every older person who files a bankruptcy petition, there are two more seniors who should, because of their dire financial straits.

What’s going on?  Retirees used to be seen as financially stable, kicking back on their savings and pensions, mortgages all paid off – enjoying their golden years. But not any more. Here are some of the major reasons why so many of our older generation have hit financial hard times:

 

          *  People are living longer, making seniors a much larger percentage of the

              population than in generations past.

          *  Retirement funds are inadequate to cover the living expenses of a longer life, and

              income has gone down in recent years – hit by the recession and lack of cost of

              living increases in social security and other pensions.

           * Property taxes and the cost of gas and ordinary consumer goods keep going up.

           * Medical expenses grow rapidly as the population ages. Medicare and other

              health care insurance plans do not begin to cover all costs of medical care for

              older people.

           * Seniors often have to rely on credit cards to pay their routine bills, burying them

              in debt they will never pay off.  This group now has more credit card debt

              than younger generations – debt that was often unthinkable for seniors only

              10 or 20 years ago.

           * Late payments on credit cards and other unsecured debts result in penalties and

              a huge increase in interest rates to over 30% interest in most cases. This makes

              even modest debts spiral rapidly out of control.

But wait…aren’t retirees “judgment proof?” Why should seniors worry about their debts, when, in most cases, creditors can’t touch their pensions or their homes during their lifetimes? If social security or IRA income each month can’t be levied by a creditor, grandma or grandpa can stop stressing, right? And if a creditor puts a lien on your aging mother’s home, what does it matter to her?  She will continue to live there until she dies, and after that, the creditor will get the money from the sale of her house.

“Judgment proof” is not the best way to describe the financial situation of many older Americans. The term is commonly used to mean that creditors can’t collect money from assets that are protected – pension, IRA, or social security income – or the home you live in, while you continue to live there. But a creditor can still file a lawsuit against you, and a court might agree that you owe the money and issue a judgment against you. So technically, virtually no one is “judgment proof.”

A better term is “collection proof” – because, even if you have a judgment against you, the creditor can’t collect it from your exempt assets. So if you have debts you can’t pay after you retire, or even if there is a judgment against you, why should you care? Here are two very important reasons:

 

       *  Creditors are shameless and relentless. They never give up trying to get money

           out of you. They call, send mail, and use every means to get your attention. To

           an older person who may be in declining health, or barely able to make ends

           meet every month, the constant harassment by creditors takes a heavy      emotional and physical toll.

       *  Creditors will often get judgments against you. You must respond to the Notice

           or Summons you receive from the court. If you do not take action, the court may

           very well authorize a levy or a freeze on your bank account. The county sheriff

           in your county is responsible for carrying out the levy, by ordering your bank to

           freeze your account and/or pay the debt out of your account. Neither the sheriff

          nor the bank may know that all of the funds in your account came from pensions

          or other exempt income. Once a freeze is in place, it can take weeks or months

         to get it reversed. In the meantime, your money is out of your reach.

Creditors can ruin a retiree’s life in ways that are far worse than their effect on younger people. Seniors have few chances to go back to work to pay off debt. There is little or no prospect of their paying off their debts in their lifetime. Credit card debt, in particular, grows rapidly, as retirees pay higher interest on interest over the years. A lien on a senior’s home to pay off that inflated debt after death often means there is little or nothing left to pass on to their children or grandchildren.

For retirees caught in the clutches of creditors, bankruptcy is often a good solution.

It usually wipes out credit card, medical and other unsecured debts, and makes it possible for most people to again manage their everyday living expenses within their income. A huge relief and peace of mind make a fresh start possible for seniors.


Wednesday, May 6, 2015

I'm a Consumer! What has the California Attorney General's Office and the Department of Consumer Affairs Done for Me Lately?

The Attorney General heads up the California Department of Justice (DOJ), and according to the department’s mission statement, has broad responsibilities to enforce laws fairly and impartially; ensure justice, safety and liberty for everyone; encourage economic prosperity, equal opportunity and tolerance; and safeguard California’s human, natural, and financial resources for this and future generations.  Justice is served by helping to prevent and prosecute criminal activity, protect consumers from victimization, and promote public safety.

 

The Attorney General can’t give specific legal advice about personal problems or represent individual Californians, but whether you realize it or not, your life is touched by many of the Attorney General’s actions every day. Here are some of the major areas that are designed to support your safety, general welfare, and quality of life:

 

  • DOJ bureaus are responsible for a variety of regulatory responsibilities in the areas of narcotics, gambling, and firearms control. They carry out laws, assist other state and local law enforcement agencies, and provide education to the public. The Bureau of Investigation has wide-ranging duties including information and intelligence networks, an anti-terrorism program, and special operations units that combat violent criminals, gangs, drug and human trafficking, and fraud.

 

  • The DOJ collects, analyzes and reports crime statistics, and maintains criminal history records for use by law enforcement and other authorized agencies. An individual may request a copy of his or her own criminal record. DOJ maintains a central index for cases of child abuse throughout the state, and handles international child abduction cases together with the U.S. Department of State under the Hague Convention; and domestic child abduction cases together with the California Child Abduction Task Force.

     

  • “Megan’s Law” information and locations for registered sex offenders may be accessed by applying on-line through the DOJ website. There is a searchable database for people who have gone missing, and you can subscribe to a Missing Persons Bulletin which covers children, dependent and voluntarily missing adults.

     

  • Elder abuse may become more prevalent as our aging population grows rapidly. The DOJ has responsibility for prosecuting abuses and policies that lead to neglect and poor quality of elder care in skilled nursing homes, hospitals and residential care facilities. Criminal history data is provided to employers of unlicensed persons providing in-home supportive or personal care services to dependent or elderly adults.

     

  • The DOJ handles many consumer fraud and complaint issues. Their website oag.ca.gov/programs offers detailed information about consumer concerns such as debt collectors, homeowners associations, e-crime, identity theft, loan modification fraud, antitrust issues, corporate fraud, lemon law, prescription drug monitoring, and many other problems that affect Californians.

 

  • Consumer questions and complaints may be filed with an on-line complaint form which is sent to the Attorney General’s Public Inquiry Unit, and will be forwarded on to other state agencies if they are responsible for regulation of the issue.

 

The California Department of Consumer Affairs (DCA) regulates and issues licenses in several hundred business and professional categories.  The DCA has

bureaus and boards that carry out the legal requirements for each of the specialties. All individuals and/or groups covered by these rules must apply for and be granted a license or certification to operate and practice in the state of California. You may check to see if someone has a valid license by going to www2.dca.ca.gov.

 

From your hair stylist, CPA, car mechanic, doctor, realtor, contractor, to your appliance repairman, pharmacist, pest control service, mental health counselor, security guard, and funeral director, all, and many more, are required to meet regulations for practice and must be licensed. The DCA handles complaints from consumers in all areas, and works together with the California Attorney General and local district attorneys to prevent and prosecute fraud in the marketplace.

 

Consumers are encouraged to make complaints and report problems when issues with business and professional practitioners are serious. Issues with certain businesses and practitioners might be resolved through the department’s Complaint Resolution Program. For other disputes, the DCA may recommend new approaches to resolving the problems, or possibly mediation, or filing suit in small claims or civil court.  File a complaint on-line at www.dca.ca.gov/online_services/complaints.

 

The DCA also offers important free information covering a wide range of consumer issues. There are guides for business and professional categories that are licensed, and a variety of others which offer important tips for handling concerns ranging from disasters to consumer fraud.  One well-known guide is “California Tenants – A Guide to Residential Tenants’ and Landlords’ Rights and Responsibilities”.  This is an excellent

brochure, giving a clear explanation of California rules and what they mean.


Wednesday, April 22, 2015

Money Matters

I handle estate planning for people who have a handful of assets, tons of assets, and everything in between. Other people have serious financial problems, and I help them file bankruptcy, so they can get a fresh start. And some folks are married or registered domestic partners and need me to file for a dissolution of the relationship. Whatever your fortune or misfortune, money and other assets are usually the focus of my work. Here are some notes and suggestions that can help protect what you already have, or regain a solid footing when you need it:

 

  • Finding Money:  You or a family member may have money waiting for you.

    Unclaimed monies must be turned over to the state by financial institutions and

    other companies. The state then must try to find the rightful owners. There is no charge to check these two official websites to search for unclaimed property:

     

    www.Unclaimed.org            www.MissingMoney.com

     

    Be wary of companies that charge you or send “special offers” to locate funds for you. Some are legitimate, but some are not. Check the above websites first.

 

  • Finding More Money:  Did someone pass away recently? Could you be the beneficiary of a life insurance policy? To get any information from insurers, you must have the authority to discuss the matter with them. You must be the executor or administrator of the decedent’s estate, a member of the immediate family; or have written authorization from that person for the insurer to release information to you. You will need a certified copy of the death certificate and as much information as you can find about the policy itself. Contact the insurer’s main office to see if they are permitted to talk to you as a possible beneficiary. If the death was a long time ago, it is likely that the funds have already been turned over to the state and will turn up on the websites listed above.

 

  • Marrying for Money:  When you marry or register as domestic partners in California, look carefully at both of your financial situations. You each bring

separate property to the union, and can choose whether to keep all of your property separate, or co-mingle some or all of it. What you acquire after the union

will usually belong to both of you as community property. You can choose how to identify all of your property by creating a pre-marital or post-marital agreement.

 

  • Splitting Up Money:  Sometimes things just don’t work out. You married,

    registered, or were in a committed relationship, and now you want out. Were you smart and signed that pre- or post-marital or cohabitation agreement? If you did, your path to single life should be fairly smooth. Everyone is clear on who owns what and who gets what when the relationship ends.

     

    Forgot those agreements in the thrill of romance? Unless you both agree completely on who is entitled to all the assets and debts, your escape from the union is likely to be painful. To dissolve a marriage or registered partnership, each person must provide very detailed financial information and documents that will serve as a basis for the two of you and the court to determine what is a fair settlement of your property. If your partnership was simply a committed relationship, it is not recognized as a union in California, and you and your partner must sort things out by yourselves. A civil lawsuit could be filed to try to settle disagreements, but the process is very complex and expensive.

 

  • Erasing or Reducing Debts:  Financial problems can hit any of us, any time.

    Student loan debts drag many of us down. Although most of these debts can’t be discharged in a bankruptcy, some can be reduced or forgiven through various programs. Get a job in public service, government or with a non-profit entity. Join the military. Apply for the Income-Based Repayment Plan. For certain student loans, become a public school teacher in a low income area. There are many other forgiveness programs that could help. Check first with your loan provider, who should be able to identify the programs that might work for you.

 

Housing debts are a major contributor to bankruptcies. If your mortgage is more than the value of the property and it is tough making the payments, it is possible the lender will foreclose and you will lose your home. There are several good refinancing programs available now. Check with your lender for options.

 

If refinancing doesn’t work, and you are in genuine financial distress, consider

bankruptcy. It can often stop an imminent foreclosure, help reduce or wipe away your other debts, and make it possible for you to retain your home and start off with a clean slate.

 

  • Giving Away Money:  Many folks give gifts to family members and charities. There may be tax consequences for these gifts, and it is crucial that you check with your tax professional to review these first. When choosing charitable organizations for your gifts, do careful research. Are they well-managed and are  they actually accomplishing what they set out to do? Use these websites to learn:

    www.CharityNavigator.org    www.Guidestar.com    www.MinistryWatch.com


Wednesday, March 4, 2015

Refreshing Your Financial Future

The U.S. Supreme Court’s DOMA decision last year opened up over a thousand  marital benefits and obligations never before available to people in legal same-sex marriages. Among these is the right to file a joint bankruptcy with one’s spouse, just as straight married persons have always been able to do.

 

Let’s take a quick look at financial issues, bankruptcy, and how they affect same-sex couples:

 

In California, large numbers of bankruptcies were filed during the “Great Recession” of the past few years. Loss of assets in the financial market, loss of jobs, and underwater mortgages were the primary reasons. Now, as the economy improves, there is a substantial decline in bankruptcies, and prospects are good for most people. But, even for people who have managed their finances well over the years, a sudden job loss, major illness, accident, or failure of a small business can tip the balance and cause catastrophic money problems.

 

People with financial difficulties may start falling behind on car payments, credit cards, mortgages. Creditors start hounding them. Lawsuits may be filed against them to recover monies owed. When the courts issue default judgments, liens might be placed on their possessions, or salaries may be garnished by the creditors. Once debtors are trapped in this whirlpool of actions, it is likely that bankruptcy is the best way out. It is far too late to negotiate a way out of debt.

 

Bankruptcy can resolve your creditor issues, and give you a fresh start. If lawsuits are pending, foreclosures are imminent, or wages are being garnished, it is usually possible to stop these actions if a bankruptcy petition is filed. There are two types of bankruptcy to consider, and both can help rebuild your finances:

 

Chapter 7 gives you the chance to clear away most debts, through a “discharge” of debts by the bankruptcy court. Let’s say you have substantial debt, and not enough income to pay it off over a reasonable period of time. You have few or no assets (such as lots of equity in a home, multiple cars, large stock market investments, etc.) that the bankruptcy trustee can sell to pay off the creditors. Of course you may retain certain necessities (home, car, bank account, etc.) if they fall within the dollar limits of the exemptions allowed by the state or federal government. If you qualify, you file a Chapter 7 bankruptcy petition, and it takes about 4 to 6 months to discharge your debts. After that, you have a clean slate for the future.

 

Chapter 13 gives you the opportunity to continue paying off most or all debts over a 3 or 5 year period, under the protection of the bankruptcy court. In this case, you have sufficient steady income so you can create a plan to pay down the debts. The plan is administered by the bankruptcy trustee and you pay the trustee an agreed-upon amount of money each month. The funds are distributed to the approved creditors, and at the end of the plan period, you are essentially debt-free.

 

In both types of bankruptcy, certain debts such as most recent back taxes, student loans, alimony and child support, and some others are not dischargeable.

 

What should same-sex couples consider if they are thinking of bankruptcy? It is important to remember that some states don’t recognize same-sex marriage at all, but the federal rule allowing joint bankruptcy filing applies to legally married couples in every state. In states that do recognize same-sex marriage, the rule may also apply to registered domestic partners. California is a community property state, and registered partners have nearly all the same rights and obligations as married spouses. Joint petitions are allowed for both married and registered same-sex couples. But the rule does not apply to other domestic partners, even though they may have shared finances and property, and been together for many years.

 

How do you decide between filing a joint petition and individual petition? It can save time and money to file a joint petition. A single filing fee, lower attorney fees, one hearing instead of two, and other reasons make it an advantage over filing individual petitions. On the other hand, in a Chapter 7, being married could sometimes be a disadvantage. Whether filing a joint or individual bankruptcy, if both spouses have income and property, assets are totaled and there may be difficulty meeting the means test in either type of petition.

 

What if you are not married or registered? You can’t file a joint petition, but one or both of you can file individually. Joint debts will be eliminated for both partners if both file petitions. They will be discharged for only the personal liability of one partner, if only one files. The other partner will remain liable for the joint debts after the petitioner’s case is closed.

 

Whether you are married, registered or single, be sure to consult an attorney about your particular situation and the best way to file for bankruptcy. Doing it right will mean a new and refreshing financial future.

 

 


Tuesday, July 1, 2014

Cross Your Fingers and Fill in the Blanks

You’ve heard enough about estate planning from your family and friends. You’re finally convinced that you need to do something to protect yourself, your partner, your property. But, you say, “I’ll be darned if I’ll pay a high-priced attorney to fill out a few forms”. You saw an ad for a complete estate plan package for $995.00  -  just go on-line, down-load all the forms, fill them out and the job’s done. You don’t have to meet with an attorney, think about it, or even leave your home to do all the estate planning you need. 

Or you heard about a “document service” where a paralegal provides you with several forms, you fill them out, and she puts them in a nice, neat file folder for you. Cheap, over and done with.

And guess what? Your local office supply store sells pre-printed legal forms. Pick them up, fill in the blanks, and you’re good to go. Why not take advantage of these or other low-cost shortcuts to peace of mind? 

There are very strong reasons why most people should avoid these methods. Wills and Trusts require careful thought and sound legal advice. Tax planning is an important part of it, too. An estate plan isn’t just an assortment of forms and documents. It is a map for the future that considers all the aspects of your present life, requires decisions about what might happen to you and your family, and is crafted so the plan will continue to evolve as time goes by.

A recent court case illustrates one major hazard of do-it-yourself documents: 

A Florida lady filled out an “E-Z Legal Form” when she made out her Will. She wanted to leave all of her property to her sister, then to her brother, if her sister predeceased her. The sister did die first, and the brother claimed he was entitled to the entire estate. But the pre-printed Will stated that all “listed” items should go to the brother. Not all of the lady’s assets were listed. And the Will did not have a residuary clause (and not even any room on the form to add such a clause) providing for the disposition of property not listed in the document.

Two of the lady’s nieces (children of another brother, already deceased) brought action. After lengthy arguments on both sides, the court decided that the listed items must go to the brother, as the Will provided, but the unlisted assets must pass outside the Will, to the nieces, who were the next heirs in the line of succession.   Although it may have been the lady’s intent that her brother inherit all of her estate, the Will did not say so, and it did not provide any way for him to claim the unlisted items. Concurring Justice Barbara Pariente commented, “While I appreciate that there are many individuals in this state who might have difficulty affording a lawyer, this case does remind me of the old adage ‘penny-wise and pound foolish.’”

Pre-printed forms can’t possibly include all the language needed to cover the wide range of possibilities and probabilities that are part of our everyday lives. There is no single Will, Trust, Power of Attorney or any other pre-printed form or pre-written format that can meet the needs of everyone. How would you know if some essential language is missing, or certain statements can cause problems, or your intent is not truly reflected in the document? How do you know what you don’t know?

Attorneys have studied the laws (and the court cases) and get to know you and all the details of your particular situation. They recognize the hazards and pitfalls of missing or incorrect language, and draft comprehensive documents that fit you like a glove. You are not a John Doe, and your estate plan shouldn’t be, either.

For those of us in the LGBT community, it is even more crucial that our plans cover the  unique family, health and property issues we face because we still lack equality under most state and some federal laws. A properly crafted estate plan gives us the visibility and legal standing that is so essential to protect our families and our assets. Our special needs require special planning.

There should be ads and articles in the newspaper and magazines cautioning people against using pre-printed legal forms. But attorneys often chuckle about this. They don’t plan to run any ads. They get a lot of business from clients who tried the do-it-yourself approach and found the documents unusable when they were needed. Folks who wanted to save a little money bought a lot grief for themselves or their families.

In the court case, the lady may have tried to save herself a few dollars by filling in the blanks, but in the end her estate had huge attorneys’ fees and two years of wasted time. The nieces, of course, were delighted with the E-Z Legal Form she used. They came out over $100,000 ahead. Definitely not the result the lady wanted.


Monday, August 20, 2012

What to Do About Upside-down Mortgages

I don’t handle most types of real estate issues in my practice, but so many of my bankruptcy clients are in dire straits because of their mortgage situation that I must try to prevent them from losing their homes. Nearly 10 million homeowners in the U.S. are at risk of foreclosure and need to take action.

We know that lenders contributed to, and sometimes caused the mess by offering risky loans to people, and then by foreclosing on many properties without following the rules.

In fact, a general lack of strict rules in the home loan industry often allowed unethical and predatory lenders to operate freely and without oversight. 

New federal and state guidelines are in place, with more on the way. There are programs to help homeowners avoid foreclosure. If you or someone you know is having difficulty making mortgage payments, or equity in the property is less than the mortgage, here is some information that may help:

  • First, NEVER pay an agency or organization an up-front fee to negotiate a loan

modification for you. In California, such fees are illegal. Even so, there are scam artists everywhere trying to take advantage of distressed homeowners. If you encounter one, report it right away to the California Department of Justice.

  • The Home Affordable Refinance Program (HARP) has been in place for some time for loans backed by Fannie Mae and Freddie Mac (about 60% of all California mortgages). It allows homeowners current on their monthly payments, but unable to refinance because of the drop in value of their homes, to refinance at today’s low interest rates and secure a lower monthly payment. But lenders were reluctant to negotiate with homeowners because of liability and other issues, strict requirements for homeowners’ credit ratings and income, and other tight rules. The original hope to help 3 to 4 million homeowners fell way short, with only about 822,000 actual mortgages refinanced.
  • HARP 2.0 is a redesigned refinance program which is taking effect right now. Many of the limitations and restrictions of the original plan have been removed, so that more lenders are likely to participate, and more homeowners likely to qualify. The program requires Fannie and Freddie to update their automated loan underwriting and approval software, which was to be completed in March 2012. You must have made at least 6 consecutive on-time mortgage payments, and your equity in the home must be less than 20%.
  • The nationwide settlement with 5 major banks, Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial a few weeks ago, will reduce home loans for up to 1 million homeowners across the country. California will receive up to $18 billion, to be used to modify loans for homeowners who are behind in their payments, repair blight in neighborhoods where there were multiple foreclosures, and other actions to alleviate the abuses that occurred in the home loan industry. This agreement does not apply to home loans held by Fannie and Freddie.
  • California Attorney General Kamala Harris is promoting a package of bills called the California Homeowner Bill of Rights, which would prohibit many of the unethical and risky practices of lenders, write the terms of the 5 bank nationwide settlement into state law and apply it to all lenders, investigate and prosecute foreclosure crimes, and give homeowners, renters and blighted neighborhoods new rights when properties are underwater and/or subject to foreclosure.
  • The federal government has now negotiated a blanket grant of permission from many large lenders to allow homeowners to refinance their 1st mortgages when they also have a 2nd mortgage or home equity line of credit. Until now, many lenders holding 2nd loans refused to agree to refinancing of a 1st loan.
  • The Small Business Administration has relaxed its rules for refinancing mortgages on small firms’ commercial property. Small businesses can now use refinancing proceeds to turn their real estate equity into working capital, to be spent on salaries, rent, utilities, inventory and other items.

Monday, August 20, 2012

Financial Problems? Points to Ponder...

When you lose a job, become injured or ill, lose a partner or spouse, or suffer any other blow to your finances, things can quickly go from bad to worse. Credit problems can really destroy your life.  Here are a few of the things that you may face:

Liens and Garnishment – If you owe money to a creditor and don’t repay it according to the terms of your agreement, the creditor may go to court and put a lien on your property; or may attach a portion of your earned income. A lien on property must be paid off when you sell the property. Garnished wages are deducted from every paycheck you receive, until the debt is repaid. Creditors are permitted to take up to 25% of each paycheck.

To garnish wages, the creditor must file an action in court, and the court issues you a summons to come to a hearing. You have an opportunity to explain why the debt is not paid, and whether you might be able to pay it soon. If you don’t attend the hearing, it is almost certain that the court will grant the creditor’s request, and the sheriff will be instructed to garnish your wages. The sheriff notifies your employer’s payroll department to start withholding money from your check, usually beginning with the next pay period.

It amazes me that so many people ignore a summons for a court hearing, and then rush in a panic to find an attorney when they receive a garnishment notice. It is often too late to do anything to prevent the garnishment once the sheriff’s notice has gone to your employer. Sometimes, if a person has severe financial problems, filing bankruptcy will stop the garnishment  -  but it takes time to file a petition. It can’t be done overnight. Most garnishment notices are received just a few days before the garnishment starts.

Cancelled or Forgiven Debts  -  Your credit card and other debts may have been written off by lenders, but you may still be on the hook because the amounts are considered taxable income to you. Creditors will send you an IRS Form 1099-C, showing the taxable amounts, and they also send a copy to the IRS, which will compare it to the tax return you file. You may not owe taxes on the amounts if you filed bankruptcy and those debts were discharged. If you did not file for bankruptcy, but your debts exceeded your assets when the debt was forgiven, some or all of it could be exempt from taxes. You must list all debts and all assets for the IRS on the appropriate forms.

Poor Credit Can Affect Employability  -  Some employers are now checking the credit of prospective employees, and passing over those with a prior bankruptcy or poor credit scores. These employers state that they believe poor credit shows a lack of responsibility. More and more states (including California) have now passed laws to restrict this practice, but often with exemptions for employees responsible for handling large amounts of cash. There are many good reasons for bankruptcy or poor credit scores, and financial problems are not necessarily a predictor of an employee’s ability to do the job.

Reverse Mortgages Can Lead to Foreclosures  -  A reverse mortgage loan allows older homeowners to convert the equity in their property into cash. This loan, the fees, and the interest on the loan do not have to be repaid until the house is sold. If any equity remains from the sale, it would pass on to you or your heirs.

But these loans can be risky. What happens if you use up the loan proceeds, and your remaining income is reduced because of medical problems, or your savings or investments run out? It is likely that you can no longer afford to pay property taxes and homeowners insurance, and if you fail to pay these, you will be in default on your loan. The lender can foreclose on your home. Instead of saving your home, you could be losing it after all.


Thursday, December 23, 2010

How To Make Your Life Miserable in One Easy Step

I am pretty sure I could remove my own appendix… but should I?  It takes years of study and training to make a person into a skilled surgeon.  If I had appendicitis, I definitely wouldn’t want an amateur doing the job.  I’ve had no medical training. I’m clueless when it comes to surgical techniques.  I think everyone would think I was crazy if I risked operating on myself. 

So, why is it that so many people think they can do it themselves when it comes to serious legal issues, tax problems or critical financial planning?  It takes years of training and study to become a lawyer, a CPA or a registered financial planner.  These professionals, like doctors, have acquired skills that other people don’t have.  But when there is a legal or financial crisis, people often choose to ignore the experts, and strike off on their own. 

I have noticed over the past few years that many people attempt to file bankruptcy on their own.  I explain to all my prospective clients that filing bankruptcy is a very serious matter, and there are many complex rules that have to be followed.  Every bit of income, every debt, and all assets have to be documented and verified.  Deadlines for filing various documents have to be met.  The bankruptcy petition itself is many, many pages of questions that have to be correctly answered.  There are the federal rules which must be followed, as well as local bankruptcy rules.   An experienced attorney knows how to navigate all of those rules, and understands how the system really works.  Wise debtors let an attorney handle their bankruptcy. 

However, all too often I have to pick up the pieces (if it’s possible to pick up the pieces) after “do-it-yourselfers” who think they know the law as well as an experienced lawyer.  The fall-out is always painful, and often ugly, for the client.  And worse, that person’s actions often affect family members and others.  I’ll tell you about two recent real-life examples which should serve as a strong reminder that legal work should be left to legal professionals:

 A prospective client called me. He was in a panic.  He told me he filed for bankruptcy pro per (meaning by himself and without the assistance of an attorney), and the bankruptcy trustee was selling his house because there was substantial equity.  He wanted me to jump in and “fix it.”  He desperately wanted my help, but it was too late.  In a Chapter 7 bankruptcy, once the process is started it’s extremely difficult to stop it.  This debtor did not understand the rules, and worse, he had relied on advice from his CPA, not an experienced attorney, on how to handle his house in the bankruptcy.  The CPA had little more understanding of the bankruptcy laws than his client.  The debtor’s decision to do it himself, and to rely on advice from a non-attorney, created a very unhappy situation.

 In another sad story of a pro per bankruptcy filer, a gentleman filed for Chapter 7 bankruptcy protection.  He did not properly list his income or his expenses, and used the wrong set of bankruptcy exemptions to protect his few assets.  There were so many red flags in his case that the United State’s Trustee took a keen interest, as well as the Chapter 7 bankruptcy trustee.  This led to numerous court hearings, examinations, and requests for documents.  The debtor wanted to have his case dismissed, to basically undo what he had done, but the Judge said no.  He was denied a discharge of his debts and prohibited from filing bankruptcy again for another year.  His case remains open though, and there is still the possibility that he will lose some of his assets.

 In both of these cases, had the pro per hired an experienced bankruptcy attorney, many of these issues could have been avoided.  In the first example, an attorney hired by the debtor would have immediately identified the equity in the house and the risks associated with filing.  The attorney could have advised the client to wait to file until the house was sold, or at least provided advice on what was likely to happen.  Timing can be everything.

 In the second example, an experienced attorney would have been well aware of all of the red flags.  The attorney would have used the correct set of exemptions and made sure that the income and expense calculations were accurate.  What became a nightmare of a bankruptcy could have been an ordinary, relatively simple route to a discharge of debts and a fresh start in life for the debtor.

 Doing it yourself sounds like a good way to save money and get the job done on your own time.  The first step may look easy…   but it’s all the steps that come after that can trip you up.  And those can be terribly costly and make your life miserable, for sure.




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