When the same thing keeps happening over and over again, I feel I should say something. Yesterday I met with a well-dressed, obviously educated and intelligent man. We talked about filing bankruptcy. He brought in and deposited on my desk a stack of documents that I usually request for such meetings. As I looked them over I said something that referred to him as having two mortgages. He seemed surprised and stated that he had only one mortgage.
At this point I had to take a breath and explain that a home equity line of credit is a mortgage, usually a second mortgage – but a mortgage. When you use a line of credit like that, it is like withdrawing money from a bank account – only it’s not money in a bank account, it’s the equity in your home. It always disturbs me to see people doing this because:
- Most don’t seem to realize that a home equity line of credit creates a lien on their home and therefore eats away at their home equity.
- Under Minnesota law the equity in our homes is one of the few things that most creditors cannot take away, except of course for a creditor holding a mortgage.
- Unlike a credit card debt or a medical bill, amounts owing on home equity lines must be paid, even in the event of a bankruptcy filing, unless the debtor is willing to let the home be foreclosed upon.
It seems to me that the loan officers do their best to make sure that consumers don’t understand the true nature of these credit lines. Not only don’t they explain it, but they can be downright deceptive about it. They talk as if it is free money, and encourage that kind of unhealthy thinking. Then they give the consumer an incomprehensible stack of papers that nobody understands, and say “sign here.”
I strongly suggest that if you need to go into debt for any reason, be sure you are doing it in a way that does not diminish the equity in your home. Beware of paperwork that puts a mortgage on your home in exchange for a favorable interest rate. That deal is not as good as it looks.
I attended a dinner last night which was hosted by my friend and former mentor, now retired attorney Alan Stiegler. He had invited me and several others to thank us for the part we had in getting his law review note, Redemption, finally published. Being on the law review is the highest honor that a law student can have. It is a student publication that reviews and comments on the legal issues of the day, but only about the top one percent or higher of the law students get to have anything to do with it. A “note” is an article, which these days can easily run over 100 pages. Mr. Stiegler’s note, Redemption, was supposed to have been published in the 1949 edition of the University of Minnesota Law review, but it never was. It was excellent work, and it is quite clear that the reason it was kept out of the publication was religious and ethnic discrimination.
I have known Mr. Stiegler for decades, but I heard this story for the first time during a visit I had with him in March, 2007. I asked him if he still had a copy of the transcript. He did. I suggested that these days with the Internet there must be dozens of places it could be published, perhaps even my web site. A few days later he dropped off a copy of the transcript at my office. After reading it, I felt even more strongly that it should be published somewhere. I began looking into possible sites where it could be posted; but Mr. Stielger felt so encouraged by the possibilities that he picked up the phone and called the office of the University of Minnesota Law review.
It was not long before a team of law review students was helping Mr. Stiegler check the citations, retype and edit the text, and prepare the “note” for publication in the current pages of the Law Review. The final form of the note can be found by clicking this link: http://www.law.umn.edu/lawreview/v91stiegler.htm. This brings you to a page with a link to a pdf document at the bottom. That pdf document is the “note.”
My part in this was quite small. Others attending the dinner included several of the students who had been staff of the Law Review, the professor who was their faculty advisor, and the librarian who will be adding Mr. Stiegler’s article to the University of Minnesota Law School’s permanent archives. My understanding is that the librarian also had a hand in helping the students find some of the publications, now in the rare book section of the law library, which had been originally cited by Mr. Stiegler.
An injustice which took place in 1949 has been corrected, and Mr. Stiegler – a well-deserving combat veteran or World War II – is happier and more at peace as a result. I want to thank those at the University Law Review, the law library and the faculty advisers, who choose to see that this was completed.
I just got back tonight from a week up north – mostly camping at Grand Marais, right by Lake Superior. It is good for the soul, and I feel refreshed in body and mind.
My wife and I have a 1999 Coleman pop-up camper – the Sun Valley model. In my younger days I was a purist. Camping meant hanging a tiny light-weight tent from my back pack and hiking as far into the woods as I could go. I would spend days out on the trail, and the more isolated it was the better. Now, however, I have gotten used to certain amenities, such as a microwave oven, an air conditioner, a propane heater, cable TV, cell phone service and wireless Internet. I still like to hike, but I don’t think I will ever go back to camping out of a backpack.
Last night after we packed up most of our stuff so we’d be ready to buzz for home this morning, we headed for a restaurant in Grand Marais called “My Sister’s Place.” I highly recommend this place. On our way over there my cell phone rang and it was a good friend, who told me about the collapse of the 35W bridge. Shortly after we got to the restaurant, I noticed that a lot of the people there were receiving cell phone calls. I could overhear a word or two so I knew that most of the calls were about that bridge. A certain subdued mood settled over the place. I imagined that similar scenes might be taking place all over the state, or at least anywhere that people from the Twin Cities might be gathered. Several folks started making calls, obviously to check on family or friends. I made a few of those calls too, but not until after leaving the restaurant.
I have a son in law who works within a few blocks of that bridge, so my daughter – his wife – was the first person I called. He had not yet come home from work, she couldn’t get him one the phone, and she was a bit worried. Eventually he showed up and all was well. Apparently I and the customers of My Sister’s Place were not the only ones making such calls to check on friends and family, and the Twin Cities phone system got really jammed up for a while.
So tomorrow it’s back to the law. I feel that my thinking will be clearer for having taken this trip.
There seems to be a lot of confusion these days about how to put a value on the assets when we list them on a bankruptcy petition. Under the old law it was easier. The value was what you could get for an item if you put it out in the front yard and had to sell it within 24 hours – or at least that was my interpretation of what the law said.
Under the new bankruptcy law the value is what it would cost to replace an item with exactly the same thing, with the same wear and tear and in exactly the same condition. That’s pretty theoretical, since it seems to require that you establish a value by finding the price of an exact duplicate of what you have. When we don’t know what to say for a value, I tell my clients to start looking at Craig’s List or Ebay and see if they can find what they have and at least establish a price range.
One of the most contested areas is the value of cars. It seems that the bankruptcy trustees want to use NADA values, which tend to be aimed at what a dealer should be able to get for a car. If a trustee does use Kelly Blue Book, it’s usually the dealership value. There is nothing in the law, however, that says you have to buy a car from a dealer or use dealership prices. Recently, in the Ramirez case (359 B.R. 794), a bankruptcy judge in Colorado decided that the proper standard for valuing an automobile is the Kelly Blue Book private party value, a number which is always a lot lower than the price that a dealer could get for the same vehicle. I applaud that decision. It seems right to me.
As far as I know, no bankruptcy judge in Minnesota has issued a written decision on the issue. I recently received an email from another attorney, however, stating that two of our judges have stated verbally from the bench that Kelly Blue Book private party value is the one to use.
For about a decade now I have been answering legal questions which I receive from LawGuru.com. I just posted a link to those answers at the right here on the blog. Over the years I have answered hundreds of questions on a great variety of topics. You can view the questions at http://www.lawguru.com/cgi/bbs/mesg.cgi?a=kellydav. From there I’m sure you can find a link for posting your own question should you choose to do so.
I usually put a little disclaimer at the end of each answer. A lot of the questions leave out essential information which if I only knew would change my response substantially. I am quite fond of saying that there is no substitute for a face to face meeting with a competent lawyer.
On my way back from Wisconsin on Sunday, as soon as we crossed the border into Minnesota, we were greeted by an electronic sign over the freeway announcing “Enhanced DWI Enforcement June 29 – July 9.”
This message appeared on all the electronic signs that I saw as I drove on my way home into Minnetonka. I wish I would have had a camera ready so I could ask my wife to get a photo of it to post on my site. We had plenty of cameras with us at the time, being on the way home from my daughter’s wedding, but they were packed away where we couldn’t get at them. If anyone happens to have a photo of that sign that they could email me, I would appreciate it.
It seems these days that the authorities have the enhanced enforcement every time there’s a major holiday. They did the same thing for the New Year’s holiday. Please consider yourself to have been warned. Enhanced enforcement means extra squad cars and officers with an attitude working overtime. They just might be a bit upset that you get to celebrate the holiday and they don’t.
And if the warning happens to have gotten past you or happens to have not been noticed by someone close to you — I’ll be keeping close to my cell phone waiting for your call. The number is 612-735-3797.
After a couple of bankruptcy hearings this morning, I’m heading to Wisconsin for the weekend where I am scheduled to walk my daughter down the aisle at her wedding. I will admit that the prospect of this event is distracting me from my usual preoccupation with solving legal questions. Could it be that there are a few things in life that are more important than my law practice? I guess so, but a lot of days it is hard to keep a healthy perspective.
I just answered a question on LawGuru.com concerning whether two DWIs received in Wisconsin would count toward making a DWI in Minnesota the third offense. The question basically was, “would a DWI in Minnesota now after two in Wisconsin be my first offense or third offense?” I guess I shouldn’t be surprised by the question, but I was. Is it a mystery that law enforcement across the country is hooked up with computers and are trading information about nearly everything?
Not only does an offense from another state count, but about a year ago the Minnesota courts decided that even if the prior offense violates Minnesota standards for advising the defendant of his or her right to a lawyer, it will be considered legal here if it was legal in the state where it happened.
So here is the answer I posted on LawGuru:
“It would be considered your third offense in ten years, and the state would seize your car – or the car you were driving at the time even if it is not
One thing I keep seeing in situations like yours is that the person with two priors always seems to be driving someone else’s car – and that’s the car that gets taken by the state. This is not the way to keep your friends, marriage or girlfriend. It really pisses people off when their car is gone for good and it’s your fault. The state doesn’t care if it’s a beater or a mercedes. It’s gone.
You can view my other answers at LawGuru by following this link: http://www.lawguru.com/cgi/bbs/attyPages/kellydav.html.
This topic is an example of how it pays to have some knowledge of more than one area of the law, since it crosses several borders from one practice area to another.
It has become a fairly common tactic for elderly people to transfer ownership of their home or farm to their children, and to keep a life estate. In other words, the children are given a deed which gives them ownership but provides that as long as the parents live, they retain possession of the property. People do this because besides avoiding probate, they hope it may help keep the property away from the state in the event that the parents wind up in a nursing home receiving Medicaid.
I cannot state more strongly how in my experience this has almost always turned out to be a bad idea. There is a waiting period of several years before it helps with the Medicaid issue, and most folks never wind up on Medicaid anyhow. Meanwhile, this is a non-exempt asset which any creditor with a judgment may be able to attach. Or in the event that one of the children has a bankruptcy or divorce, this is an asset that gets all tied up in those processes.
Just for good measure, if one of the children has a problem with the IRS or the Department of Revenue, this creates a handy asset for the tax men to grab.
My advice to most older people who may be thinking about this: keep your home ownership, keep your dignity; the problems you are about to create may be much worse than the possible aniticpated problem you are trying to solve.
I tell this story with permission from the person to whom it happened. To me it is sad, profound, a sign of the times and just awful – all at once. This sort of thing may have something to do with the fact that I seem to enjoy filing bankruptcies and more or less thumbing my nose at the big banks and credit card companies.
It seems here a few days ago that a woman from Minneapolis, who was behind in her auto loan payments, drove to the gas station and spent over $50 filling her tank with gas. With the prices going up as they have been, this is becoming a more common experience. I know it just happened to me.
Then after going home, and before having a chance to even use that gas, along came some repo guys with a tow truck who hooked up the car and drove away with it. On top of taking the car, they got her full tank of gas!!! How sad. How terrible.
I must admit to having a few unkind thoughts about the repo guys. I can’t help but wonder: by the time the car got to the lender or impound lot or whatever place they were taking it, did it still have the gas in it; or would repo guys be doing a bit of a black market gas business on the side?