Moving to New Location Today

Anyone who has spoken with me over the past few months knows that I have been moaning and complaining about how my landlord was selling out to a developer and the building containing my office is scheduled to be torn down.  My beautiful office being destroyed.  It saddens me.

As of this morning, however, the moving truck is on its way and I hope to be unpacking at my new location as of late this afternoon.  The telephone and internet man is not coming until tomorrow morning, however, so that means that communications via my land line may be disrupted for a while.  If you need me the best bet will be to call  my cell – 612-735-3797.

The new location will be 11900 Wayzata Blvd. #116E, Minnetonka, MN 55305.  This is on the frontage road on the north side of 394 between Hopkins Crossroad and Ridgedale Drive.  It’s about a block east of the Staples store.  The office complex is called Marsh Run.

As many of you know, my old office had a patio and a back yard – something that an office would not ordinarily have.  For an office it was wonderful, and I loved it.  I didn’t think I would ever find any kind of an office space even close when it came to an amenity like that.  But I have managed to find something that has some similarity in that regard.  The new office actually has a deck that overlooks a little pond.  As far as the view goes, it is actually better  than the old office.

I’m going to be pretty distracted with moving and getting unpacked for the next few days; but taking  care of my clients and taking care of business has priority.  Everything that needs immediate attention will be taken care of.  As I said, if you need me just call my cell:  612-735-3797.

Payday Loans – NO NO NO NO NO

I see on my Google Plus page that an outfit called “Get Payday Loans” has added me to their circles – or something.  Usually I would add them back, but I just can’t do it.  From where I sit payday loans are about the most evil thing on the planet.  They are very addictive.  Once a person gets started, they are drawn into debt and will have the devil of a time getting out.

I have never done a study or looked at any statistics on this subject.  However, I have dealt with these in numerous bankruptcy cases, so I have some opinions based on what I  myself have seen – at least what it looks like to me.  For one thing, it looks to me as if the rates they charge are very high.  Another thing I seem to be seeing is that some of the banks seem to like these things – I suspect because they charge a fee to set them up on a customer’s checking account so that when the pay check is deposited, the money automatically disappears to the lender.

I believe that anything which is automatic – happening painlessly behind the scenes without drawing full attention to itself – makes it easier to get deeply in debt.

So no, I’m not adding “Get Payday Loans” back.

What to Bring to the First Meeting at My Offce

For me the starting point for most bankruptcy cases is a call from the prospective client.  If you are reading this that could be you.  Before anything else I like to do a screening over the phone.  This can be done in about fifteen minutes, sometimes maybe a bit longer.  No need to be afraid of me.  I’m easy to talk to.  There’s no fee for the phone conversation.  If the information from the phone conversation indicates that bankruptcy is appropriate, whether that be a Chapter 7 or a Chapter 13, the next thing I want to do is meet face to face in my office for a more serious consultation. For this I will charge a small consultation fee, which I will have quoted in the phone conversation.  I will credit the consultation fee against my fee for the case if we decide to go ahead.  If I suggest that you come in for a consultation, it’s because I’m already fairly certain that it is a case I would accept.

There are four batches of information that I would ask you to bring when you come:

  1. Forms.  There are two forms on my web site, the bankruptcy questionnaire and the monthly expense sheet.   Please print these two forms and fill them out in pen and ink.  Pencil is OK too.  Then bring them with you when you come.  Some of the questions, especially on the first form, are hard to answer.  If you can’t figure out the question, leave it blank and we’ll talk about it when you come in.  Complete the expense sheet to the best of your ability, and we’ll go over those numbers when you come in too.  Remember that things you charged on a credit card count as an expense as well as the things you paid for in cash or by means of your checking account.
  2. Tax returns.  I’d like to see your state and federal tax returns for the past two calendar years, along with your W2s and any similar supporting paperwork.  At the time of writing this post, that would be the returns for 2011 and 2012.  If you filed for a Minnesota property tax refund or Minnesota rent credit, I’d like to see that return for the past two calendar years as well.  If you file separate returns for your corporation or LLC, bring them along as well.
  3. Pay stubs and income information for the past seven months.  I need to see the last seven months of pay stubs from your your job and from the job of your spouse.  If you don’t have them, get them from your employer or from your employer’s web site.  By seven months I mean the six previous months plus the month we are in.  If you don’t have pay stubs because you are self employed, I need a spread sheet showing your gross income and your business-related expenses for that same seven month period.  If you don’t have pay stubs because you are unemployed, I need detailed info on what unemployment benefits you are receiving and what taxes are being withheld from your benefits if any.  If you are receiving child support or spousal maintenance, I would want dates and amounts received during that seven month period.  If you are on  Social Security or Social Security Disability, provide me with details of how much you received gross in the past seven months and what if anything was withheld from that.  If there is any kind of income coming in from anywhere, I need to know about it.
  4. Details about your debts.  I want to see every piece of paper you have describing each and every debt.  Include your credit cards, car loans, mortgages, tax debts, student loans and any fines and penalties you owe.  I usually can’t make the student loans go away, but I still need to know all about them.  You probably intend to keep paying your mortgages and car loans, but we need to list them anyway.  Some of your tax debt may be dischargeable, but even if it isn’t we need to list it all.  Be sure to include nasty letters from lawyers and collection agencies.  Eventually we will be checking your credit report, but for the first meeting the information you have handy about your debt will probably be enough.

As you might have gathered by this point, that consultation in my office is usually quite thorough.  I should be able to give you an opinion concerning your situation that will be worth the trip.  Figure on spending an hour and a half – more if we are planning on running a means test.

Tax Season is Upon Us

Well, tax season is upon us. I am hearing from quite a few folks who have returns ready to file but don’t have the money that they are required to pay in. What I usually say is that in most circumstances it is better to file the return without paying than it is to delay filing. If you file your return without paying, the taxes you owe might be dischargeable in a bankruptcy three years from now; but if you don’t file the return, chances are that the taxes would never be dischargeable in bankruptcy.

Another reason to file is that tax filings are required to be up to date prior to the filing of a Chapter 13 bankruptcy.  And for Chapter 7 bankruptcy it is best to have them up to date.  It is possible to file a Chapter 7 without having the tax filings all finished, but it is not a good idea.  In any bankruptcy case you are required to list all your assets and all your liabilities.  A tax refund is an asset, and if you owe taxes that certainly is a liability.  Either way, without the taxes done, you don’t know what you have and you can’t  provide the full information that is required in the bankruptcy petition.

Some situations may call for something different, but most of the time it’s best to file on time even if you can’t pay on time.  The IRS and the Minnesota Department of Revenue are usually fairly easy to work with when it comes to setting up payment plans.

Keeping Your House in a Chapter 7 Bankruptcy

Can the lien of the second mortgage be removed from my house? - Bankruptcy

Of all the questions I get asked, “can I keep my house” could be the most frequent.  I have a long article about it on my site, probably too long.  For one thing, the web page covers both Chapter 7 and Chapter 13.  For another thing, the article covers the topic of letting the house go as well as keeping it.  Here I’d like to just say a few simple words about keeping your house – the house you are living in – when you file a Chapter 7 bankruptcy.

So here I’m assuming that you are filing a Chapter 7 and you want to keep your house.  If you have any equity in the house, that equity will have to be claimed as exempt in order to keep the bankruptcy trustee from taking the house away from you.  In most cases claiming the house as exempt it  easy.  If the equity doesn’t exceed $10,000 for a single person or $20,000 for a married couple, we can claim the house as exempt under the federal exemptions.  If the equity is more than that, it would be best to use the Minnesota state exemptions which allow for up to $390,000 of equity.

Once we are satisfied that your equity is protected as exempt, the next issue is the mortgages.  We have to list those in the bankruptcy petition like any other debt, and that means that your personal obligation to pay them should eventually be discharged.  I say mortgages in the plural, because most of my clients seem to have two – a first and a second.  Some people I talk with seem to think that if their mortgage obligations are discharged, then the house is free and clear.  That is not the case.  The mortgage liens remain on the house even though the debt or debts themselves are discharged.  Ths means that if you want to keep the house long term after filing a Chapter 7 bankruptcy, you need to plan on continuing to pay the mortgages.

This is a bit of a simplication, and for more detail read my keep my house page.  But what it usually comes down to is being able to claim the equity as exempt and being able to keep making the payments.

It’s Always Something

I hate this.  I have a lease for my office that covers the next two years, but the landlord just announced to me and the rest of the tenants that the place will be torn down in the next few months to make way for some sort of new development.

I love this place.  Maybe I’ll have to chain myself to my desk or something.

It’s like Rosanne Rosannadanna used to say, it’s always something.  https://www.youtube.com/watch?v=Z7gLJr03vNQ

Sales Tax on Legal Services?

Payday loan worries
Now my bankruptcy is going to be taxed?
Now my bankruptcy is going to be taxed?

Minnesota Governor Mark Dayton just announced that he wants to levy a sales tax on legal services.  I think I heard the proposed rate is 5.5%.  Funny, I always thought that the filing fees that we already have to pay were a sort of tax.  Not long ago , under the previous governor, all the filing fees in Minnesota were increased dramatically because of state budget problems.

I wonder if besides the attorney fee he also wants to tax the filing fees.  Since all I do is bankruptcy work, which is always filed in federal court, the filing fees I collect from my clients are all for the federal court.  Query:  Is it constitutional for a state to put a sales tax on a federal fee?

If you are from a state where attorney fees are already subject to a sales tax, I would be interested to hear the details of how it is done in your state and what the clients think about it.  My clients are already about as broke as they can get.   To tell you the truth, this feels very uncaring to me.  I understand that one state legislator is already talking about how this tax is going to help people.

Here’s a link to an article in today’s Star Tribune on the subject.

What NOT to do while going Over the Fiscal Cliff

Cliff near Pike's Peak

 

Cliff near Pike's Peak
Watch out for the temptation to under withhold .

Most people I talk to have not heard of the “fiscal cliff.”  Those who have believe it will not affect them.  This includes a husband and wife I met with yesterday.  But when I ran the numbers for them, based on a November 1st article in Forbes, I found that between the two of them their paycheck withholding should go up by about $438 per month.  That is, the net take home pay for the two of them together will be $438 less per month starting January 2, 2012.  That is just a few days from now.  When I tried to warn them and suggested that they should be thinking about how they would deal with this, they blew me off.  They are absolutely in denial about the prospect that this could ever happen.  If we go over the fiscal cliff as scheduled,  this should come as a heck of a shock.

My calculations assume, of course, that no steps will be taken to reduce the impact of the fiscal cliff.

From where I sit it looks like a majority of people are living right on the edge.  For them a drop in take home pay like this will mean they no longer have the funds to pay their credit card debt.  Often when people are in such a situation, they go to their employer and increase the number of exemptions they are claiming for withholding purposes on their paychecks.  They claim more withholding exemptions than they should.  Some increase the number of exemptions to the point that no taxes are being withheld at all, and for them all that is withheld is social security and medicare.  This increases their take home pay, but it is at the cost of not having enough taken out to cover state and federal tax liability.  The income which should have been withheld for taxes is then used to make payments on credit card debt.  Often this is still not enough to get that credit card debt under control.

When it comes time to file their tax return, they find that they owe a tax debt which is too large for them to pay.   Now on top of the credit card debt there is a substantial tax debt.  Eventually they wind up in my office.  I can help get rid of the credit card debt.  But as long as the tax debt is less than three years old, there’s nothing I can do to help with the tax debt.

The worst creditors you can have are the IRS and the Minnesota Department of Revenue.  In almost all circumstances, it is better to stop paying other debts before you stop or reduce the withholding of taxes from your pay check.  Don’t fall for the temptation to unreasonably increase the exemptions you claim for withholding from your paycheck.  That will work for a short time, and then you’ll really wish you hadn’t done that.

This post is for general information purposes only and should not be considered legal advice.  You should consult the attorney of your choice concerning the details of our case.  Reading or responding to this post does not create an attorney-client relationship.  I am a debt relief agency helping people to file for relief under the federal bankruptcy code.

 

A Heart Warming Holiday Thank You

The day before Thanksgiving I received an email from a client whose Chapter 13 we wrapped up in 2011.  He had thanked me profusely at the time back in 2011, but he was still remembering me this year and he wanted me to know it.  He thanked me again, saying he just couldn’t forget how helpful

Jellybean the Basset Hound
Jellybean today, happy and Healthy

I had been.  The reason he is still thanking me is that he credits me with having saved the life of one of his best friends, a Basset Hound named Jellybean.

While it is commonly said that bankruptcy is a lifesaver, it is rare to be able to point to a specific situation and say here’s where I saved a life.  The story in this case goes like this.  When a Chapter 13 debtor has bonuses on a regular basis, the trustee usually requires a provision in the Plan providing that all or part of each bonus be paid into the plan as an additional payment.  When I have a case  where there are such bonuses, the provision I usually put into the Chapter 13 Plan says that when a bonus is received, that has to be reported to the  trustee.  Then the trustee is to determine what portion of the bonus is to be paid into the plan.  This leaves a bit of wiggle room to argue about letting the debtor keep part of the  bonus should a special need arise.

So when this particular client reported to me that he had received an unusually large bonus, my first question was whether anything was going on for which he really needed to use part of the money.  He  said yes but he didn’t suppose there  was much that could be done about it.  It turned out that his Basset Hound, known as Jellybean, was very ill.   Jellybean had a form of cancer that resulted in tumors all over the inside of his mouth.  They could be removed surgically and the chances of recovery were very good, but the surgery was expensive – a couple thousand dollars.  Without the surgery Jellybean didn’t have long to live, and  my client was already resigned to seeing his good friend die.  With all available funds being paid into the Chapter 13 Plan, he definitely could not afford the surgery.  It was very sad because Jellybean was nowhere near the end of what would have been his normal life span.

Well, I said I couldn’t promise anything but let me see what I could do.  This bonus was huge, more than anything we had been expecting, and the funds needed for the surgery would be a relatively small portion.  I contacted a staff attorney at the trustee’s office and made my pitch.  I’ll never forget that conversation.  I went into it without a lot of confidence.  I was just thinking “well it never hurts to ask.”  Somewhat to my surprise the staff attorney remarked that he had a warm spot in his heart for dogs.  He noted that payments into this Plan were becoming much more than we had expected at the beginning.  If I recall correctly, the trustee’s office may also have grabbed a tax refund from my client.  There was now a good chance that 100% of the claims in the case would be paid.  I was instructed to never expect that anything like this would ever be granted again, but this time and THIS TIME ONLY they would let my client keep enough for the surgery. When the surgery was done, we were to provide the trustee’s office with a receipt from the veterinarian proving that was where the money had gone.

I love it when I have some good news for my client, because so very often I’m the guy with the bad news.  When I told my client about this he was delighted and very thankful.  He  scheduled the surgery right away, and Jellybean come through with flying colors.  Now this holiday season my former client is debt free and still has the company of Jellybean, the Basset Hound and his good friend.

I hope this story warms your heart as it does for me.  Merry Christmas, Happy Hanukkah, Happy New Year, and may all your holidays this year be joyous.

Good “Business Insider” Article on How Much Student Loan Debt a Person can Manage

When I sit down and go over debts with a client, I find that at least a third of my clients have massive student loan debts – way more than they could ever get paid based on their current income.  It is my job to explain that student loan debt cannot be discharged in bankruptcy, at least not unless one is seriously ill or disabled.  I used to do adversary petitions asking the court to declare student loans dischargeable, but I have given up on that.  Over the years the standards have tightened to the point that I view winning one of those as nearly impossible.

So it was with great interest that I read an article this morning in Business Insider about a future law student who just figured out that the kind of student loan debt required to complete law school would be “like walking into my own grave.”  The article includes a video which apparently comes from Yahoo.  The video makes reference to thousands of law school graduates unemployed and living in their mother’s basement.  I haven’t seen it so much with law school graduates, but I have done bankruptcy work for all sorts of other graduates who were unable to find work in their field.

If I am hearing and reading this correctly, the article says to not run up more student loan debt than a sum equal to one third or one half of the income you anticipate from your first job after graduation.  For many I would take that to mean that if massive student loan debt is required for a particular program, then that educational program is probably not worth it.

This is for general information purposes only and does not create an attorney-client relationship.  I am a debt relief agency helping people to file for relief under the federal bankruptcy code.