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Monday, September 21, 2015

What happens to a debt after it is discharged bankruptcy?

After a debt is discharged, it is eliminated completely. The debtor is no longer legally required to make payments on the debt. The discharge is a court order that requires that all collection efforts on the debt cease. This is an extension of the automatic stay issued at the beginning of the bankruptcy. The creditor will likely write off this loss in tax filings, so some monies will be saved in this regard.  If the creditor attempts to collect on a debt in bankruptcy, or after it has already been discharged, the court may issue sanctions against the creditor. This is enforced whether the creditor attempts collection by letter, phone call or lawsuit. Not every debt is discharged in a chapter 7 bankruptcy, so it is important to confirm which debts are eligible before asking the court for assistance.

A discharge is typically issued automatically by the bankruptcy court four months after a bankruptcy petition is filed unless a timely objection is filed by a creditor. Once issued, a discharge can only be revoked if a creditor appeals to the bankruptcy court alleging that the petitioner obtained the discharge through fraud or that the petitioner failed to disclose pertinent information to the court, committed one of several acts of impropriety listed in the bankruptcy code or failed to provide adequate explanation of a misstatement in an audit of the case. 

There is nothing in the law preventing a debtor from making payments on a debt that has been discharged, even though there is no legal obligation to do so. If a discharged debt was owed to a friend or family member, however, there is no prohibition on repaying that debt. There are 19 categories of debt that must be paid even after a chapter 7 bankruptcy, including debts secured by collateral, such as homes or cars, most student loans, some tax debts and child support arrears. Individuals should speak to an attorney before declaring bankruptcy to determine if any debts are non-dischargeable in their individual cases.  


Monday, September 7, 2015

Would transferring your home to your children help avoid estate taxes?

Before transferring your home to your children, there are several issues that should be considered. Some are tax-related issues and some are none-tax issues that can have grave consequences on your livelihood. 

The first thing to keep in mind is that the current federal estate tax exemption is currently over $5 million and thus it is likely that you may not have an estate tax issue anyway. If you are married you and your spouse can double that exemption to over $10 million. So, make sure the federal estate tax is truly an issue for you before proceeding.

Second, if you gift the home to your kids now they will legally be the owners. If they get sued or divorced, a creditor or an ex- in-law may end up with an interest in the house and could evict you. Also, if a child dies before you, that child’s interest may pass to his or her spouse or child who may want the house sold so they can simply get their money.

Third, if you give the kids the house now, their income tax basis will be the same as yours is (the value at which you purchased it) and thus when the house is later sold they may have to pay a significant capital gains tax on the difference. On the other hand if you pass it to them at death their basis gets stepped-up to the value of the home at your death, which will reduce or eliminate the capital gains tax the children will pay.

Fourth, if you gift the house now you likely will lose some property tax exemptions such as the homestead exemption because that exemption is normally only available for owner-occupied homes.

Fifth, you will still have to report the gift on a gift tax return and the value of the home will reduce your estate tax exemption available at death, though any future appreciation will be removed from your taxable estate. 

Finally, there may be more efficient ways to do this through the use of a special qualified personal residence trust.  Given the multitude of tax and practical issues involved, it would be best to seek the advice of an estate planning attorney before making any transfers of your property.


Monday, August 17, 2015

Medical Debt & Bankruptcy

My husband and I are facing bankruptcy primarily due to our insurmountable medical debt. Will these charges be forgiven? Or will we still owe a portion of the outstanding balances?

Medical debt is one of the hallmark dischargeable debts in Chapter 7 consumer bankruptcy – and may be totally erased by a successful bankruptcy filing. According to data compiled by the U.S. Census Bureau and the federal bankruptcy courts, medical debt remains the reigning number one cause of bankruptcy in the United States. Fortunately, bankruptcy laws consider medical debt to be a “nonpriority unsecured debt,” meaning it will more than likely disappear at the conclusion of the discharge process – a welcome relief for overburdened debtors, many of whom are dealing with significant health issues as well.

Understanding the debt hierarchy

During the bankruptcy process, the trustee assigned to the file will be required to evaluate the petitioner’s assets and pay off as many outstanding debts as possible. Once an asset profile is identified, the trustee will begin with secured debts, which are those attached to underlying collateral (e.g., home, vehicle, boat). Debtors may choose to walk away from these debts, reaffirm the debt, or redeem the debt. From there, the trustee will require payment of high priority unsecured debts, including taxes or child support obligations. These types of debts are generally not dischargeable, and must be paid regardless of the petitioner’s status in bankruptcy. Lastly, unsecured nonpriority debts are those that are dischargeable in the bankruptcy process, provided the debtor is unable to pay the outstanding balance – and, fortunately, this category includes medical debts.

Dealing with medical debt in bankruptcy

If a petitioner’s available assets are depleted to pay secured or high priority debts, he or she may be able to discharge medical debt in its entirety. If, however, assets remain to put toward an outstanding balance at a hospital or practitioner’s office, the trustee will ensure the petitioner pays as much as possible toward the balance. After all assets and available cash are depleted, remaining nonpriority unsecured debts will be discharged, allowing the petitioner to more on toward a brighter financial future.


Thursday, August 6, 2015

Seven Tips for Negotiating Your Divorce Settlement

Regardless of how long you have been married, negotiating a settlement is the most important part of the divorce process. Although it is no easy task, working with your spouse to arrive at mutually agreed terms of your marital dissolution is easier on your wallet and your psyche. Whatever conditions caused the breakdown in the marriage are likely still present throughout the divorce negotiation, exacerbated by emotions such as anger and fear as you each transition into the next stage of your lives.

However, staying focused on what’s best for your future will serve you well as you navigate these tumultuous waters. Taking your divorce case to trial and letting the court decide what will become of your property or children is rarely in your best interest. Although you may not get everything you hoped for during a settlement negotiation, you will save a tremendous amount of money, time and emotional anguish.

Divorce settlement negotiations involve a degree of both skill and art, both of which can be attained by following a few simple tips. Even if your attorney is doing the negotiating on your behalf, it is important that you are clear regarding your priorities, so you can make decisions that are truly in your own best interest for the future life you are establishing post-divorce.

Negotiating a settlement agreement necessarily involves a certain amount of give and take, on both sides, so keep in mind that you most likely won’t get everything you want. But following the tips below can help ensure you get what’s most important to you.

  • Establish clear priorities.
  • Know what you can give up completely, where you can be flexible and those critical items where you are unable to budge.
  • Be realistic about your options and the bigger picture, so you can be reasonable when you must “give” something in order to “take” something.
  • Stay focused on the negotiation itself, and your future; avoid recalling past resentments or re-opening past wounds. Your divorce settlement negotiation is no place for “revenge” which can ultimately delay your case and cost you thousands in unnecessary legal expenses.
  • If your soon-to-be-ex-spouse becomes emotional or subjects you to personal attacks, don’t take it personally. This may be easier said than done, but it is important to stay focused on your priorities and realize that such “noise” does not get you any closer to a settlement agreement.
  • If you spouse presents you with a settlement offer, consider it carefully and discuss it with your attorney. It may not include everything you want, but that may be a fair trade off in order to finalize your divorce and move on with your new life.
  • If you are negotiating your own settlement agreement, consult with an attorney before you make an offer to your spouse or sign any proposed agreement.

By keeping the focus on your priorities, and avoiding the emotionally-charged aspects of your failed marriage, you can ensure you negotiate a divorce settlement agreement that you can live with.
 


Monday, July 27, 2015

Estate Planning for the Chronically Ill

There are certain considerations that should be kept in mind for those with chronic illnesses.   Before addressing this issue, there should be some clarification as to the definition of "chronically ill." There are at least two definitions of chronically ill. The first is likely the most common meaning, which is an illness that a person may live with for many years. Diseases such as diabetes, cardiovascular disease, lupus, multiple sclerosis, hepatitis C and asthma are some of the more familiar chronic illnesses. Contrast that with a legal definition of chronic illness which usually means that the person is unable to perform at least two activities of daily living such as eating, toileting, transferring, bathing and dressing, or requires considerable supervision to protect from crisis relating to health and safety due to severe impairment concerning mind, or having a level of disability similar to that determined by the Social Security Administration for disability benefits. Having said all of that, the estate planning such a person may undertake will likely be similar to that of a healthy person, but there will likely be a higher sense of urgency and it will be much more "real" and less "hypothetical."

Most healthy individuals view the estate planning they establish as not having any applicability for years, perhaps even decades. Whereas a chronically ill person more acutely appreciates that the planning he or she does will have real consequences in his or her life and the life of loved ones. Some of the most important planning will center around who the person appoints as his or her health care decision maker and also who is appointed to handle financial affairs. a will and/or revocable living trust will play a central role in the person's planning as well.  Care should also be taken to address possible Medicaid planning benefits.  A consultation with an estate planning and elder law attorney is critical to ensuring all necessary planning steps are contemplated and eventually implemented. 


Monday, July 20, 2015

Student Loans & Bankruptcy: What are the Options?

I am drowning in student loan debt. Is this debt dischargeable in bankruptcy?

Traditionally, student loans were not considered a dischargeable debt under federal bankruptcy laws. However, as national student loan debt has skyrocketed into the trillions of dollars, struggling graduates may be able to escape the burden of four-figure monthly payments by successfully proving severe financial hardship. As well, there are a number of less common avenues through which student loan debt may be discharged, which could be a financial life-saver for those meeting eligibility criteria.

Three-prong undue hardship test

Under current consumer bankruptcy law, there is a three-part test to determine if a student loan is dischargeable based on undue hardship. First, you must prove that, if forced to repay the loan under its minimum payment terms, you would be unable to maintain a minimum standard of living. While the phrase “minimum standard of living” has not been officially defined in the bankruptcy code, it is generally considered to mean the financial ability to maintain adequate housing and meet daily needs for the borrower and his or her dependents.

Second, the borrower must show that the inability to maintain a minimum standard of living is not temporary in nature, and is likely to continue throughout the duration of the loan repayment period. Lastly, discharge may be possible if you have made a true good faith effort to repay the loan prior to filing for bankruptcy – which means a period of at least five years.

Known as the Brunner test, this three-prong analysis looks for poverty, persistence, and good faith – and may be a good option for borrowers who have tried, but are simply unable, to repay that those looming and unrelenting education debts.

Other options

As a debtor, there may be other options for avoiding student loan repayment, primarily if your alma mater  is involved in any kind of investigation for fraud or consumer deceit. In some instances, students have earned relief from some or all of their student loans by successfully highlighting their school’s false promises or exaggerated graduation/employment rates – thereby triggering a consumer protection or breach of contract action.


Monday, July 6, 2015

The Two Paths to Asylum

“Give me your tired, your poor,

Your huddled masses yearning to breathe free,

The wretched refuse of your teeming shore.

Send these, the homeless, tempest-tost to me,

I lift my lamp beside the golden door!”

This, according to Emma Lazarus’s famous poem “The New Colossus,” is what the Statute of Liberty cries to the world. It is a reminder that America opens its doors to the most desperate of immigrants, those whose very life is threatened if they return to their home country.  In this day and age many of these immigrants are refugees seeking asylum.

A refugee is “someone who is unable or unwilling to return to and avail himself or herself of the protection of his or her country of nationality or, if stateless, country of last habitual residence because of persecution or a well-founded fear of persecution on account of race, religion, nationality, membership in a particular social group, or political opinion.”

There are actually two paths to asylum self-proclaimed refugees can take, known as affirmative and defensive asylum respectively. Which path is appropriate depends largely on the filer’s current immigration status.

Affirmative asylum is available to refugees who have been physically present in the United States for less than a year, regardless of their immigration status. An application for affirmative asylum is filed directly with U.S. Citizenship and Immigration Services (USCIS). If a self-proclaimed refugee has been physically present in the United States for more than a year, he or she can still apply for affirmative asylum if he or she can show that circumstances that materially affect his or her eligibility for asylum have changed, or that extraordinary circumstances delayed his or her filing. He or she must apply for affirmative asylum within a reasonable amount of time given the circumstances.

Defensive asylum, as the name suggests, is a defense to deportation. It is filed with the immigration judge presiding over the self-proclaimed refugee’s removal proceeding.

The key to success in both affirmative and defensive cases is proving the applicant is truly a refugee as defined above. How the evidence is presented depends on the type of asylum.

Affirmative applications for asylum are heard by USCIS Asylum Officers. The process is a non-adversarial interview. Defensive applications are heard by Immigration Judges in adversarial (court-like) proceedings.

If you think you are a refugee, you should contact an experienced immigration immediately in order to apply for asylum.


Tuesday, June 30, 2015

Is There Anyway a Disinherited Child Could Receive an Inheritance From an Estate?

If your estate plan and related documents are properly and carefully drafted, it is highly unlikely that the court will disregard your wishes and award the excluded child an inheritance.  As unlikely as it may be, there are certain situations where this child could end up receiving an inheritance depending upon a variety of factors.

To understand how a disinherited child could benefit, you must understand how assets pass after death.  How a particular asset passes at death depends upon the type of asset and how it is titled. For example, a jointly titled asset will pass to the surviving joint owner regardless of what a will or a trust says. So, in the unlikely event that the disinherited child was a joint owner, that child would still inherit the asset because of how it was titled.

Similarly, if you left that disinherited child as a named beneficiary on a life insurance policy or retirement plan asset, such as an IRA or 401k, that child would still receive some of the benefits as the named beneficiary even if your will stated they were to take nothing. Another way such a "disinherited" child might receive a benefit is if all other named beneficiaries died before you.

So, assume you have three children and you wish to disinherit one of them and you state you want all of your assets to go to the other two, and if they are not alive, then to their descendants.  If those other two children die before you and do not have any descendants, there may be a provision that in such a case your "heirs at law" are to take your entire estate and that would include the child you intended to disinherit.

If you wish to disinherit a child, all of these issues can be addressed with proper and careful drafting by a qualified estate planning lawyer.  


Friday, June 26, 2015

Mediation & Alternative Dispute Resolution Options in Divorce

My spouse and I would like to pursue an amicable divorce, and would like to stay out of court if at all possible. Are there alternative methods to divorce resolution?

With the dawning of no-fault divorce in New York, couples looking for a more amicable, less-stressful dissolution experience may be able to achieve such results through the use of alternative dispute resolution. Namely, mediation and collaborative divorce models have proven wildly successful in New York and elsewhere, allowing families the opportunity to transition their family dynamics with dignity and grace, as opposed to name-calling and vitriol.

Collaborative divorce

As the name suggests, a collaborative divorce is one in which all parties agree to forgo litigation (i.e., court intervention) in lieu of working together to arrive at a practicable solution. Issues ranging from spousal support to child visitation are negotiated in a non-adversarial environment, and parties are encouraged to work together – as opposed to in opposition – to arrive at a settlement agreement that meets the needs of the family as a whole. Collaborative divorce relies on the mutual agreement by both spouses to engage in full disclosure during all negotiations, as well as treat all parties involved with respect.

Mediation

As a component of the traditional divorce model, mediation is often used when parties are stuck on a particular issue, and is designed to avoid the costs and time investment of full-blown litigation. In lieu of the formal adversarial process, parties are seated at a table before a neutral third party. This third party will then work with both sides to determine the most important factors at play, as well as offer solutions for both parties to consider. If, at the conclusion of the session, an agreement cannot be reached, parties will be scheduled for a full hearing before a New York judge.


Tuesday, June 23, 2015

The American Dream is Alive and Well

The Internet can be a very hostile place, with trolls and bullies lurking around every corner. So it came as a big surprise when a photo of an illegal immigrant graduating from college went viral, not for generating an outpouring of xenophobia and hate, but of support.

The popular blog Humans of New York (HONY) was bombarded with positive comments after it posted a picture of a young lady in cap and gown with her accompanying quote “I’m an illegal immigrant.” Many commenters offered words of encouragement, with several noting that she is the living embodiment of the American Dream.

Others pointed out that the young woman's comment could be interpreted as a joke. If she were in this country on an educational visa, it would technically have expired the moment she got her diploma. 

Although the public is supportive of immigrants working towards a better life, immigration officials are not allowed to give you a free pass just because you are in school. Student visas are relatively easy to obtain compared to other types of visas, so there is really no reason not to have legal status while you are in school.

If you are an immigrant and are pursuing the American dream via starting your own business or seeking employment with a business within the United States, you may qualify for a different type of visa.  For example, those looking to work in the United States can apply for H1B, H2B and L1 visa’s among others.

If you are an immigrant, and your American Dream involves getting a college education, graduate degree, working for an American company or starting your own business within the United States, we strongly recommend hiring an experienced immigration attorney to help you navigate the system.


Monday, May 25, 2015

Effects of Bankruptcy on an Inheritance

If you are expecting an inheritance but considering personal bankruptcy, you might be concerned about what will happen. Whether an inheritance gets pulled into an ongoing bankruptcy proceeding depends on the size and form of the inheritance, the type of bankruptcy filed, and the timing of the death of the person leaving the inheritance relative to the filing of the bankruptcy proceeding.

Size and Form of the Inheritance

The word “inheritance” is most often associated with money; however, many estates consist of far more than cash. The nature of the item inherited can determine whether it is pulled into the bankruptcy estate of the recipient. For example, a vacation cabin on the lake that is passed down to multiple family members is going to be treated differently by the bankruptcy court than a few shares of stock willed to an individual.

Type of Bankruptcy

There are two different chapters under which most debtors file for personal bankruptcy: Chapter 7 and Chapter 13. In a Chapter 7 case, the bankruptcy trustee can typically take the inheritance and liquidate it in order to pay off creditors, unless the debtor has an exemption they can use to protect it. In a Chapter 13 case, the debtor is more likely to be able to keep the inheritance, but he or she could see the repayment obligations to creditors increase.

Timing Issues

Whether an inheritance is part of the bankruptcy estate, and thus reachable by creditors, depends largely on when the bankruptcy was filed relative to when the person who left the inheritance passed away.

If the person who left the debtor the inheritance died within 180 days of the bankruptcy, the inheritance is part of the bankruptcy estate. There are two important things to note about this rule. First, it is the date of death, not the date that an inheritance is received, that matters. Second, the 180 days count both backward from the date of filing and forward from the date the bankruptcy is closed.

If you are currently going through a bankruptcy without the assistance of an attorney, or you are considering filing a bankruptcy and you have received notice of an inheritance (or even if you think you might be inheriting something in the near future), it is important to seek advice from an experienced bankruptcy attorney.


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