Image: Filomena Scalise / FreeDigitalPhotos.net
Tennessee has increased its personal asset exemption limit from $4,000 (which was written into the laws in 1980) to $10,000. The new law was passed April 5, 2010, and it went into effect July 1, 2010. This law will help debtors in Tennessee keep a greater amount of possessions, which will help reduce the chance of them becoming burdens of the State. See TCA 26-2-103 (http://www.michie.com/tennessee/lpext.dll?f=templates&fn=main-h.htm&cp=) (not yet updated on the official TCA website as of July 5, 2010) for reference.
Many of my debtors come to me, and they are panicked about the thought of the trustee in a bankruptcy taking their belongings. Tennessee does not have expansive exemptions, so there is some concern, but, as always, it depends on the situation. Generally speaking, a single debtor is permitted $10,000 worth of assets (this limit is new as of July 1, 2010). This includes the money in your bank accounts, your furniture, and the equity in your car, among other things. Your 401(k), IRA, and clothing come under separate exemption categories and are not included in the $10,000. What the exemption limit means is that, as a debtor, if your assets are worth more than $10,000, the trustee can conceivably come to your house and take your property that exceeds the $10,000 limit. This is a scary thought. Remember though, that actions involving a court do not happen willy-nilly. Rather, the trustee and your attorney will be having discussions about the value of your assets, and you will have more than adequate warning if the trustee needs to come and value your assets to potentially seize them.
Now, some people ask me then, “well, can I just give my car to my mom?” No. You will need to account for any such gifts of assets on your statement of financial affairs. If you sell your assets for a reasonable price and use the money for living expenses, the trustee generally does not take issue with such actions. However, it is generally a bad idea to transfer ownership for a nominal or no price to a relative immediately before filing bankruptcy. The trustee could cite you with committing bankruptcy fraud, and then you would not be granted a discharge and could face stiffer consequences involving the federal courts. Being honest is always the best policy.
Remember that if you have any concerns, please speak with your attorney, who can help you value your assets and explain how the exemptions will apply to your case.
In the past several months I have had several phone calls and inquiries about what to do when your child turns 18. In most cases a child support obligation terminates when the child reaches the age of 18 or graduates from high school. However, there are some exceptions to this, including but not limited to, the agreement of the mother and father, disability of the child, health concerns of the child, etc.
What happens when it is time to stop paying? If you are paying directly to the other spouse, you may simply be able to stop paying. However, if you are paying through the state child support office a Motion to Terminate Child Support is necessary. In either case, it is the best course of action to simply file a motion to terminate child support. This way, there will be no surprises later on down the road.
If you have questions regarding your child support obligations or need assistance in terminating your child support, contact an experienced Tennessee Child Support Attorney.
The law uses many terms that may not be widely understood by people not familiar with the law. One question that I was asked recent is; What is an arriagnment? This is a widely understood term by lawyers, but may not be as well known by people that dont spend as much time in court as I do. The following is a brief definition:
In Tennessee an arraignment is the formal reading to the accused of the charges alleged to have been commited by the accused. At this stage of the process an accused can enter an initial plea. There are three possible pleas that are most often used: not guilty, guilty, no contest.
Following the entry of a plea the court will generally set a review date and/or a settlement date. If a person pleads guilty at the first appearance the Judge may pronouce sentence immediately. In some cases, a plea of guilty may result in the judge pronouncing sentence immediately.
You are generally required to attend the arriagnment. Should you fail to attend the arriagnment you may be faced with additional criminal charges, fines, and most likely an warrant for your arrest being issued by the court.
If someone is being held in jail, without specific charges, he or she must be arraigned within a short time period, usually 24 to 48 hours of the initial arrest.
If someone is being held in jail for a specific charge they are also entitled to a timely arraignment proceeding to be formally charged. Bail may be set following the arraignment, bail may be denied if the crime is of a serious and/or violent nature and/or the person may be released to return at a specific date. It is important to remember that a release from custody and/or a determination of whether bail will be set or at what amount it will be set is within the discretion of the trial judge.
When new clients meet with me for the first time, I often advise them that as soon as they know they are going to be filing for bankruptcy within the next 90 days, they should stop paying any creditors. The main reason for this is so any of those payments will not be treated as a preferential payment, and the trustee will not have to ask for that money to be given to the bankruptcy estate. Another reason I advise this include that I want to make sure my client is as stable as possible going into the bankruptcy. One of the few items I stress for my clients to pay as the bills become due are utilities and secured debts that involve assets the client wants to keep (such as a house or a car). The utility companies do not negotiate — either you pay them and get their services or you do not pay them and do not receive their services. A lawyer can do very little to no negotiating with a utility company. In addition, if a client is behind on utilities going into the bankruptcy, the utility company can request the debtor submit a security deposit to ensure payment of services. As for the secured debts, a creditor generally will not agree to the debtor reaffirming (read: keeping) the debt and the asset unless the debtor has proven himself to be worthy by staying current. So, in the end, pay your utlities and the bills for the things you want to keep!
I am inspired to write this article today after a meeting I had this past week. I met with an individual to complete their estate planning documents (will, living will, powers of attorney for assets and health care) and as we were finishing up and thanking them for coming in they said the most wonderful thing- “This was my birthday present!”
When I asked what they meant, they explained that the costs associated with getting the documents prepared had been the birthday present of a close friend. I was struck by what an unusual gift this was. Certainly paying for the costs is a gift in and of itself, but the peace of mind that the individual can now have having their estate done is a gift as well.
We all worry about buying gifts- whether they are the right size, right color, or right for the persons’ tastes. But here is a gift that fits, and will continue to provide the best gift of all – peace of mind.
In estate planning- wills, trusts, living wills, etc. – we as attorneys often find that it is the most difficult to get our clients to start the discussion about estate planning. Once we have had the opportunity to sit down to discuss the process and execute the documents it becomes cathartic; that is, there is a sense of relief that their estate is in order. Most individuals I find want to have wills in place to protect their estate and to help their families through the probate process. They want to have their affairs in order.
Now, I am going to propose a new tradition to those that have prepared their estate- an annual review of your estate documents. I am going to suggest that it be April 15th. No, I am not trying to associate your estate planning, which should be a painless endeavour with the pains of tax preparation! What I am suggesting is that since you have your file cabinet open, and are filing your taxes away for safekeeping, you should pull out your will to see that it still protects your estate.
Many changes may have happened during the past year that you may cause you to need to or want to change your will – sale of your residence or vacation home, sale of specific items that were bequeathed to an individual, birth, adoption, or death of a family member, and the divorce of your spouse. All of these thing may have an effect on your estate and your intentions when you originally wrote the estate plan. You may want to read through your documents to make sure that the specific bequests still make sense. Has a family member had a life-changing event that no longer makes the specific bequest the best idea either from a emotional intent or tax consequence point of view?
Often, minor changes to a will can be completed through the use of a codicil. If you find that a change needs to be made, please visit with your attorney as to the best course of action. If multiple changes should be made, perhaps a new will is in order. Even though a new will may be advised, the process will be much simpler than the first time because you and your attorney have had the preliminary discussions about estate planning. Now, you are just correcting your estate.
People create wills for a variety of reasons. One of the biggest is to protect those that they care for. An annual review of those documents is the best way to make sure that your intentions are fulfilled in the most complete way. Mark your calendars now!
A lot of my bankruptcy clients do not have much money. Generally, that is a given, and it is the reason they are needing to file for bankruptcy. However, many of them do not know how they can afford a bankruptcy, and so instead of seeing a lawyer and trying to get some relief, they continue to live in a perpetual state of fear from their bill collectors. If you know that you are going to be filing for bankruptcy, it is advisable to stop paying credit cards and other similar bills. It is important to stay current on your house, car, insurance, and utility bills, but the other ones you can let go. Why? Isn’t this counter-intuitive? The answer has a couple of dimensions: (1) you need the money to live on (i.e. eat, keep a roof over your head, get to work); (2) the payments to creditors are usually so small that they only pay a small percentage of the interest; (3) a trustee can pull back payments made to creditors within 90 days of filing for bankruptcy as preferential payments, so the creditor could end up without a payment anyway; (4) you will need the money to pay the bankruptcy attorney. A wise Chapter 7 bankruptcy attorney knows to get paid in full before filing a bankruptcy case. This is because otherwise the debt will be discharged in the bankruptcy, and the attorney will not be able to collect on it afterwards. In addition, the automatic stay will bar any attempts during the bankruptcy of the attorney to collect on the debt. Always be wary of an attorney who says he or she will let a client pay later — they may not know the law as well as they should.
On a related note, it is very important for a debtor who wants to keep her house and car to be current on those payments. A secured creditor has no reason to enter into a reaffirmation agreement with the debtor to continue the debt through the bankruptcy for collateral such as a house or car unless the debtor has proven to be trustworthy and reliable with payments. It is also important to stay current on the insurance for a house and car because that is often a requirement by a creditor when extending credit. If a debtor lets the insurance lapse, a creditor may have the right to foreclose or repossess on the basis of breach of contract. Finally, it is important to keep your utilities current because otherwise they will be shut off, and they will only be turned on again when you are current.
As you know, Middle Tennessee was recently hit by what can only be described as the flood of the century. While people in surrounding states may have dealt with this kind of flood in the recent past, this was something we simply were not prepared for. That being said, a big round of applause needs to go out to our local area governmental bodies for responding as they did. More applause needs to go out to the citizens of this great state for standing up and reaching out a helping hand to our neighbors.
Now, the water has all but dried up and we are recovering from the flood. However, a black cloud is appearing on the herizon; a new type of storm is brewing. That rumbling noise is not the sound of distant thunder, its the sound of a thousand motivated footsteps from the lawyers that are about to descend upon us. WHY? When there is a disaster, there is litigation. Some of the litigation will be based upon flood damage and whether or not homes were insured as well as many other issues. Businesses will likely see a rise in litigation in the coming months as many are not able to fill orders, complete projects or fullfill contractual obligations. Some of the things may be covered in your existing contracts. Others, like the flood itself, were not expected and therefore not adequetly prepared for.
What to do? Well, with everything, preperation is the best offense and defense. Following the flood, many people are reviewing their insurance policies just to make sure they are adequetly covered for future events. This is one of the good effects of an event like this. Businesses need to take a look over their existing contracts and make a plan for emergency preparedness in the future. If you dont have a good lawyer, find one and find one quick. Nothing ruins the flow of your business like a lawsuit. Even if you know good and well you can win, it takes time away from your business and costs money that you may not have at that moment. So, my words of advice to you are this: find a experienced lawyer you trust, develop a relationship and take care of what needs to be taken care of. Your business is your life and its important to have a plan.
If you have been or think that you are about to go down the road toward a lawsuit, be it against you or you against someone else, it pays to have someone help you navigate through the process. Contact a competent legal professional to assist you.
What is a loan modification?
A loan modification is an adjustment to your existing loan in order to make it a more affordable loan- the goal is allow you to stay in your home and not lose your home to foreclosure. It is important to understand that loan modifications are not for everyone and they are not guaranteed. There are many different programs offered through banks and through the government through the American Recovery Act.
Since the enactment of the American Recovery Act, there have been several different versions, and consequently many different requirements and limitations on loan modifications. It is important to keep up to date on the changes. The best way to do that is to either visit with your credit counselor or your attorney.
Your attorney or counselor will be able to assist you with your application process. There are numerous forms that will need to be filled out and some will feel quite intrusive. Please keep in mind that you are providing the information (annual income, loss of employment, current value of home, etc.) so that your lender will be able to calculate a new monthly payment on your loan. Your lender may be able to write down the principal on your home in light of your loss of income and a depreciation in your home’s value as compared to the amount you owe.
Be patient- the application process will take time. It may take six months or more to finish the process. Once your loan modification is approved, you will be placed on a temporary payment plan. YOU MUST comply with the new terms for the required number of months in order to move into a new permanent payment structure. If you miss a payment during this time, you will lose the ability to have a loan modification.
If you are in a position that making payments is becoming a challenge, I would encourage you to visit with your attorney or counselor now and find out what options may be available to you. I know that it is difficult to talk about financial problems and most individuals would like to pretend that things will get better, but I encourage you to get guidance in preparation of changes in finances now rather than later.