Happy New Year! 

Many individuals will start the New Year resolving to improve their financial affairs. Though bankruptcy is a great tool, which generally includes benefits such as the discharge of credit card and medical debt, a new exemption scheme, effective January 1, 2013, will give potential filers even more to be excited about.

Exemption Basics

A key protection offered by the Bankruptcy Code is found in Section 522. This section details a debtor’s rights regarding exempt property—property that is shielded from liquidation.

Exemptions are statutory provisions that generally protect individual assets from liquidation based on an assigned dollar value. For example, pursuant to CCP § 703.140(b)(3), debtors are permitted to shield up to $600 per “household” item.  In other words, you can prevent creditors from seizing any of your appliances or furnishings if they are worth less than $600/item.  Under CCP § 703.140(b)(2), you can shield up to $4,800 of the fair market value of your motor vehicle.  There are numerous exemptions that apply in different contexts and can even apply in conjunction with each other.  A vehicle that is valued at $6,000 can be fully protected by combining the Motor Vehicle (b)(2) exemption with the “Grubstake” (b)(5) exemption (see below).

The bottom line is that a careful application of the exemption statutes can often allow debtors to retain their assets during and after a bankruptcy filing.

The 2013 Exemptions

The assigned exemption values change every three years to account for inflation. On January 1, 2013 a new exemption scheme became effective allowing debtors to take advantage of even stronger protections. Whereas a person filing for bankruptcy protection in California on December 20, 2012 would have been able to exempt up to $23,250 in “any property” under CCP § 703.140(b)(5) & (1), a debtor that filed on January 15, 2013 would have been able to exempt up to $25,340 under the same statutes—a $2,090 difference!

More Than a “Fresh Start”

The Bankruptcy Code and the attendant exemptions were created to give filers a “fresh start.”  They were designed with the idea that a person free from burdensome debt would be a more productive member of society.  But the protections offered by the exemptions, particularly the new valuations, provide more than a fresh start—they provide an invaluable tool and an opportunity.  Instead of rewinding and requiring individuals to begin their lives anew, the exemption scheme allows debtors to carry on—without the worry of losing invaluable possessions.

-Caroline M. Reebs, Attorney-at-Law

We hope all our readers are having a wonderful holiday and have many, many blessings to count!

Along with one’s family and one’s health, people are perhaps most thankful for having a roof over their head.

Unfortunately, in recent years that happiness has turned to anxiety for many homeowners.  Having had no choice but to purchase at a wildly inflated price during the housing bubble, nowadays it seems like just about everybody is “underwater” in their mortgage.  Then, when bad fortune strikes, a few missed payments leads to foreclosure — and the house can’t be sold for anything near the amount of debt attached to it.  Basically, that leaves no option but bankruptcy.

However, in this context there is something else to be thankful for — our nation’s bankruptcy laws.  Although people tend to equate the idea of bankruptcy with the thought of losing everything, in fact under Chapter 13 it is often possible to remain in your house and ultimately keep it.

Remember, it may not be in the lender’s interest to foreclose and sell at a fire sale — and with recently enacted laws either in place or about to be, lenders are now obliged to seriously consider a loan modification before taking the first step toward foreclosure.

During the often extended period that the modification possibilities are reviewed, some Chapter 13 filers may arrange to make monthly “Adequate Protection” payments that amount (often) to only 31% of gross income.  If the modification is approved, this amount often becomes permanent — though the period of the mortgage will be greatly extended.

The downside, though, is that disapproval of the modification will leave you more “underwater” than before, since the difference between the Adequate Protection payment and the old mortgage rate will be tacked onto the total debt.

But that’s what bankruptcy is for: allowing you to keep your possessions if you can pay for them in the long run, or allowing you to get rid of just about all your debt in exchange for giving up your property.  In either case, though the former is obviously better, there is something to be thankful for, if only being able to live in an apartment and never having to worry about the mortgage debt again.

This Thanksgiving, remember that our bankruptcy laws are there to help you if you’re going through a tough time.  You may have more to be thankful for than you realize!  Come see us at The Mlnarik Law Group, and we’ll try to help you have a lot of great Thanksgivings in the future, even if perhaps this year’s holiday isn’t what you’d hoped for.  And that’s something else to be thankful for:  As President Lincoln once remarked, the truest statement you can make is “This too shall pass”!

BOO!!

It’s that time of year again — when the days get shorter and darker, the leaves fall, a cold wind blows, and our thoughts might turn to mortality as we reflect upon another summer come and gone. In fact, in almost all mid-latitude and northern areas, since time out of mind a date has been set aside in autumn or late summer to venerate departed ancestors. China has the Hungry Ghost Festival, Mexico and Latin America (via the Aztecs) have the Day of the Dead, Korea has Sije, Christianity has All Souls’ (or Saints’) Day … and kids of all ages have Halloween.

Halloween is a way to lighten up such a dark subject. Think about it: we take the scariest subjects and make them into jokes, replete with funny tombstones, dancing skeletons, laugh-inducing ghouls. Children, ordinarily terrified at the thought of ghosts and witches, gleefully enjoy the company of as many such characters as possible — and even dress up like them!

This reminds us that fear can be alleviated by the proper attitude. If you find yourself in dire financial straits, it’s no laughing matter — but the fact is, there’s nothing all that scary about bankruptcy. Avoiding bankruptcy out of fear is a classic example of letting “fear itself” (to quote FDR) dictate your attitude. In truth, bankruptcy is one of the best ways to escape the fear caused by a once-in-a-lifetime crisis.

Here are some examples illustrating the last point:

Fear of Harassment by Creditors

Once you file, you are protected by the “automatic stay” — an injunction against creditors, who cannot bother you during the course of the bankruptcy unless they make a motion to do so and the court grants it. In fact, if a creditor violates the stay injunction, there’s a good chance you can get the court to award you damages for the violation (though it may depend on how egregious the violation has been).

Fear of Losing Your House

Although some people are hopelessly “underwater” in their mortgage, many bankruptcies result in a renegotiation with the lender (that is, a loan modification). It is often in the lender’s interest to let you stay in your house rather than to foreclose and go to the trouble of selling at a discount. In fact, new state and federal laws make the loan modification process more accessible, and oblige the lender to make a good faith effort to mitigate your losses.

Fear of Damaging Your Reputation

Part of the bargain of bankruptcy is that it is “transparent.” To ask for the benefits of bankruptcy, you must be willing to publically disclose your financial situation.

But how likely is it that anyone you know or meet is going to sign up with the electronic file service and request your records? If you’re struggling, that fact is already reflected on your credit reports — which are often accessed by potential employers, anyway. It’s hard to see how you could look worse by taking the responsible step of filing for bankruptcy.

Moreover — and far more important — there is not really much of a stigma about bankruptcy anymore . . . particularly given the universal crisis of the past five years. The majority of personal bankruptcies are rooted in outrageously high medical bills. Often, bankruptcies are due to the great American entrepreneurial spirit; small businesses have a high failure rate, but where would we be if no one were willing to risk failure? And, of course, many people have been victims of the housing bubble.

Don’t Fear “Fear Itself”

If you think bankruptcy might be a good option, give The Mlnarik Law Group a call. We’ll be able to quickly assess your situation and determine the best path for you to take. When those creditors come knocking on your door in their scary garb and shout “trick or treat,” you can have a good laugh — and, if you’re feeling generous, maybe let them grab a mini Snickers bar!

-Jim Erickson, Attorney-at-Law

As we celebrate Labor Day, let’s appreciate the hard work we all do but also take stock of the rewards we’ve reaped. All those hard-earned dollars should have value not only in meeting our current needs but also in providing for our future.

Life insurance is often overlooked as a financial planning tool. In fact, it’s considered a core element of sound financial planning. Yet millions of Americans do not have life insurance and millions more are underinsured.

Do I Need Life Insurance?

It is a myth that only people with children under eighteen need life insurance. While it is important to protect the welfare of minor children, don’t forget that your spouse/partner, parent or anyone else who depends on your income will be protected as well.

What Kind Of Life Insurance Do I Need?

For most people a term life policy is good enough. A term life policy is life coverage only. On the death of the insured it pays the face amount of the policy to the named beneficiary.

You pay a fixed amount each month for a specified period, such as ten or twenty years. Term life policies usually have lower premiums and a higher degree of control and flexibility than whole life policies. For example, you can have the term life policy automatically renew on an annual basis or semi-annual basis. When the term is up, your coverage ends.

Unlike term life insurance (which is for a specified term), whole life insurance is for your whole life. Unless you make a change to your whole life policy, you have lifelong coverage with no future medical exams. The biggest benefit of whole life insurance is that a payout is guaranteed. You will not have to worry about becoming uninsurable later in life. However, in exchange for a guaranteed payout, the premium for a whole life policy may be several times higher than for a term life policy with the same payout amount.

If you decide to cancel your whole life policy, you are entitled to receive the cash value minus any penalties, fees and taxes. Additionally, you may borrow against the cash value. If you die before paying off the loan, funds will be deducted from the insurance proceeds to pay any outstanding balance and interest.

When Should I Buy Life Insurance?

There is no hard and fast rule. You should consider buying life insurance as soon as you have a child. However, many people are having children later in life, so keep in mind that the older you are the higher the cost.

So take a moment this Labor Day — while you’re enjoying your day off! — and think about what kind of life insurance will best protect the fruits of all your labor. You deserve it — and the Mlnarik Law Group is glad to help you decide.

– Angie Tong, Associate Attorney

Many new domain owners are not aware of the laws or procedures concerning domain ownership and become targets of these types of scams believing that their brand will be diluted by not registering with these companies; or worse, that they will be the subject of a dispute with a company that has already trademarked that domain name.   The bottom line is, do not respond to these emails and delete them immediately.  It is likely that your email address has been harvested by data mining the Internet Corporation for Assigned Names and Numbers (ICANN) “WHOIS” data base (a publically accessible database which publishes the details of every new registered domain name), or by reviewing the Official Gazette for Trademarks (OG) and you are receiving these emails based on this publically available information.   This particular scam has been around for years and has been well documented.   If you have questions or concerns it is advisable to discuss the matter with your attorney. 

-Aro T. Ebenhahn, Law Clerk

Recent reports highlight an alarming trend:  an increasing number of seniors are burdened by credit card debt and are facing foreclosure.  In fact, according to a University of Michigan Law School study, “the age sixty-five-and-over cohort is the fastest-growing age demographic [seeking bankruptcy protection].”

That seniors are reaching out and seeking bankruptcy assistance, however, is not the most troublesome issue.  It is the cause of such financial hardship, and the reason why additional seniors are failing to file for bankruptcy, that warrants close consideration.

On this Senior’s Day, we’ll debunk two popular bankruptcy myths: 1) that bankruptcy will force you to relinquish your home, and 2) that bankruptcy will deplete your pension.

1)      Protections for Your Home

Of primary concern to seniors is the safekeeping of their residence.  Not only can bankruptcy allow seniors to protect their home as a dwelling, it can also help them preserve it as an asset for their heirs.  The Bankruptcy Code allows debtors several key exemptions (i.e., assets or cash that the debtor can keep, even if everything else is liquidated).  Of particular relevance is the homestead exemption, which prevents creditors from receiving all of the equity in a debtor’s home.

In addition, bankruptcy may also indirectly protect the home by preserving existing equity for the benefit of the debtor’s heirs.  The most commonly discharged debt in bankruptcy is credit card debt; almost all such unsecured debt can be removed in bankruptcy.  If the debtor does not file for bankruptcy, however, unsecured creditors can pursue the equity in the debtor’s home — even after the debtor has passed away.  By contrast, a timely bankruptcy filing and a discharge of creditors’ claims will bar unsecured creditors from pursuing the family home, whether now or in the distant future.

2)      Protections for Your Pension

A second concern faced by seniors is the prospect of a depleted pension.  The Bankruptcy Code provides formidable exemptions for many types of pensions.  A bankruptcy filing ensures that the exempted funds cannot be reached by the bankruptcy trustee or by creditors.  For example, your “401(k)” is exempt — and so are plans under Section 401(a), 403, and 457.  Speak to your attorney for a complete assessment of your pension and whether it can be protected by a bankruptcy filing.

Overall, a timely bankruptcy filing will not only protect a retiree’s home and pension, it can also provide emotional benefits (such as welcome relief from credit card and medical debt, as well as from creditor phone calls) — thus ensuring that the proverbial Golden Years are just that much brighter.

-Caroline M. Reebs, Attorney-At-Law

Social Media Information as Part of the Employment Process

Aunt Marge just posted pictures of her vacation to Las Vegas, my brother just checked in that he was at a concert in San Francisco, and my status today is reminiscent of the serenity prayer. So what does this have to do with my job? For a growing number of employers, it could make the difference between hiring me and sending me the “Thanks, we’ll call you” letter.

When deciding if an applicant is a good fit for their organization, employers increasingly use a prospective employee’s social media information as an effective source. It raises serious issues, however, to demand that a prospective employee provide a password, or to “shoulder surf” an applicant’s social media website during the interview process. To begin with, such information is arguably private — and it could be an invasion of that privacy to require access. Second, social media sites could provide a prospective employer with information (race, marital status, sexual orientation, etc.) that would violate employment law if it were demanded during the interview process. Third, the prospective employee’s consent is insufficient to protect the employer, because in the context of an employment situation the consent may result from coercion or duress (for those interested in a relevant court case, see Pietrylo v. Hillstone Restaurant Group 2009 WL 3128420 (D.N.J. 2009)).

On July 11, 2012, Governor Brown signed the Homeowner Bill of Rights. This important bill extends reforms to help homeowners who are having trouble with their residential mortgage. The most significant aspects of the bill follow:

1. The bill prevents lenders from “dual-tracking” borrowers. This means that when a homeowner is negotiating new terms for a modification with a residential loan borrower, the lender is prohibited from pursuing a foreclosure simultaneously.

2. The bill imposes civil penalties of up to $7,500 for auto-signing foreclosure documents (this process is frequently referred to as “robo-signing”, meaning that lenders file testimony about their possession of original documents and their review of business records without checking the accuracy of their statements).

3. The bill also requires lenders and loan servicers to establish a simple point of contact for borrowers. If you contact the lender, you will be able to reach someone with knowledge of your residential loan who has direct access to a decision maker. This means no more runaround from the lender when you call to check on the status of your modification request.

This Bill is going to protect many Californian residents who are in default, as well as many more who are or will be in the modification process.

If you have questions about how this bill will impact you, or questions about real estate or mortgage law issues, you are welcome to contact real estate attorney Elena Franz at (408) 919-0088 or elena@mlnariklaw.com

-Elena Franz, Real Estate Litigation Attorney

For most people, their house is their biggest investment. It makes sense to hire a real estate attorney to ensure that you understand all aspects of your transaction with the seller and any regulations related to the purchase.

Homeowner Associations (HOAs)

Review of your covenants, conditions and restrictions (CC&Rs) by an attorney can alert you to items you might be unfamiliar with. More important, it can keep you from buying a property that is already violating a CC&R — thus avoiding liability toward the association or a neighbor later on. There may be restrictions (for example on flooring types, or pets, or turning your property into a rental unit) that you will wish you had known about!

Short Sales & Foreclosures

If you’re selling or buying a property as part of a short sale or foreclosure, additional assistance from an attorney may be beneficial in guiding you through the process. If you’re buying a property that was foreclosed on by the lender, you may need assistance with an unlawful detainer (eviction) action.

Litigation

Sometimes, real estate transactions just don’t work out. For instance, there may be title disputes, or a failure to disclose property defects, or problems with the transaction itself. You will need a real estate attorney to alert you to your rights, and help you enforce them.

Transaction Review

Sometimes you need a real estate attorney to assist with reviewing or drafting contracts. These can range from lease-to-own option agreements, rental documents, to documents memorializing agreements regarding property ownership to documents prepared by another party.

As always, if you have any questions regarding real estate law, please don’t hesitate to contact me.

Elena Rivkin Franz, Real Estate Litigation Attorney

elena@mlnariklaw.com or by phone (408) 919-0088

Just about any business activity entails a certain amount of liability. In some professions, depending upon the potential damages that a would-be Plaintiff might incur, such liability could be enormous. If a business is a community asset, the community may ultimately be responsible for the cost of any damages caused by the business. By defining a business as your spouse’s sole property (instead of the community’s), you can help insulate yourself from any liability.

2)      Prevent a Personal Business from Being Liquidated Upon Dissolution

Many people invest their entire adult lives in developing a business, or inherit family businesses that have been operating for generations.  Without a prenuptial agreement, it is possible for a personal (pre-marital) business to become owned by the marriage. If this happens, the spouses would be entitled to a buyout for their portions of the business upon divorce. Moreover, if one spouse can afford to buy out the other, the Court may be forced to order the business sold.

3)      Control the Amount of Potential Spousal Support

One of the primary reasons for entering into a prenuptial agreement is to minimize the amount of spousal support that one party has to pay the other after divorce.  A spousal-support order can financially cripple a divorcee for years, as a large percentage of earnings are paid to the prior spouse.  Should your marriage end in divorce, proper planning before marriage can help insure that you will be able to move on with your life without having to make years of financially crippling payments.

4) Protect Your Assets from a Spouse’s Creditors

Under California law, debts incurred for the benefit of the community or for the benefit of a community asset are jointly owed by both parties to a marriage.  In certain circumstances, a spouse’s separate property can be sought by creditors to satisfy a debt incurred during marriage.  A prenuptial agreement can help protect your separate property assets, or even your share of what would be community property, from your spouse’s creditors.

5) Minimize Conflicts Over Finances During Marriage

One of the most cited reasons for divorce is disputes over money and finances.  Many couples have different priorities and views on how money should be spent. Under California law, the standard presumption is that income earned through a spouse’s time, skill, or labor during the marriage belongs to the marriage. A prenuptial agreement can change this presumption and allow a spouse to have complete control over his or her finances. When you and your spouse have very different spending habits, maintaining control over your own income and allowing your spouse to control theirs can actually decrease conflict and provide for a healthier relationship.

-James J. Steinle, Family Law Attorney