What is the Meeting of Creditors?

The meeting of creditors, also called a 341 meeting, because it is held pursuant to section 341 of the Bankruptcy Code, is often the only appearance that a debtor makes in his bankruptcy. The meeting is conducted by the bankruptcy trustee appointed to the case, not the bankruptcy judge. The purpose of the meeting is for the trustee to question the debtor under oath about the debtor's schedules and statement of affairs, and to allow creditors to question the debtor. In most cases, creditors don't appear at the meeting. This is because their appearance is useless in most cases, especially where the debt is unsecured. Occasionally a secured creditor will appear and ask about insurance, condition of the collateral or what the debtor intends to do (surrender, redeem or reaffirm the debt). In Utah, trustees hold meetings every hour with 10-12 debtors appearing each hour. This means the trustees allocate 5-6 minutes per case.

House Votes to Extend Death Tax

The House of Representatives voted to extend the estate tax, which was set to expire in 2010 as part of the Bush-era tax cuts. The Senate still has to approve an extension, an unlikely event before December 31, given that the Senate is pre-occupied with the health care reform issue. A likely alternative is that the Senate votes to temporarily extend the estate tax until it can take up debate on a permanent extension.

As presently written, the estate tax would have expired in 2010, only to be revived in 2011 at a higher rate, 55% instead of the current 45%. The House extension maintains the maximum rate at 45% and applies only to estates over $3.5 million.

Republicans are unanimous in their support of repealing the estate tax, which, they say, hurts small businesses such as farmers and car dealerships that have substantial assets that bump the value above the exemption limit. Maintaining the estate tax burdens the transer and, therefore, the viability, of family owned businesses from one generation to the next.

Which Bankruptcy Lawyer?

Bankruptcy is one area of the law that is booming right now. If you're thinking of filing, you have dozens, if not hundreds, of options when it comes to choosing a bankruptcy attorney. Any lawyer licensed to practice law and admitted to practice before the local federal court can file a bankruptcy for you. The question is, should she?

Congress, in its infinite wisdom, requires attorneys to tell their prospective bankruptcy clients that the client doesn't need an attorney to file bankruptcy. And the bankruptcy courts have done a good job of making the forms you need available online. But that's where the government's help ends. It's up to you to figure out how to fill out a form. Is that debt secured or unsecured? Does it go on Schedule D or Schedule F? What's an executory contract or lease? Should I mark the box "reaffirm," "surrender," or "redeem"? And did you know there is a fourth option that isn't on the form?

When choosing a bankruptcy attorney, as in most things, you get what you pay for. Someone's fees might be low because he just switched from doing divorces to bankruptcies last week. Don't automatically choose the attorney with the lowest rates or the biggest Yellow Pages ad.

Estate Planning or Successon Planning?

Though often used synonomously, the terms "estate planning" and "succession planning" differ slightly. Estate planning often refers to planning for estate taxes, but can also mean planning for the distribution of your estate, that is, who gets what.

Succession planning means planning specifically for the succession of a family business to future generations. Succession planning may involve estate taxes, but they are secondary to the purpose of the planning, which is to allow a successful family business to be passed on intact to future generations. This can be very tricky because issues such as outstanding loans, employee relations and everything involved in running a business is involved in succession planning.

An estate plan might include a succession plan, or it might provide for the sale of the business.

Why Do People File Bankruptcy?

This is a question that has puzzled those who study human behavior for years. Why do some people file bankruptcy while others don't? Lots of theories have been advanced: lack of education in money matters; crushing debt from unexpected medical bills; divorce or death; or just plain irresponsible behavior in running up credit card bills. Now a nationwide study has shown at least one contributing factor: The toughness of state collection laws.

It seems that in those states where creditors have more power to collect debts, such as through garnishment of wages, foreclosure of judgment liens on real property, attachment of personal property like cars, and the like, people are more prone to file bankruptcy than debtors in states where creditors can't make their lives as miserable.

Personal Assets at Risk in Business Bankruptcies

Many entrepreneurs don't realize that their personal assets (homes, cars, savings, etc.) may be at risk if their business files bankruptcy. This is because many entrepreneurs do business as sole proprietorships, which, in the eyes of the law, is simply the individual doing business under an assumed name. When that happens, there is no business entity apart from the individual: they are one and the same. If business debts force the business to close, all of the assets of the individual are at risk to pay creditors' claims, and if the business files bankruptcy, it's really the individual who is filing, so all of his or her assets pass under the control of the bankruptcy trustee.

Incorporating or forming a limited liability company (LLC) is some protection, but not if banks and other creditors require personal guarantees from the officers, members or shareholders.

Do It Yourself Wills

I just read a blog post from a woman touting an online legal service provider, telling the world how great and easy it is to do your own will online through this company. I've previously posted about the pitfalls of do it yourself bankruptcies, but a do it yourself will is even worse. At least if you make a mistake in your bankruptcy, you have a chance to fix it. If you screw up your will, not only can't you fix it, you won't even know something is wrong.

There are a host of potential problems with a do it yourself will and estate plan. Yes, you can provide for someone to have legal custody of your children. But what about providing for them? What instructions are you going to leave and how binding will those be about whatever they inherit. For example, you do have life insurance don't you? Do you plan to leave that to the kids outright? To a 12-year old? Or are you just going to name your BFF as the beneficiary under the policy and hope she knows what you would do?

Think about it. Would you feel comfortable about buying a kit and instructions to build a car or a house from an online company and do it yourself? Doesn't your family deserve better?