A Florida man, John Goodman, recently made news when it was announced that he intends to adopt his girlfriend, Heather Hutchins. This prompted speculation that the move was designed to protect some of Goodman's fortune (he's a wealthy socialite in Florida) because in March he was found guilty of DUI manslaughter in the death of Scott Wilson in an automobile accident in which Mr. Goodman was driving under the influence of alcohol. Wilson's family sued for damages. The case has been dismissed, suggesting a settlement.
The question immediately comes to mind, can one adult adopt another and, if so, why? The answer is yes, one adult can adopt another adult. There are several reasons. One of the most common is in the case of a remarriage where the new spouse has adult children. Each spouse might wish to solidify the blended family by adopting each other's children, thus making one big, happy family. Another reason is in states that do not recognize same-sex marriages, one member of the couple might adopt the other to give them both something similar to marriage under laws of inheritance and benefits such as health.
For a more detailed look at adult adoption, see this good post by the firm of Bryan Cave:
http://trustbryancave.com/girlfriends-come-and-go-but-daughters-are-forever-the-case-for-adult-adoption/#page=1
Tuesday, April 24, 2012
Tuesday, February 7, 2012
Two Common Bankruptcy Myths
There are a lot of myths surrounding bankruptcy, about what it can or can't do, who can file, who can't, that you can except certain debts, etc. Two of the more pervasive myths are (1) that you need a minimum amount of debt in order to file and (2) that you have to repay all your debts in Chapter 13. Both are false.
Anyone can file bankruptcy with any amount of debt. In theory if you owe someone $25 you can file, though you'd probably be committed because the filing fee is $306. But the truth is, there is no minimum amount of debt required. Whether you file is a personal decision. For some people, $5,000 is too much debt. For others, $500,000 is not too much. It all depends on the individual.
When it comes to Chapter 13, you do not have to repay all your debt. It would be a foolish program if it required full repayment. Think about it. If someone can't repay their debts NOW, how are they going to be able to repay them in only 60 months, the maximum time allowed under Chapter 13? What Chapter 13 does is look at what you can afford to pay and require you to pay that for the length of the plan, which is 36 or 60 months, depending on a number of factors. At the end of the plan, any remaining debt is discharged, just like in a Chapter 7. But Chapter 13 has advantages over Chapter 7: There is no means test, which disqualifies some debtors from Chapter 7; you get to keep assets that you might otherwise lose in Chapter 7 (such as cars, houses, stocks, etc.); and some debts that can't be discharged in Chapter 7 can be discharged in Chapter 13.
Anyone can file bankruptcy with any amount of debt. In theory if you owe someone $25 you can file, though you'd probably be committed because the filing fee is $306. But the truth is, there is no minimum amount of debt required. Whether you file is a personal decision. For some people, $5,000 is too much debt. For others, $500,000 is not too much. It all depends on the individual.
When it comes to Chapter 13, you do not have to repay all your debt. It would be a foolish program if it required full repayment. Think about it. If someone can't repay their debts NOW, how are they going to be able to repay them in only 60 months, the maximum time allowed under Chapter 13? What Chapter 13 does is look at what you can afford to pay and require you to pay that for the length of the plan, which is 36 or 60 months, depending on a number of factors. At the end of the plan, any remaining debt is discharged, just like in a Chapter 7. But Chapter 13 has advantages over Chapter 7: There is no means test, which disqualifies some debtors from Chapter 7; you get to keep assets that you might otherwise lose in Chapter 7 (such as cars, houses, stocks, etc.); and some debts that can't be discharged in Chapter 7 can be discharged in Chapter 13.
Friday, January 27, 2012
JP Morgan Chase Shuts Down Collection Arm
An interesting article in American Banker just caught my eye. JP Morgan Chase, one of the bigggest of the big guys, has quietly shut down most of its consumer collection activities. As recently as mid-2011 this division was bringing in hundreds of millions of dollars a month in revenue for JPMC. Chase is mum about why it has stopped collection activities, but speculation is that it has something to do with similar problems faced by Chase, B of A and others in foreclosures: Lack of documentation for the debts.
It looks like the bank that was too big to fail is now too big to manage.
It looks like the bank that was too big to fail is now too big to manage.
Thursday, January 12, 2012
Saving Your Business in Chapter 13
Most people think of Chapter 11 when they think of reorganizing a business. While it's true that you have to file Chapter 11 if you have a corporation or a limited liability company (LLC), if you're a sole proprietor you can reorganize through Chapter 13.
A sole proprietor simply means a person running a business without having incorporated or formed an LLC through which she conducts the business. If you're "doing business as" (d/b/a), you're probably a sole proprietor. There is no legal distinction between the business and the individual in a sole proprietorship. While this is often a disadvantage when it comes to protecting your personal assets (home, car, savings, etc.) from business debts, if it becomes necessary to reorganize the business being a sole proprietor lets you do so through Chapter 13.
Chapter 13 is only for individuals, which is why businesses generally don't file Chapter 13. But because there is no difference between the individual and the business in a sole proprietorship, solos can reorganize in Chapter 13. This means they can modify business leases, pay some debts, reject some contracts and often get all the advantages of Chapter 11 without the expense or hassle. So if your business is struggling Chapter 13 might be just what you need.
A sole proprietor simply means a person running a business without having incorporated or formed an LLC through which she conducts the business. If you're "doing business as" (d/b/a), you're probably a sole proprietor. There is no legal distinction between the business and the individual in a sole proprietorship. While this is often a disadvantage when it comes to protecting your personal assets (home, car, savings, etc.) from business debts, if it becomes necessary to reorganize the business being a sole proprietor lets you do so through Chapter 13.
Chapter 13 is only for individuals, which is why businesses generally don't file Chapter 13. But because there is no difference between the individual and the business in a sole proprietorship, solos can reorganize in Chapter 13. This means they can modify business leases, pay some debts, reject some contracts and often get all the advantages of Chapter 11 without the expense or hassle. So if your business is struggling Chapter 13 might be just what you need.
Tuesday, January 3, 2012
Bankruptcy Mills
There is an interesting article on MSN about cut-rate bankruptcy lawyers, also known as bankruptcy mills. You can read it here:
http://articles.moneycentral.msn.com/Banking/BankruptcyGuide/BewareCutRateBankruptcyAdvice.aspx
What constitutes a "bankruptcy mill" is in the eye of the beholder. Filing hundreds or even thousands of bankruptcies a year doesn't make a firm or an attorney a mill in my opinion. What does make a bankruptcy mill is when the attorney doesn't give the client the personal service the client deserves. If the attorney is up front and says, in effect, "we'll do a bankruptcy for you for $XX, but realize that for that price you won't get return phone calls, we won't answer your questions and we won't do much more than prepare the forms and attend the meeting of creditors," the client can hardly complain. But unless the attorney makes such a disclosure, most clients expect, and I would say, deserve personal attention. Questions arise. Clients expect those questions to be answered. They also expect a certain amount of "hand-holding" through what is usually a traumatic event in their lives. When an attorney ignores a client WITHOUT FIRST DISCLOSING that the bargain-basement fee the client paid doesn't entitle the client to personal attention, then that firm is a bankruptcy mill.
http://articles.moneycentral.msn.com/Banking/BankruptcyGuide/BewareCutRateBankruptcyAdvice.aspx
What constitutes a "bankruptcy mill" is in the eye of the beholder. Filing hundreds or even thousands of bankruptcies a year doesn't make a firm or an attorney a mill in my opinion. What does make a bankruptcy mill is when the attorney doesn't give the client the personal service the client deserves. If the attorney is up front and says, in effect, "we'll do a bankruptcy for you for $XX, but realize that for that price you won't get return phone calls, we won't answer your questions and we won't do much more than prepare the forms and attend the meeting of creditors," the client can hardly complain. But unless the attorney makes such a disclosure, most clients expect, and I would say, deserve personal attention. Questions arise. Clients expect those questions to be answered. They also expect a certain amount of "hand-holding" through what is usually a traumatic event in their lives. When an attorney ignores a client WITHOUT FIRST DISCLOSING that the bargain-basement fee the client paid doesn't entitle the client to personal attention, then that firm is a bankruptcy mill.
Friday, December 30, 2011
Modifying a Mortgage in Chapter 13
Lots of clients ask, "Can I modify my mortgage if I file Chapter 13?" Unfortunately the answer is usually "no". While automobile and other secured loans can be modified in Chapter 13, so far the mortgage industry lobbyists have convinced Congress that borrowers should be held to whatever bargain they made when they got their loan, even if their house is worth less than what they owe or if interest rates have dropped way below the rate they got. In most cases all a borrower can do is gain time to catch up any delinquent payments. However, the borrower must make all future payments (those coming due after she filed) when and as they are scheduled.
There are two cases where mortgages can be modified in Chapter 13. The first case is where there are more than one mortgage. The first mortgage cannot be modified, but if the house is worth so little that all or part of the second and subsequent mortgages are more than the value left after the first, those mortgages can be modified or "stripped down", meaning the unsecured portions get treated as unsecured debt.
The second case where a mortgage can be modified is if the bank has other collateral besides the house. For example, suppose the bank took not only a mortgage but also a security interest in a car, or some stock. In that case the mortgage can be modified even if the value of the house exceeds the amount of the mortgage.
There are two cases where mortgages can be modified in Chapter 13. The first case is where there are more than one mortgage. The first mortgage cannot be modified, but if the house is worth so little that all or part of the second and subsequent mortgages are more than the value left after the first, those mortgages can be modified or "stripped down", meaning the unsecured portions get treated as unsecured debt.
The second case where a mortgage can be modified is if the bank has other collateral besides the house. For example, suppose the bank took not only a mortgage but also a security interest in a car, or some stock. In that case the mortgage can be modified even if the value of the house exceeds the amount of the mortgage.
Monday, October 10, 2011
If It's Good Enough for Steve Jobs, It's Good Enough for You
We don't know for sure, and we probably never will, but it appears Steve Jobs has protected his estate, to the extent he can, through living trusts. A living trust is a trust established and funded during one's lifetime. Lots of trusts are established during the maker's life, but lots remain unfunded, meaning nothing was ever put into the trust. When that happens, the trust is like an empty basket -- good for nothing.
Forbes magazine reported on October 7 that real estate records from 2009 show that Jobs and his wife transferred three pieces of real estate into two separate trusts. This doesn't mean that he transferred all of his assets, such as his Disney stock, with an estimated value of $4.4 billion, because transfers of property other than real estate do not need to be recorded in public records. But it's likely he did. Someone as smart and as private as Steve Jobs probably took the proper steps to minimize his potential estate tax and protect his heirs from the publicity that would surround probate of his estate.
There is a long list of celebrities who failed to properly plan their estates. As a result, they unnecessarily lost a good part of their estates to the IRS. Some of these are Jimi Hendrix, James Brown, Steig Larsson (author of The Girl With the Dragon Tattoo), Gary Coleman, Sonny Bono and Michael Jackson.
Forbes magazine reported on October 7 that real estate records from 2009 show that Jobs and his wife transferred three pieces of real estate into two separate trusts. This doesn't mean that he transferred all of his assets, such as his Disney stock, with an estimated value of $4.4 billion, because transfers of property other than real estate do not need to be recorded in public records. But it's likely he did. Someone as smart and as private as Steve Jobs probably took the proper steps to minimize his potential estate tax and protect his heirs from the publicity that would surround probate of his estate.
There is a long list of celebrities who failed to properly plan their estates. As a result, they unnecessarily lost a good part of their estates to the IRS. Some of these are Jimi Hendrix, James Brown, Steig Larsson (author of The Girl With the Dragon Tattoo), Gary Coleman, Sonny Bono and Michael Jackson.
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