Is Syracuse the next Detroit?

The Albany Times Union is reporting that the pressures that caused Detroit to go into bankruptcy also exist here in New York State due to “stagnant or shrinking tax base caused by declining population and de-industrialization as well as swelling legacy costs for pensions and health care for retirees.”

…the state constitution sets limits on the amount of debt a given municipality can carry. According to data from DiNapoli’s office, Syracuse had reached 53 percent of its limit as of 2011; Albany was at 33 percent, Schenectady at 42 percent and Troy, which was under a control board in the 1990s, at 2.77 percent.

Peter Baynes, executive director of the New York Conference of Mayors noted that the trouble of Detroit are “prevalent” in New York, and many cities are on a “glide path” to bankruptcy.

Read more: Is Detroit bankruptcy prelude to upstate crisis?

SAVING REAL ESTATE THROUGH BANKRUPTCY

Many real estate owners are confronting the worst housing market in decades. Foreclosures and loan defaults are at an all-time high and refinancing is difficult even for credit worthy home owners. As a result, bankruptcy has become the favorable choice for many property owners facing foreclosure. Here are some of the ways bankruptcy can help:

  1. The filing of a bankruptcy petition stops a foreclosure dead in its tracks:
    The “automatic stay” provision of the bankruptcy code will temporally stop all litigation and any attempt to collect a debt the moment the bankruptcy case is filed with the court. In fact, filing a bankruptcy petition can immediately stop a foreclosure sale. A federal bankruptcy case filing trumps many state rights of creditors to proceed against a debtor, with few exceptions.
  2. A bankruptcy case can serve to cure a default and reinstate a mortgage:
    Most property owners that have fallen behind on mortgage payments have few remedies available to them that do not include either the full payment of their mortgage arrears in one lump-sum or redemption of the property through payment of the entire balance due to the lender. But in this credit-tight market, these options are rarely available. For that reason, a Chapter 11 Bankruptcy or chapter 13 bankruptcy case is often the only solution available to save real estate. These cases enable a property owner to cure a mortgage default by repaying the mortgage arrears through a monthly payment plan. Once the property owner completes the plan, the mortgage is reinstated and the default is cured.
  3. Some mortgages can be eliminated or modified in bankruptcy:
    The bankruptcy code permits a debtor to modify the terms of mortgage if the property is worth less than the amount due to the lender. A second mortgage on a residence and any mortgage on any other property may be modified or reduced. In some instances, if the first mortgage exceeds the value of the property, a second mortgagee can convert the lien from secured to unsecured status. The second mortgage holder then is treated as a general creditor with no rights against the real estate. This bankruptcy procedure has become a powerful tool for homeowners with no equity in their homes. Relieving homeowners of the burden of paying second mortgage often provides the additional income needed to save the home.

Thus, bankruptcy can serve as a tool for a homeowner to level the playing field against big banks, and assist individuals to get back on the road to financial stability.

Why Consider Using a Living Trust?

In the process of making plans to protect one’s family and loved ones upon one’s death, many people have chosen a living trust. Also known as an inter vivos (Latin for “within one’s life”), this type of trust is very flexible.This type of trust is distinguished form a testamentary trust, which is created by a will and only comes into effect at the time of the decedent’s death.

Unlike a will, a living trust has the ability to transfer property after the creator’s death while avoiding probate. Note that this is different from a testamentary trust thus invoking—and not avoiding—the probate process.

In New York under the Estates, Powers, and Trusts Law section 7-1.14, any person, natural or otherwise (e.g., a corporation), may create a living trust. A natural person must be at least 18 years old to do so. Any property, real or personal, may be disposed of through a living trust. The creator of a trust is called a settlor, and a living trust is created and effective during his life. In other words, should a settlor so choose, the beneficiary of a living trust need not wait until the settlor’s death to begin benefiting from it.

To execute a living trust, a settlor must to state its terms in writing. A trustee is a person who is appointed in a trust to oversee the distribution of assets within it. One advantage of a living trust is that its settlor may appoint himself to be the trustee. The execution of a living trust need not be acknowledged nor witnessed unless a third person has been appointed as trustee. This enhances the level of control a settlor has over the property transferred to the living trust.

A living trust only governs the property within the trust itself. It is not sufficient for a person to execute a document stating that certain property is considered to be within the living trust—the property must have been actually transferred to the living trust for it to be considered a part of it. Because the property must be unequivocally placed within the living trust to be subject to it, there is no question that the settlor intended for said property to be in the trust.

Unlike in many other jurisdictions, in New York, a living trust is irrevocable by default, unless otherwise stated in writing. So long as the living trust is properly executed, the settlor need not be concerned with having to state terms of irrevocability; it is assumed that the settlor intended the trust to survive, both during life and in death.

As you can see, there are a lot of little requirements of a living trust you need to comply with. In addition, since living trusts avoid probate, judges strictly construe these requirements.

Top five common mistakes made before filing for bankruptcy

You just lost your job, you got divorced or you had a medical emergency. Your money is running out. You are in a panic. What do you do?

Most folks think Bankruptcy is the last thing they want to do.  Maybe they are right.  But, if you are in this situation, here are five things YOU SHOULD DEFINITELY NOT DO, when financial disaster strikes.

  1. DO NOT WITHDRAW MONEY FROM YOUR RETIREMENT ACCOUNT TO PAY DEBTS.
    Virtually all retirement funds, IRAs 401Ks, pensions, etc. are protected assets when you file for bankruptcy.  This means that the Court, the Trustee or your creditors can not attach that money when you file Chapter 7.  So, do not touch that money to pay your debts.  Leave it in the bank. In fact, not only will you be giving up your retirement nest egg, but, depending on your age, you may also incur a 20% tax penalty for early withdrawal.  The worst part is that the penalty tax in not dischargeable in bankruptcy.
  2. DO NOT TAKE LARGE CASH WITHDRAWS FROM YOUR CREDIT CARD
    Any debts incurred within 90 days prior to filing bankruptcy are not dischargeable in bankruptcy.  If you take money from your credit cards to pay off some other debt, you will be replacing dischargeable debt with non-dischargeable debt. Bad idea. Furthermore, any payment of more that $600 to any one creditor within 6 months of filing bankruptcy may be deemed a preferential transfer and disallowed by the Court. Paying off old debt with new debt is never a good idea.  Talk to a bankruptcy attorney before you make any financial moves.
  3. DO NOT EMPLOY DEBIT CONSOLIDATORS
    In most cases, credit consolidators do not work well for debtors. These companies charge a lot of money, most of it up front.  The do not get creditors to reduce the amount owed.  They merely get banks to give you more time to pay.  Most of the clients end up filing bankruptcy, after depleting their life savings.  These deals only work for debtors with high incomes, who have the ability to make large lump sum payments to creditors.  If a debtor is already having difficulty meeting current expenses, a debt consolidator is not a viable solution.
  4. DO NOT TAKE OUT A SECOND MORTGAGE
    Obtaining a mortgage today is difficult, especially for individuals with credit scores below 660.  However, even if a debtor may qualify for a second mortgage, adding more debt may not be the best solution.  A debtor must take a long, hard look at their household budget, current monthly expenses, as compared to monthly income.  Taking out a second mortgage may merely add to one’s expenses and push one further in debt. Discuss your options with a financial adviser or a bankruptcy attorney before making this move.
  5. DO NOT BORROW MONEY FROM FRIENDS OR RELATIVES
    When you file bankruptcy, you have to provide the Trustee with three to six months of bank statements. If you take a loan from a family member and deposit those funds in your bank account, the deposit will be a red flag to the Trustee.  These funds may not be exempt from Bankruptcy. You will also be obligated to report this loan on your petition. Repayments to relatives of over $600 could also been deemed a preference transfer, and disallowed by the Trustee.

Before you make any of these transfers, consult a Bankruptcy attorney for guidance.  An ounce of prevention can be worth more than a pound of cure.

Chapter 13 bankruptcy: Five things you need to know.

1. Plan Ahead: If you are reading this blog, you have already taken the first step to begin the process of Chapter 13 preparation. The more information you have the easier the process will be. More importantly, the more you know the less anxious you will feel as you proceed forward through the legal process of bankruptcy.

An experienced bankruptcy lawyer is the best source for reliable information. Another great source is the U.S. Bankruptcy Court website (uscourts.gov/bankruptcy). You can find plenty of mis information on the internet. Be careful. We provide a free initial office consultation to help you identify your options and to explain the bankruptcy process.

2. Review your financials: If you file Chapter 13, you will have to prepare a monthly budget of expenses. Separate your fixed expenses from your discretionary expenses. Fixed expenses include home mortgage, car payment, food, utilities, transportation, insurance, and medical expenses. Unsecured credit card debt is discretionary along with entertainment, and deferrable expenses.

You will need to know how much available income you will have to fund your Chapter 13 Plan.

3. Documents you will need for Filing Chapter 13: Here is a list of the documents you will need for your first meeting with your bankruptcy lawyer. without the requisite documents the meeting will not be as productive:

  • Last two years of federal tax returns. If you own a business you will need both Personal & Business returns.
  • Last three months bank statements (checking account), if you have more than one account, bring all accounts.
  • Last two months of all income statements, pay stubs for all sources of income for you or for both husband and wife, if married.
  • List of all debts, mortgage statements, credit card statements, etc.
  • Any court papers, if you are being sued or have been served with court papers or judgments you.

4. Advanced Planning: If you have a home mortgage, and you want to keep your house, continue to pay the mortgage. If you have a car loan and you want to keep the car, continue to pay the car loan. If you have unsecured debt, and you can’t afford to pay everything skip the credit card payments. If you have plans to file Bankruptcy, the size of your credit card debt is the least significant issue.

5. How Many Court Appearance will be Required: When you file Chapter 13, you will be required to go to court a minimum of two appearances. The first meeting will be before the U.S. Trustee, at a creditors hearing. This is an informal session, not in the court room. The second appearance will be before the Judge at the Confirmation Hearing. If all your papers are in order and you are current with your chapter 13 plan payments the hearing will be short and your lawyer will do all the talking for you.

NYC Comptroller cites Kings County Public Administrator’s Office for poor performance

NYC Comptroller John Lui’s office did an audit of Kings County Public Administrator’s Office (KCPA) and found

KCPA failed to properly carry out its fiduciary responsibilities because it did not act in the best interests of estates, carry out its duties prudently, and comply with statutory rules and regulations. Specifically, KCPA did not implement internal controls for critical estate administration functions including asset identification, collection, safeguarding, and distribution; estate accounting including the recording, documenting, and reporting of income and expenses transactions; bank account administration; and estate management, monitoring, and tracking.

The KCPA is responsible for administering the estates of people in Brooklyn who die without a will or when no suitable person is wiling to administer the estate.

The report also found

…failure to establish proper internal controls to monitor and safeguard estate assets may have provided the opportunity for certain mishandling of estate activities and the recently reported misappropriation of funds. During the course of our audit, we became aware of an issue involving the indictment of a KCPA bookkeeper for stealing more than $2.6 million from decedents’ estates between August 2008 and November 2011.

You can read the full report here: Audit Report on the Financial and Operating Practices of the Kings County Public Administrator’s Office

Or you can download the report here (PDF)

More than half of Americans don’t have a will

The website Daily Finance reports

The newly released 2011 EZLaw Wills & Estate Planning survey shows a fairly significant disconnect between our ideals and our actions when it comes to preparing for our deaths. While 60% of those surveyed said they believe all adults should have estate plans, only 44% said they have one.

Read more: Why More Than Half of Americans Don’t Have Wills

James Gandolfini’s $30 million estate mistake

The late actor, James Gandolfini died and left an estate worth an estimated $70 million. Now thanks to bad estate planning, the IRS may take up to 50% of that estate.

The larger-than-life actor gave $1.6 million dollars to various friends and relatives. He split the rest up among the following people: his two sisters-30%, his wife-20% and 20% to his daughter. His son was the benefactor of a life insurance policy which is not subject to taxes.

The New York Daily News quotes William Zabel, the estate lawyer for the stars, , as saying,

“It’s a nightmare from a tax standpoint.”

Zabel said the “big mistake” was leaving 80% of his estate to his sisters and his 9-month-old daughter. That makes the money subject to death taxes at rate of 55%.

You can read Gandolfini’s will here.

So, even being a rich celebrity doesn’t mean you can’t get bad advice.  With that in mind, here are six tips that will help you pick the right probate/estate planning attorney.

  1. Look for an estate attorney with a customized web site, rather than one with a prepackaged generic site with lots of pretty pictures. Pick a custom site loaded with informative wills, trusts or probate articles about the area of law that pertains to your situation. Content-heavy sites are prepared by experienced wills and trust lawyers, not web masters. Avoid those slick sites with lots of flash. You want an old-school law firm with knowledge, not glitz.
  2. Look for an estate planning law firm that specializes in the area of law that you need. A general law firm that says they do everything cannot possibly do everything well. The content on the web site will give you an indication of what the firm does best.
  3. Contact the NY estate lawyer directly and try to speak to the probate attorney who will be handling your case. Don’t settle for being diverted to a paralegal or an assistant. If the estate planning lawyer is too busy to speak with you initially, ask for a call back. If he or she is too busy to give you the attention you need, maybe you should try someone else. When you speak with the estate lawyer, make sure he/she is a good listener. They can’t help you if they don’t listen. It is important that you feel comfortable with your estate planning lawyer. First impressions are critical.
  4. If the New York probate attorney has client reviews on their site, read them all. You will be able to differentiate between honest reviews and canned ones. Don’t be put off by a single bad review; it will only legitimize the others. After all, you can’t please everyone all the time.
  5. Ask the NY probate lawyer to explain the entire process to you. Do not be shy; you have the right to know. A good estate lawyer should be able to explain even the most complex matter in simple, easy to understand terms. Remember, you are the boss since you are paying the bill.
  6. Finally, go with your gut. Picking the right wills, trusts or estate lawyer can be a challenge. Once you find the right person, the rest of the process will be much easier.