Busch Law Center

How A Short Sale REALLY Works

Wed, 25 Aug 2010 22:40:56 -0700

Bank of America Training Video Explains All
Many people have been frustrated by the short sale process, and the enigma wrapped in a mystery that it seems to be. No one, especially the banks, can give an answer to a simple questions: when will my short sale get approved?

If you want to know what to do to get your short sale done quickly, watch this video:

That’s right, use the correct font! And be on hold for 37 times before you can talk to someone! The secrets are revealed!

Now it all makes sense . . . .

If you have any questions or know of someone who needs help, call us at 623-298-4220 or email us.

The Time is Now for a Short Sale

Sun, 13 Jun 2010 23:51:57 -0700

Tax Relief Won’t Last
One of the realities of the U.S. Tax Code is that debt which is forgiven is included as ordinary income on your taxes. Here’s an example where you borrowed $100,000:

Original Loan – $100,000
You Paid Off – $20,000
You Still Owe – $80,000

Your lender, for whatever reason, did not collect the $80,000 you still owed. The lender sends you a 1099 for the forgiven debt, and the IRS would include $80,000 as ordinary income.

Given the current economic situation and the number of foreclosures and short sales happening, Congress does not want to force the economy into further problems and possible depression. So Congress passed the Mortgage Relief Act of 2007, which cancels ordinary income incurred as a result of debt forgiveness on your primary mortgage.

This is good news for homeowners faced with foreclosure or short sales. But there’s a catch – the cancellation of debt only applies if the foreclosure or short sale happens before 2013. In other words, if you wait to sell or foreclose and the closing or auction doesn’t happen until after 2012, you will have to count the amount forgiven as income.

Why Not Wait?
First, with a foreclosure, you are not in
control of when the bank will sell the
home. The bank may start a foreclosure
in 2011, but not actually hold the auction
until 2013. Why would that happen?

Lenders are not out to do what is best for
you – banks do what is best for the bank.
If the bank sees an advantage in waiting
until 2013 to finish the foreclosure, it will
delay the auction. The few extra months
you get to stay in the house without
paying your mortgage won’t make up
for the tens of thousands of dollars you
may end up owing in taxes. And the IRS
won’t sit around not collecting what is
owed it.

Second, a short sale typically takes 6-9 months to complete. Some happen faster, others take longer. It’s not unheard of for a short sale to take 18 months. Do you really want to take the chance that your short sale doesn’t close by 2013, and get stuck wtih a huge tax bill?

Right now, it is favorable for banks to conduct short sales rather than have to pursue a foreclosure and risk taking back the property. Many properties are stripped of fixures, like air conditioners, cabinetry, ceiling fans and plumbing, either before or after the foreclosure. Some are simply in bad condition and need updating in order to sell for anything close to fair market value.

Finally, you need to seriously crunch the numbers and see when (or if) you will ever get back to break-even on your home, even if you get a loan modification approved (which, by the way, I have yet to see a principle reduction). If you’re $100,000 upside down in your home, it will likely take about 14 years for you to gain that value back. So in 14 years you could sell your home and break even. Is that worth it? Does that make financial sense?

So What Do I Do?
I have been advising most of my clients to give up on loan modifications and move to a short sale. The opportunity is now to get out of debt. In 2-3 years, you could qualify for a mortgage again. Heck, it will take that long for banks to loosen up lending guidelines again anyway. Then you can buy a home at today’s low prices and get apprciation for 10 years rather than spend the time trying to get back to even.

If you have questions about your situation, give us a call and we can discuss your options with you. Not every solution is right for each person, and your situation is different from your neighbor’s, even if your house is the same.

One of the keys to a successful short sale is having a realtor who is experienced and knowledgable in the area. If you need a referral to a good relator, let us know and we can help.

Be sure to consult with your tax professional before making any decisions. Not all mortgages qualify for debt relief, or only part of the mortgage may qualify. You should not make any decisions on short sale vs. foreclosure or other option without seeking professional advice.

If you have any questions or know of someone who needs help, call us at 623-298-4220 or email us.

Modification, Short Sale or Foreclosure?

Mon, 31 May 2010 00:59:19 -0700

Which is Right for You?
That is the questions – are you better off with a modification, short sale, or foreclosure of your home? Or none of the above? Let’s take a look, but first some quick definitions so we’re speaking the same language:

Modification – A loan modificaiton is where the bank changes the terms of your loan so that the payments are more affordable, ideally with a reduction in principle as well as lowering the interest rate.

Short Sale – The lender(s) agrees to let you sell your home for less than what you owe on it (thus the money from the sale is “short” what remains on the loan).

Foreclosure – The bank says “We’ve had enough” and either takes you to court or sells your house at auction.

Deficiency – The amount left over on the loan after you sell your property or are foreclosed upon. Many times the bank can come after you for this amount, filing a lawsuit in court to get a judgment, and then garnish your wages, attach other property, etc. to collect.

Modification
This is the Holy Grail of saving a home. Unfortunately, it’s about as common as the Holy Grail itself, with or without Monty Python. The problem is that the lender has no financial incentive to modify the loan, and neither myself nor any attorney, real estate agent, or mortgage broker I have spoken with have seen a principle reduction (some second loans have settled for less, but this was not a modification but a settlement).

I have seen modifications where the interest rate is reduced temporarily, such as 2.5% for a couple of years, gradually climbing to 4.5% after eight years and locking in at 4.5%. But the term of the note is lengthened to 40 or 50 years. That means an extra 10 or 20 years of paying interest on your house, so the bank makes up its money in the long run and then some.

Will you be living in your current home in 40 years? Didn’t think so. Me neither.

Modifications are tossed about by politicians, bankers, homeowners, realtors, etc., but very few people even get one. Bank of America has only done about 100 or so based on the last report I saw. And anywhere from 40% to 80% of those loans that are modified are back in default within 9 months. Why? Probably because there was no principle reduction, so the payments really weren’t much less. In fact, I’ve seen loan modification proposals where the payment actually went UP. Now why would anyone who is having trouble paying a mortgage agree to pay more per month?

The modification “industry” is fraught with fraud, scams, and even people who mean well and try really hard but simply can’t get the job done because the lenders don’t want to do modifications. Let me repeat:

The banks do not want to do loan modifications.

Short Sales
The short sale is a relative newcomer to the real estate transaction process. Only in the past few months have we seen banks willing to consider short sales instead of foreclosures. I belive the lenders decided they couldn’t take back all of these properties, and they were not selling them for much more than they received at auction anyway. So what are the advantages of a short sale?

1. All loans on the property agree to take less and settle the debt. Be sure your lender agrees to WAIVE any right it may have to a deficiency. In Arizona, I do not advise my clients to accept any short sale if the lender insists on being able to go after my client for a deficiency.
2. May be entitled to tax relief for debt forgiveness and up to $1,500 for moving expenses under government programs.
3. There is a temporary relief from taxes incurred when you short sell (or foreclose) a property and the lender sends you a 1099 for the deficiency amount (taxed as ordinary income). This program expires in 2013, so you need to plan ahead. Most lenders take 4-6 months minimum to close a short sale, and they may drag out the procedure if the 2013 deadline approaches specifically to make people pay for the debt forgiveness.
4. Often you can qualify for another mortgage in 2-3 years, rather than 5-7 or more for a foreclosure.

One other factor to consider in a foreclosure: You may be able to work with an investor who can buy your house and lease it back to you, with an option to buy it in 2-5 years. Be careful. Although there are many legitimate programs around, there are just as many scams. Everything should be disclosed in the contracts, such as rent, option price, repurchase price, etc.

Remember, if it’s not in writing, it didn’t happen. Never, ever take someone’s word for it, or trust that it will be worked out later. Truly honest programs, like Housing Angels, tell you everything up front and show you all the agreements before you have to commit to anything.

Foreclosure
In Arizona, we have an anti-deficiency statute which
prohibits a lender from pursuing a deficiency against the homeowner if the property was residential, the loan(s)
was the original loan used to buy the property, and the
home is on 2 1/2 acres or less. Things get a bit cloudier
if you have refinanced, especially if you took out cash or
did not put all of the refi loan proceeds back into the
property.

Sometimes a foreclosure may be best because it
completely severs a bank’s right to collect anything
from the homeowner if the anti-deficiency statute applies.
It can also be advantageous tax-wise, because if the
lender cannot go after a deficiency, then it cannot report
the deficiency as forgiven debt, which the IRS can tax to
you as ordinary income. Also, if you do not qualify for a
short sale (perhaps because you do not have a financial hardship), you may need to look at foreclosure.

Foreclosure is easy – you can simply walk away from the home. However, the house is your responsibility until it is actually foreclosed upon (judgment rendered or auction conducted), so be sure to keep up your homeowner’s insurance – you don’t want a bank coming after you for a $150,000 fire damage bill because someone broke into the house after you vacated it and started a fire, stole cabinets and copper pipe, etc.

Conclusion
There are options for those who find themselves struggling to keep their home. However, one thing is certain: The time is NOW to evaluate ALL your options, even if you don’t want to consider all of them.

Right now the lenders are doing things they do not normally do, and there are special tax breaks which will expire. You may have recently had or currently have a financial hardship which would entitle you to a modification or short sale, but in 6 or 12 months that hardship may no longer exist.

You have to look at your house as a business investment, and decide what makes the most financial sense for you and your family both now and in the future. If your house is seriously underwater, now may be the time to get out from under it even if you can make the payments. Will you still be upside down in 5 years? 10 years? Does that make good financial sense?

At the bare minimum, you need to know how these options and others fit your situation. You may decide to soldier along and keep your home and existing loan, and that’s fine if it works for you. But for many of you, something needs to be done now, before the current climate changes and you lose out on any of these options.

If you have any questions or know of someone who needs help, call us at 623-298-4220 or email us.

Photo Radar Going Away July 15

Thu, 6 May 2010 21:14:21 -0700

Arizona DPS Cancels Contract
Arizona’s Department of Public Safety (DPS) just informed RedFlex, the contractor which operates Arizona’s speed cameras, that it will not renew the photo radar contract for DPS’ fiscal year 2011. All speed cameras will be turned off on July 15, 2010.

That’s wonderful news for Arizona’s travelers. While some argue that photo radar slowed Valley drivers, it had become more of a danger than a help. Drivers knew where the speed cameras were located, slowed down, and simply sped up after passing the camera.

The problem is that if someone wasn’t paying attention, or was fearful of getting a ticket, they hit their brakes when they realized they were close to a speed camera. I have seen many near accidents as people slam on their brakes near the speed camera, even if they were near the speed limit anyway. Many times they slow to 45 mph in a 55 mph or 65 mph zone.

Fortunately, DPS realized that photo radar was not working. The original goal (at least as publicly stated) was to reduce accidents and make the highways safer. There is no evidence to suggest that speed cameras make the roads any safer.

When the pitch was made by RedFlex to DPS, it analyzed estimated numbers of tickets issued among other statistics, including expected profit. That’s right, expected profit.

The underlying reason for photo radar was to make money.

Obviously it didn’t make enough.

If you have any questions or know of someone who needs help, call us at 623-298-4220 or email us.

Arizona’s New Illegal Immigration Law

Wed, 28 Apr 2010 00:01:00 -0700

What’s the Real Deal With It?
There has been a LOT of attention drawn to Arizona’s new immigration bill, SB1070. If you want to read the bill for yourself, click here.

Arizona’s Immigration Bill SB 1070 gives law enforcement officers the right, with reasonable suspicion, to inquire about a person’s immigration status by requiring them to produce identification. The police cannot pull someone over because they think the person is an illegal; some other act must have been first committed to warrant the stop.

Compare it to Arizona’s seat belt law – police can’t pull you over if they see you not wearing your seat belt, but if you’re pulled over for speeding and you’re not wearing your seat belt, the officer can cite you for failure to wear the seat belt. This immigration policy works in much the same way. Law enforcement also cannot violate any federal immigration laws.

The law basically makes it a trespassing crime to be in Arizona if you are in the country illegally. Law enforcement is required to immediately turn over an illegal alien to the appropriate federal agency. The law also makes it a crime to hire illegal aliens/immigrants, so it affects employers also.

People seem to have strong opinions on both sides. To me, the real question is, why do we need it?

Federal Government Failure
The United States government is charged with securing the borders of our country. The Feds control immigration and set the rules for how someone may visit or immigrate to the United States.

The problem is, of course, very complex. One of the criteria to immigration today is that the government has to be able to verify that you are who you say you are. What’s important to remember is that many, many countries don’t have good birth records or identity verification like we have in the U.S. So the government or the individual may not be able to prove that they are who they say they are.

However, that’s not an excuse for the mountains of red tape people face in trying to come here legally. It can take years for someone who has proper documentation to work through the system That’s unacceptable and that is where true immigration reform needs to occur. There’s no reason someone should have to wait 5-10 years for an answer whether they can stay in the U.S.

Illegal Immigration
Because of the near impossibility of working through the system, many people have resorted to illegal immigration. Most come to the U.S. seeking work or a better life, which is admirable. However, it is illegal.

Advocates against Arizona’s Immigration Bill state that the people who have come here illegally aren’t hurting anyone and that they’re just here to work and make a better life for themselves. They claim that families may be broken up if parents are deported, or that educational opportunities may be lost. And that may be true.

But the problem with their arguments is that all of them ignore the primary issue – these people came to this country illegally. They crossed the border somewhere without permission, perhaps without identification, and they are now living and working in the U.S. against the law.

Why Is It a Problem?
Illegal immigrants don’t pay income and other taxes which are used to provide services. They often don’t seek medical care unless seriously ill because of fear that they will be discovered and deported, which greatly increases costs because they then use emergency rooms rather than general practice physicians. They don’t have car insurance or similar insurances because they don’t have social security numbers. And the list goes on.

I know several people who have been in car accidents with illegal immigrants, most of which were the fault of the illegal immigrant. They had no car insurance (a problem which is not limited to illegal immigrants, of course), but because they are basically untraceable, there was no way for the other person to recover damages. Their car insurance premiums increased because they had to make a claim (which is another story), but it illustrates how illegal immigrants can cost those of us here legally more money.

The real problem is that illegal immigrants are here illegally. They blatantly broke the law. They cut in line to get here. That’s not fair to those who are going through the proper channels to come here legally.

The reasons given by illegal immigration advocates is simply not sufficient. They complain that the law is permitting racial profiling. I don’t see anything in there that authorizes or supports racial profiling, but let’s face it, in reality, primarily hispanics will be looked at by law enforcement here. I’m sure law enforcement will be more suspicious of hispanics. But that doesn’t mean there will be racial profiling. It doesn’t mean that there won’t, either.

Advocates for the bill cite crime as a reason for the law. But we have crime from legal citizens as well as illegal aliens. And let’s face it, crime from drug traffickers isn’t going to stop because Arizona passed a new law. Drug smuggling will only stop once the demand for drugs stops, or the risk becomes too great for the reward. In other words, profits are not great enough to justify the risk of being arrested or shot.

This bill is a reaction by the State of Arizona to poor federal government immigration policies. The fact is, the feds haven’t protected the border like it should. So Arizona did what it could to get something done. Only time will tell if it is the right action, but the one thing it has done is to bring national attention and focus on the illegal immigration issue.

Maybe now something which will truly help can be done.

If you have any questions or know of someone who needs help, call us at 623-298-4220 or email us.

Get It In Writing!

Wed, 14 Apr 2010 00:42:16 -0700

Is It Really That Important?
YES!

OK, so I should write a little more than that for a blog entry.

Always get something in writing. But why? And is it really that important?

Here’s an example:
I was in court the other day, and the case before ours was an eviction. The tenant, a single mother, stated that she and the landlord had come to an agreement regarding the rent which was owed, and also reasons as to why it hadn’t been paid. The landlord was also being foreclosed upon, and the tenant stated that she knew she wouldn’t get her security deposit back if he was foreclose upon (she’s probably right).

While she had rights as a tenant, she didn’t exercise them. She never sent a written notice to the landlord about repairs which needed to be made, as required by Arizona law. She had even drafted a letter to the landlord, but decided to “be a nice person” and not send it to him.

When you are in a dispute with someone, or there is a possibility of a dispute arising, don’t rely on a phone call, voice mail, text message, etc. Protect yourself by putting it in writing and delivering it to the other party. And if it’s really important, mail it certified mail.

For many of our activities which we do for clients, we send letters and other notices by various methods, including email, fax, first class mail, and certified mail. If you may need to prove delivery at a later date, know that there are statutes which require certified mail, not registered mail, Priority Mail, UPS or FedEx. If the law or a contract requires you to send a notice via certified mail, some other form of proof of delivery may not meet the law’s or contract’s requirements, and therefore you would not have effective delivery.

What About Friendly Deals?
Here’s the Golden Rule: No deal is a friendly deal if it goes bad. And every deal has the potential to go bad. People make strange decisions when they feel they are not being treated fairly or they see an opportunity to get more money. Assume that every deal could go bad, and follow up even good conversations wtih a confirmation letter. Simply state what was discussed, what was agreed upon and what was not. Now you’ve covered yourself, and you have documentation to show a judge should you ever need it.

Judges Like Documentation
Remember this: The judge in any case has no idea what happened. He probably will never know, either, because one side will tell a different story than the other. That doesn’t mean someone is lying (although that certainly happens) – different people have different perspectives and remember events differently.

A judge can make a decision only based off of testimony and documents admitted into evidence. There will undoubtedly be information you think is important that the judge says does not apply to the legal issues or which is inadmissible in court.

The bottom line is always, always get it in writing, even if you have to create the writing. You can never go wrong putting the deal in writing; you can get burned by relying on a verbal agreement.

If you have any questions or know of someone who needs help, call us at 623-298-4220 or email us.

FLASH! You’ve Been Caught on Camera!

Mon, 29 Mar 2010 12:15:53 -0700

What’s the Deal With Photo Radar in Arizona?
Photo radar, or the speed camera, is generally hated by motorists. You’re driving down the highway, minding your own business, and *FLASH*, you’re nailed. Or you didn’t even notice the camera, and you get a “love letter” a month or so later in the mail.

Photo radar has its backers and its detractors. Backers state it has reduced accidents, resulting in fewer injuries and fatalities. While fatality rates have fallen, so has the number of vehicles on the road and the number of accidents. So stating that photo radar itself has reduced fatalities is quite the stretch, and there is no evidence I have seen which supports such a claim.

I will say that there appears to be fewer people who drive like maniacs at 90-100 mph. However, there is a greater number of people who slam on their brakes because they look up and see the photo radar, and even though they were going at or close to the speed limit, still react by hitting the brake pedal and slowing to 10 mph below the speed limit.

Frankly, I think this is becoming more dangerous than the occasional speeding maniac. When all four lanes of traffic have to slow very quickly, the chance of an accident increase dramatically. I’ve seen several near misses due to a driver who was obviously terrified of the giant metal eye on the side of the road.

How Do I Avoid Getting a Ticket?
First is know where the speed cameras are
located. There are many websites which can
provide this info. Here’s a list of websites which
tell you where the cameras are located:

AZ511.gov
AZCentral.com
PhotoEnforced.com
abc15.com

I use an App for my iPhone called Trapster,
which monitors exactly where I am via GPS
and gives me audio warnings of speed cameras
red light cameras, speed traps, etc. as I come upon them. I don’t use it all the time, because I know where many cameras are on my usual routes. But it’s very useful when traveling to a new area. You can download Trapster for free from the iTunes App Store here. Trapster is also available for many other mobile devices as well from their website. I don’t receive anything from Trapster and am not affiliated with the company, I just like the product.

I got a Ticket. What do I do?
First, know that the notice sent to you in the mail is nothing more than a request for you to admit you were speeding at the time the photo was taken. This is not a ticket. In order for this to be a valid moving violation, you would have to be served by a sheriff’s deputy or private process server. Here’s what I advise clients who get one in the mail:

Throw it away.

Now, don’t think this is a license to speed around the state. On the contrary, if you rack up enough photo radar tickets, the county will send someone out to serve you. Then you will have to appear in court. Also, be aware that the City of Scottsdale, AZ, will send special process servers out to serve you.

There also is an argument and belief that photo radar is unconstitutional. One justice court judge in Surprise, AZ, has even ruled this way. The argument is that photo radar creates a separate class of speeders or violators – those who are pulled over by a law enforcement officer, and those who are shot with photo radar. The problem is the fines are different, and therefore the argument says the tickets violate the Equal Protection Clause of the Arizona and U.S. Constitutions.

Protection from the Photo Radar
There are special license plate covers, sprays, etc. you can buy to obscure your license plate from the photo radar. However, most of these are illegal, and I would not advise you use them.

One of the best methods is to put your vehicles in a trust, LLC, or corporation. The reason for this is that a trust, LLC or corporation cannot drive a car, so the municipality must send you a notice and ask the trust, LLC or corporation to please identify who was driving the vehicle when the alleged violation occurred. You are under no obligation to respond to such requests, so once again, you:

Throw it away.

We can create a Family Transportation Trust for you for $500, in which you can put as many vehicles as you like and insulate yourself and family members from photo radar tickets. It’s simple to do and will not affect your insurance or control over the vehicle. Contact us to find out more information.

The bottom line is that photo radar tickets are a pain, but they are not expensive enough for someone to seriously challenge in court (meaning take it to an appeals court level for a meaningful decision on constitutionality). The best bet is that cities realize they don’t make money off of them, and that they are actually adding work to the court system and costing the municipality money.

In the end, photo radar will be a business decision. It’s just not big enough for most people to spend time fighting.

However, it certainly wouldn’t hurt to let your local representatives know how you feel. And let them know that you consider things like photo radar when you go to the ballot box.

If you have any questions or know of someone who needs help, call us at 623-298-4220 or email us.

What’s Up with the Estate Tax?

Mon, 15 Feb 2010 12:20:28 -0700

Will Congress Do Anything This Year?
So it’s 2010, and there is no estate tax this year. So if you’re planning to die soon, and you have a large, taxable estate, 2010 looks great!

But Congress doesn’t like no taxes coming in from estates, so it wants to change the law. Not to no estate tax permanently, but to some other amount.

The question is, will it happen? And if so, what amount?

Here’s the current status: the Bush tax cuts in 2001 created a gradual step up in estate tax until the limit reached $3.5 million in 2009 (anything under that was tax free, anything over was taxed at 46%). In 2010, there is no estate tax, but the Bush law sunsets in 2011, and the estate tax goes back to 2000 levels.

That means that if you die on January 1, 2011 (instead of Dec. 31, 2010), your estate will pay taxes on everything over $650,000 at 55% (this includes life insurance proceeds calculated to determine the size of your estate).

Congress, facing the largest budget deficit in history, wants more money coming in. And dead people don’t vote, so let’s tax them (or their estates). But at what rate, and when is it effective?

Many in Congress want the estate tax reinstated to 2009 levels, but retroactive to include 2010. So there would be no “tax free” year, even if you died while the law stated there were no taxes in 2010. Which raises many constitutional and legal, if not ethical, issues regarding any retroactive tax.

The real problem for Congress is that can’t agree on what it wants to do. And the estate tax issue is certainly not high on the priority list. So this issue could slip until 2011, simply because there are too many other things happening.

This presents a big problem to planning your estate – we are waiting for Congress to tell us what they want, and then to design methods of working with the new laws.

Right now it’s very important to have your estate plan up to date and flexible. You don’t want to be caught off guard or have your estate sacked by some new/reinstated tax.

If you have any questions or know of someone who needs help, call us at 623-298-4220 or email us.

Credit Cards Got You Down?

Mon, 25 Jan 2010 13:36:08 -0700

Have you looked closely at your accounts?
Credit cards are a way of life in America. Unfortunately, the credit card companies have given out so much “free” credit, without ever requiring any real principal to be paid back.

The federal government only requires that your monthly minimum payment contains 4% of the outstanding principal balance. The rest of your payment is interest. That means if your payment is $100, only $4 goes to reducing the principal amount owed. Then the company charges interest again the next month, calculates your minimum payment, and sends you a statement. No wonder the balance never goes down, right?

Here’s an example: I have a client who looked back at 20 years of credit card bills. Here’s the interesting statistics they discovered:

Amount charged $425,000
Amount paid to companies $600,000
Amount still owed $450,000

Those numbers DO NOT include three refinances, which included about $70,000 which had been taken out of their homes and used to pay off credit cards over those 20 years (3 separate refinances)! This story is not unusual, either. The numbers may be different, but the goal of the bank is the same – keep you in debt forever.

Making the minimum payments will never get you out of debt. It would take 30 years or more to pay off a debt if you just made the minimum payments. Absolutely unreal and all part of the bank’s plan.

So what if you can’t make payments any longer?
Some people, particularly in this economic recession (or depression, depending on whom you ask), are simply not able to make the payments on their credit cards. Sometimes hard choices have to be made on which debts to pay and which to let go. Here are some considerations to apply:

1. Credit cards are unsecured debt. This means the bank can’t take your car, boat, bank account, home, etc. unless it sues you and wins a judgment. Even then, it will be behind any other creditor you have, like your mortgage company.
2. The bank has to prove the debt. If the bank files a lawsuit against you, it has the burden of proof to show that a valid debt exists. Most of the banks, and especially the collection agencies, don’t have the documentation necessary to prove the debt. If the right procedures are followed, we can make the debt uncollectible.
3. Your credit score. Not paying your credit cards will result in negative reports on your credit report, which will decrease your credit score. You also will have credit limits on credit cards decreased or even terminated, even on accounts which are in good standing. However, this can be repaired later once the debts are handled.
4. Banks will settle debts. Most banks will settle credit card debts very readily for 50% of the debt or even significantly less. This varies from bank to bank, and account to account. However, the bank will demand a very quick payoff timeline, sometimes even immediate.
5. Prioritize your debts. Not all debts are important. You need to decide where to best spend your money and then how to handle debts which you cannot pay.
6. Bankruptcy may not be the answer. There are methods to eliminate or make uncollectible any credit card debts you may have. Plus, bankruptcy may not do what you need. Often, in order to keep your assets (car, house, furnishings, etc.) you have to agree to pay back your credit card debt or a significant portion of it. That may not help your family in the long run to get out from under the debt control of the banks. There are alternatives.
Eliminate Credit Card Debt
We have methods which can elminate your credit card debt. During this process, which will take several months to complete (time varies depending on your account status, the bank, etc.), we help you eliminate your credit card debt and help you move to just spending cash instead of living on credit.

The great advantage to our Debt Elimination Program is that you learn to live on your cash and stop depending on credit for your expenses. You will start to see your savings account grow, and you won’t have the worry of paying your credit card bills hanging over your head. You will sleep better.

There are many, many advertisements for debt settlement or consumer credit counseling services. Most of these won’t relieve you from the debt; they simply negotiate a consolidated new loan with simple interest instead of compount interest (which is why credit card debt never goes down), and you still have to pay off the debt. You get locked into a repayment plan which may last several years and still wreck your credit.

We have another option. Our Debt Elimination Program works best the earlier we can get started, ideally before your debt is sold to a collection agency (although it will work even if a collection agency has already been harassing you). If you are looking for an alternative to bankruptcy or a counseling/settlement agency, contact us and we can describe the program to you.

If you have any questions or know of someone who needs help, call us at 623-298-4220 or email us.

Congress Discussing the Estate Tax

Tue, 22 Dec 2009 17:48:50 -0700

So What Will Happen?
We have about one week left of estate taxes. In 2010, there is no estate tax. However, unless Congress acts, the current law which raised the estate tax thresholds (to no estate tax in 2010 from $1 million in 2001) and lowered the tax rate (to 45% from 54%) will expire. This means the estate tax will revert back to 2001 levels, which is $1 million and 54% tax rate.

Congress is starting to look at repealing the law for 2010 and instituting some sort of estate tax. Of course, they’ll have to screw up health care first before they have the time to address the estate tax next year (in case you believe universal health care run by the government is a good idea, please email me with any program which the government runs that actually works well. If you can’t think of one, don’t feel bad; me neither.).

Here’s how the estate tax works: For every dollar above the limit ($3.5 million in 2009), your estate pays taxes (45% in 2009).

So you don’t have $1 million or more in the bank? That’s not all that counts. Here are some of the assets which count toward your estate tax:

1. Cash, stocks, bonds, securities;
2. Equity in real estate, like your home;
3. Life insurance death benefits;
4. Investments;
5. Vehicles;
6. Inheritance;
7. Funds and assets held in revocable trusts.

One of the real surprises here for most people is life insurance. While the government can’t directly tax life insurance death benefits, it simply adds the death benefit to calculate the size of your estate. So the rest of your assets have to pay the tax. Here’s an example:

John dies with an estate of $1 million dollars in his IRA, equity in his home, cash, and other assets. He also has a $1 million life insurance policy. If he dies in 2009, he pays no estate taxes (limit is $3.5 million). If he dies in 2010, he pays no estate taxes (no estate tax under current law). If he dies in 2011, he pays $550,000 in estate taxes ($1 million limit, tax rate of 55%).

His life insurance is not taxed, so his other assets bear the burden of paying the taxes. This means his family may have to sell various assets to pay the taxes, or use the life insurance proceeds (which were meant to take care of John’s family) to keep the family home.

The other issue with this tax is that most of the assets which are being taxed are items on which taxes were already paid or were bought with after-tax dollars. To me, that’s double taxation and hits families hard.

If you want some changes in the estate tax, contact your representatives and senators and let them know how you feel.

If you have any questions or know of someone who needs help, call us at 623-298-4220 or email us.