Estate Planning Basics

Thinking about planning on how your assets will be distributed after you pass is never an easy thing to think about.

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However, after working hard after so many years, no one wants another party or the state to determine how his or her assets are distributed.  According to a recent survey by RocketLawyer.com, over 50% of Americans die without a will.  There may be many reasons for avoiding writing a will such as procrastination, belief they do not need a formal will and that their assets will be handled properly without a written document and simple procrastination.

The Law Office of John Iaccarino has put together a list of a few documents that are essential to ensuring control over your wealth distribution and medical decision-making as you approach your later years:

  • Will — This is the foundational estate planning document which lays out the wealth distribution and names an executor of your estate.
  • Trust — A trust is a more specific distribution document, usually working in tandem with the will, which can maximize tax benefits and lay out the terms for distribution. We are experienced with all forms of trusts, including AB Trusts, QTIP Trusts, Credit Shelter Trusts and pour-over trusts.
  • Power of attorney — The power of attorney is a document that appoints an agent, someone you trust, to be in charge of your finances if you lose the capacity to handle these affairs yourself. A power of attorney can be set to begin immediately or it can be “springing,” which means it only takes effect at the point in which you are legally declared unable to handle your own financial affairs.
  • Advanced healthcare directive — A health care directive provides specific instructions for how your health care providers should proceed in the event that you are unable to communicate your medical wishes. It also appoints an agent to handle any unforeseen medical decisions that need to be made on your behalf when you can no longer make or communicate these decisions yourself.

 

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Fairness for Struggling Students Act

Pursuing a higher education has many benefits: job opportunities, increased earning potential, societal benefits etc.  However, receiving a degree comes at a cost – and for some, a cost they may never be able to repay in their lifetime due to the high interest rates of private loans.

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Under the proposed “Fairness for Struggling Students Act of 2013”  private student loans would be dischargeable in bankruptcy.

According to the NCBRC, the biggest issue facing individuals who possess private student loan debt is the lack of flexibility of these types of loans:

Although private student loans comprise only about 20% of the total student loan debt, private loans tend to be substantially more onerous for borrowers. They typically have higher interest rates, limited or no availability of deferment or forbearance, and no income-based repayment plans. In addition, they are not subject to the consumer protections in place for federal student loans.

To learn more about the pending legislation, click here

Frequently Asked Questions About Bankruptcy

Stress. Anxiety.Depression.  

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These are all feelings that many people with severe debt are facing as they ponder over what solutions that can turn to in order to fix their financial problems.  For those facing serious debt that they are unable to resolve due to lack of financial resources, filing for bankruptcy can be the only solution to resolve their debt issues.

Deciding to file for bankruptcy is never an easy decision.  Many clients come in with questions or misunderstandings as to how the bankruptcy process works, the different types of filings an individual can choose from, requirements, etc.  Here at The Law Office of John Iaccarino, we have answered some of the most frequently asked questions regarding bankruptcy to help you decide whether or not filing for bankruptcy is the solution to solving your debt problems.

1. What are the advantages of bankruptcy?
Once discharged through bankruptcy your debts are erased; in other words you are no longer responsible for paying them.

2. What about my credit?
The fact is that when lenders or other creditors review your credit report they rank bankruptcy as the worst.

3. How long do I have to wait to rebuild my credit?
You can rebuild your credit immediately with a secured loan or credit card. In fact you can even obtain these items while going through the bankruptcy process.

4. How long does it take before my debts are discharged?
Chapter 7 takes between 3 to 8 months;
Chapter 11 can take from just under a year to many years;
Chapter 13 can take several months while trying to get your repayment plan approved. However, the actual discharge is not final until you’ve met the payment plan requirements which take from 36 to 60 months to complete.

5. How long until my credit gets back to the point where I might hope to get a regular credit card or mortgage?
Rebuilding credit depends on how aggressively you try to get back on track, but don’t figure less than 1-3 years. Remember, you can always get a secured credit card or a mortgage with a low loan to value (LTV) and high interest rate, sometimes even still in the middle of a bankruptcy.

6. How would I know if Chapter 7 is right for my situation?
If you have very few assets with no property and your assets can be exempted then Chapter 7 may be right for you as long as you have no other obligations such as court ordered alimony, child support payments, criminal restitution, non-dischargeable taxes, or student loans. (list of non-dischargeable items) Many national creditors prefer that you file Chapter 7 if they cannot recover at least 50 cents on the dollar.

7. Which bankruptcy chapter is the least expensive?
Chapter 7 is the least expensive because you do not have to pay off the debts. The next least expensive is Chapter 13 where you repay about 10 cents on the dollar, followed by Chapter 11.

8. Can I pick and choose which assets to put into a personal bankruptcy?
No. Every asset you own must be included in the filing. After filing you may choose to exempt some of your assets.

9. So I exempted my vehicle, what happens to it?
You didn’t actually exempt the vehicle (or any asset) you really only exempted the equity (if any) in the asset . So, if you have a loan for $17,000 on a vehicle worth $20,000 then you exempt $3,000. However this does not mean you get to keep the car free. You only keep the vehicle if you make payments on it.
On the other hand, if the situation was reversed and you owed $20,000 on a vehicle worth only $17,000 then you could choose to simply give the vehicle back and owe nothing. One of the advantages to filing bankruptcy.

10. What does reaffirm mean?
You become personally liable for the debt again. For instance, in the vehicle example above if you kept the car and made payments the creditor would probably want you to sign a new contract (reaffirm) for the vehicle.

11. What exactly can I exempt?
It depends on which state you live in. Most states allow the Federal exemptions but also have state exemptions that may be more favorable. See this list of Bankruptcy Exemptions – Federal and State

12. Does my personal bankruptcy affect my corporation?
No! But your shares go to the trustee and may restrict your voting and transferring privileges.

13. Can I file a personal Chapter 11?
Individuals may file. Chapter 11 – More info

14. Do I have to appear before a bankruptcy judge?
No, you will meet with a trustee and your creditors at a meeting called 341.

15. What is the trustee’s job?
Find assets with equity, liquidate them and then pay off the secured creditors. If any money is left then they also pay unsecured creditors based on priority. For a more in depth explanation see Chapter 7 “The Role of the Trustee”

16. What if I want to keep some non-exempted assets?
In most cases, you can buy them back from the trustee.

17. If I change my mind after filing can I get of or stop the bankruptcy?
Only the judge will decide if it may be dismissed or not. Even if you get the case dismissed your credit report will still show that you filed.

18. After I file bankruptcy can I still workout the non-exempt assets?
In Chapters 11 and 13 you may negotiate with your creditors out of court. In a Chapter 7 you may do a workout if the trustee abandons the property.

19. What does it mean when a trustee abandons property?
When the liquidation value of an asset cannot pay off the secured creditors, the trustee “abandons” it, or simply gives it back to the debtor. Although you’ve been discharged from the obligation, if a workout can not be achieved or payments made, you’ll probably lose the property at a foreclosure.

20. I thought bankruptcy stopped foreclosure? Can they still take my house?
When you file Bankruptcy, you receive an “automatic stay” on court actions such as foreclosures and sheriff’s sales. A creditor can still go into court and ask the bankruptcy judge for a “relief from stay”, and if granted the creditor can proceed with court action to foreclose.