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Archive for November, 2012

Interest Rates Remain the Same for the First Quarter of 2013

November 30th, 2012

WASHINGTON ― The Internal Revenue Service today announced that interest rates will remain the same for the calendar quarter beginning Jan. 1, 2013.  The rates will be:

  •  three (3) percent for overpayments [two (2) percent in the case of a corporation];
  •  three (3) percent for underpayments;
  •  five (5) percent for large corporate underpayments; and
  • one-half (0.5) percent for the portion of a corporate overpayment exceeding $10,000.

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis.  For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.

Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.

The interest rates announced today are computed from the federal short-term rate determined during October 2012  to take effect  November 1, 2012, based on daily compounding.

Courtesy of The Internal Revenue Service.

IRS Strengthens Integrity of ITIN System; Revised Application Procedures in Effect for Upcoming Filing Season

November 29th, 2012


WASHINGTON –– The Internal Revenue Service announced today updated procedures to strengthen the Individual Taxpayer Identification Number (ITIN) program requirements. The new modifications and documentation standards further protect the integrity of the ITIN application and refund processes while helping minimize burden for applicants.

The changes build on previously announced interim procedures. During the last several months, the IRS gathered feedback from stakeholders and interested groups on how to best safeguard the integrity of and improve procedures for this important tax identification number.

ITINs play a critical role in the tax administration process and assist with the collection of taxes from foreign nationals, resident and nonresident aliens and others who have filing or payment obligations under U.S. law. Designed specifically for tax administration purposes, ITINs are only issued to people who are not eligible to obtain a Social Security Number.

“Our review allowed us to evaluate the program and gather feedback to make needed adjustments,” said IRS Acting Commissioner Steven Miller. “We believe the final rules balance the need for greater integrity for the ITIN and refund processes while minimizing the impact on taxpayers.”

The IRS will maintain its new, stronger standard for issuing ITINs. ITIN applications will continue to require original documentation or copies certified by the issuing agency.  In addition, the IRS finalized its earlier decision to no longer accept notarized copies of documents for ITINs. Most of the interim guidelines have been made permanent. Those requirements that changed will provide additional flexibility for people seeking ITINs while continuing the stronger protections.

A key change is that, for the first time, new ITINs will expire after five years. This change will help ensure ITINs are being used for legitimate tax purposes. Taxpayers who still need an ITIN will be able to reapply at the end of the expiration period. This step will provide additional safeguards to the ITIN program to help ensure only people with legitimate tax purposes are using the numbers. In addition, the IRS will explore options, through engagement with interested groups, for deactivating or refreshing the information relating to previously issued ITINs.

As part of its review process, the IRS heard from stakeholders that it is difficult in some instances for individuals to be without documents such as passports for extended periods. As a result, the IRS determined that trusted outlets other than its centralized ITIN processing site need to be available to review original documentation. As part of this recognition, while original documents or copies certified by the issuing agency are still required for most applicants, there will be more options and flexibility for people applying for an ITIN. These options provide alternatives to mailing in passports and other original documents.

Certifying Acceptance Agents (CAAs) – an important intermediary in the ITIN application process – will be able to engage in the ITIN process by reviewing original documents or copies certified by the issuing agency, but will be subject to new safeguards. CAAs will be required to certify to the IRS that they have verified the authenticity of the documents supporting the ITIN application. For certain ITIN applicants, this provides an option where they will not need to mail original documents such as passports.

With respect to dependent children, in order to adequately substantiate identity and foreign status and protect important child tax credits, ITIN applications submitted to IRS by a CAA will continue to be required to include original documentation. For children under six, one of the documents can include original medical records. For school-age children, the documentation can include original, current year school records such as a report card.

CAAs will now need to meet new requirements and will face stronger due diligence standards to verify the accuracy of supporting documentation. For the first time, only those covered under Circular 230 are eligible to serve as a CAA. Exceptions are made for CAA applicants from financial institutions, gaming facilities, Low-Income Taxpayer Clinics and Volunteer Income Tax Assistance (VITA) Centers. CAAs will be required to take formal forensic training to help them identify legitimate identification documents. The IRS also plans greater oversight and compliance activities with CAAs to safeguard the ITIN process.

In addition to direct submission of documents to the IRS ITIN centralized site or use of CAAs, ITIN applicants will have several other avenues for verification of their documents. These options include some key IRS Taxpayer Assistance Centers (TACs), U.S. Tax Attachés in London, Paris, Beijing and Frankfurt, and at the Low-Income Taxpayer Clinics and Volunteer Income Tax Assistance (VITA) Centers that have CAAs. The procedure announced Oct. 2, 2012 for foreign students at educational institutions to be certified through the Student Exchange Visitors Program (SEVP) remains.

The finalized procedures are effective Jan. 1, 2013, in time for the 2013 tax-filing season when many ITIN applications are submitted along with a taxpayer’s income tax return. Later in January, participating IRS Taxpayer Assistance Centers will be available to review and certify passports and national identification cards in person for primary, secondary and dependent applicants. The first set of TACs that will review and certify documents for ITINs are located in areas where past ITIN activity has been prevalent. Additional details on participating IRS locations and other rules will be available soon on IRS.gov.

As announced previously, some categories of applicants are not impacted by these documentation changes, including:

  • Spouses and dependents of U.S. military personnel who need ITINs.
  • Nonresident aliens applying for ITINs for claiming tax      treaty benefits.

The IRS also stressed that it will continually monitor and work with interested stakeholders on the ITIN process and intends to make appropriate adjustments to ensure the process works in a fair, balanced fashion that meets the needs of taxpayers and tax administration. Individuals or organizations that want to comment on these procedures can do so by submitting an email to ITINProgramOffice@irs.gov.

Courtesy of The Internal Revenue Service.

COSTLY DEBT SETTLEMENT SCHEMES PREY ON THE MOST DEBT-BURDENED CONSUMERS STRUGGLING TO RECOVER FROM ECONOMIC DOWNTURN

November 27th, 2012

What a Half Million Unwary Consumers Don’t Know:  Schemes Only Work for 1 in 10 Who Pay for Them; Consumer Alert:  Debt Settlement Programs Seen as “#1 Threat to America’s Most Indebted Consumers.”

WASHINGTON, D.C. – October 17, 2012 – As few as one in 10 unwary consumers who are lured into so-called “debt settlement” schemes actually end up debt free in the promised period of time, making the risky schemes the No. 1 threat facing America’s most deeply indebted Americans, according to a major new consumer alert issued today by the nonprofit National Association of Consumer Bankruptcy Attorneys (NACBA). Available online at http://www.nacba.org, the NACBA consumer alert notes:  “Already struggling with home foreclosures, harsh bank and credit card fees, and other major financial challenges, America’s most deeply indebted consumers are now falling victim to a major new threat:   so-called ‘debt settlement’ schemes that promise to make clients ’debt free’ in a relatively short period of time.  Unfortunately, most consumers who pursue debt settlement services find themselves facing not relief but even steeper financial losses. Even the industry acknowledges – though not in its ever-present radio and online advertising – that debt settlement schemes fail to work for about two thirds of clients. Federal and state officials put the debt-settlement success rate even lower – at about one in 10 cases – meaning that the vast majority of unwary and uninformed consumers end up with more red ink, not the promised debt-free outcome.”
The private debt-settlement industry remains robust.  More than 500,000 Americans with approximately $15 billion of debt are currently enrolled in debt settlement programs, according to industry estimates.  And there is room for further growth:   One in 8 U.S. households has more than $10,000 in credit card debt.
Durham, NC bankruptcy attorney Ed Boltz, NACBA Board member and incoming NACBA president, said:   “Based on what bankruptcy attorneys are seeing across the nation, we believe that debt settlement schemes are the number one problem facing America’s most deeply indebted consumers today. Bombarded with slick radio and Web advertising falsely promising a smooth road to being debt free in a short period of time, these companies prey on the most desperate victims of the economic downturn.   These particularly vulnerable consumers usually end up getting sued, stuck with outrageous fees, more deeply in debt, and far worse off in terms of their credit score.”
Earlier this year, NACBA focused national attention on the “student debt bomb,” which then was identified as the fastest growing consumer debt problem being handled by consumer bankruptcy attorneys.
Richard Thompson, a Rialto, California, retiree and victim of a debt settlement scheme, said:    “I was told they could settle my $89,000 in debts for a total of $39,000 if I made payments of $1,800 for 22 months.  I was contacted about a chance to settle $15,000 debt for $6,000 but my debt-settlement company ignored the offer.   In fact, I paid them a total of $25,200 as they kept on ignoring settlement offers from creditors.  I thought they were taking care of me by bringing my debt down, but all they were doing was taking my money.   I ended up with $25,000 more in debt than I started out with.   Before I retired I worked 25 years as a manager, now I have had to go back to work as a part-time security guard to help make ends meet.”
Bankruptcy attorney Trisha Connors, a NACBA member from Glen Rock, New Jersey who has testified before the New Jersey Law Revision Commission on debt settlement abuses, said:   “Over the last three years, I have worked with 12 different for-profit debt settlement companies and over 25 clients who came to me after their debt settlement program failed to serve them.  The results with each client were the same:  exorbitant fees being paid, settlement (at best) of one small credit card debt, and mounting late fees and penalty interest charges on the unsettled debts.  When clients informed the debt settlement companies of their desire to exit the program, the firms kept all or most of the accumulated savings for debt reduction as ‘fees.’  Every person I dealt with who had been current on their debts prior to contacting a debt settlement program told me that the sales representative told him the only way to be successful in the program is to stop paying credit card bills.”
Ellen Harnick, senior policy counsel, Center for Responsible Lending, said:   “Debt settlement companies require clients to default on their debts before they will negotiate.  This adds late fees and penalty interest to their debt and frequently results in the client being sued by creditors.  Since only a tiny proportion of debts are actually settled by these companies, clients are typically left worse off than they were when they started.”
In addition to highlighting the stories of three victims of debt settlement schemes, the NACBA consumer alert notes the following:
•    There is now across-the-board agreement on the danger that debt settlement schemes pose to consumers.  The Better Business Bureau has designated debt settlement as an “inherently problematic business.”  Similarly, the New York City Department of Consumer Affairs called debt settlement “the single greatest consumer fraud of the year.” Across the country, the U.S. Government Accountability Office (GAO),  the Federal Trade Commission, 41 state attorneys general,  consumer and legal services entities, and consumer bankruptcy attorneys have all uncovered substantial evidence of abuses by a wide range of debt settlement companies.
•    Debt settlement schemes encourage consumers to default on their debts.  Because creditors frequently will not negotiate reduced balances with consumers who are still current on their bills, debt settlement companies often instruct their clients to stop making monthly payments, explaining that they will negotiate a settlement with funds the client has paid in lieu of their monthly debt repayments.  Once the client defaults, he or she faces fines, penalties, higher interest rates, and are subjected to increasingly aggressive debt-collection efforts including litigation and wage garnishment. Consequently, consumers often find themselves worse off than when the process of debt settlement began:  They are deeper in debt, with their credit scores severely harmed.
•    “Self help” may be the best answer for smaller debt burdens.   If you have just a single debt that you are having trouble paying (such as a single credit card debt) and you have cash on hand that can be used to settle the debt, you may be able to negotiate favorable settlement terms with the creditor yourself.  Creditors typically require anywhere from 25 to 70 percent on the dollar to settle a debt so you will need that much cash for a successful offer.  Be sure to get an explicit written document from the creditor spelling out the terms of the debt settlement and relieving you of any future liability.  Also be prepared to pay income taxes on any of the forgiven debt.
•    Nonprofit credit counseling agencies can help, but must be vetted carefully.  If, like most people, you owe multiple creditors and do not have the cash on hand to settle those debts, you may want to consult a non-profit credit counseling agency to see if there is a way for you to get out of debt.  But make sure to check it out first: Just because an organization says it’s a “nonprofit” there is no guarantee that its services are free, affordable or even legitimate.  Some credit counseling organizations charge high fees (which may not be obvious initially) or urge consumers to make “voluntary” contributions that may lead to more debt. The federal government maintains a list of government-approved credit counseling organizations, by state, at www.usdoj.gov/ust.  If a credit counseling organization says it is “government approved,” check them out first.
•   Bankruptcy will be an option for some consumers.  Bankruptcy is a legal proceeding that offers a fresh start for people who face financial difficulty and can’t repay their debts.  If you are facing foreclosure, repossession of your car, wage garnishment, utility shut-off or other debt collection activity, bankruptcy may be the only option available for stopping those actions.  There are two primary types of personal bankruptcy:  Chapter 7 and Chapter 13.  Chapter 13 allows people with a stable income to keep property, such as a house or car, which they may otherwise lose through foreclosure or repossession.  In a Chapter 13 proceeding, the bankruptcy court approves a repayment plan that allows you to pay your debts during a three to five year period.  After you have made all the payments under the plan, you receive a discharge of all or most remaining debts.  For tax purposes, a person filing for bankruptcy is considered insolvent and the forgiven debt is not considered income.  Chapter 7 also eliminates most debts without tax consequences, and without any loss of property in over 90 percent of cases.  To learn more about bankruptcy and whether it makes sense for you, go to http://www.nacba.org/Home/AttorneyFinderV2.aspx.
NACBA urges consumers to steer clear of any companies that:
•    Make promises that unsecured debts can be paid off for pennies on the dollar. There is no guarantee that any creditor will accept partial payment of a legitimate debt. Your best bet is to contact the creditor directly as soon as you have problems making payments.
•    Require substantial monthly service fees and demand payment of a percentage of what they’ve supposedly saved you. Most debt settlement companies charge hefty fees for their services, including a fee to establish the account with the debt negotiator, a monthly service fee, and a final fee– a percentage of the money you’ve allegedly saved.
•    Tell you to stop making payments or to stop communicating with your creditors. If you stop making payments on a credit card or other debts, expect late fees and interest to be added to the amount you owe each month. If you exceed your credit limit, expect additional fees and charges to be added. Your credit score will also suffer as a result of not making payments.
•    Suggest that there is only a small likelihood that you will be sued by creditors.  In fact, this is a likely outcome.  Signing up with a debt settlement company makes it more likely that creditors will accelerate collection efforts against you.  Creditors have the right to sue you to recover the money you owe. And sometimes when creditors win a lawsuit, they have the right to garnish your wages or put a lien on your home.
•    State that they can remove accurate negative information from your credit report. No company or person can remove negative information from your credit report that is accurate and timely.
Boltz emphasized:  “Many different kinds of services claim to help people with debt problems.  The truth is that no single solution works in all cases.  Bankruptcy is an option that makes sense for some consumers, but it’s not for everyone.  For example, the National Association of Consumer Bankruptcy Attorneys and its individual consumer bankruptcy attorney members do not encourage every person who looks at bankruptcy to enter into it.   What makes sense for each consumer will depend on their individual circumstances.  We encourage everyone to get the facts and do what makes the most sense in their situation.”

Courtesy of National Association of Consumer Bankruptcy Attorneys.

Chapter 13 Bankruptcy: Can I Pay One Debt Better Than Others?

November 26th, 2012


Everyone with debts has at least one bill they’d like to pay, even if they can’t pay them all.  So if you are already filing Chapter 13 bankruptcy and repaying some debt, why not treat some better than others?

Sometimes that is allowed and sometimes not.  It’s a complicated issue because, at the heart of the Chapter 13 plan, there is a pool of money — the payments you make — which has to be divided among creditors.  If one is paid more, others get less typically.  So favoring one means discriminating against others.

The law requires some discrimination.  For example if you aren’t paying everyone in full, then you typically have to provide for special “priority” claims to be paid in full.  These are things the government has a special interest in — paying the trustee, child support, recent taxes and so on.

In other cases, like your home and car, the law often allows payment of these “secured” debts in preferential ways over your other debt because you need those assets to keep going (and putting the money into the pot each month!).

But what if the debt is one you can’t wipe out at the end of the typical case, like student loans?  Can you pay those in full and “short change” the other debts you can wipe out?  Sadly, there are only limited ways to do that because it gives you a “head start” not a “fresh start” at the end of your case, according to some.

In October, 2012, a couple argued they should be able to pay non-priority taxes they could not wipe out in full not because it would help them out…but because the tax authorities had done nothing wrong and deserved to be paid.   (Did you hear the Rolling Stones’ “Sympathy for the Devil” when you read that?  Maybe it was just me.)  The 8th Circuit’s bankruptcy appellate panel did not buy that argument either.  See, In re Copeland, #12-064 (8th.BAP 11/12/12).

So arguing that your sister’s loan to you deserves special treatment because she’s been good to you probably won’t fly either.  But all is not lost.  If paying the debt with special treatment is necessary to keep your case afloat or otherwise earning income, then it might be better received by the court.  So some judges have allowed restitution and some business-related debts to be paid preferentially, recognizing that going to jail or having to close your business down is counterproductive to getting anyone paid well.

Courtesy of Bankruptcy Law Network.

NACBA: COSTLY DEBT SETTLEMENT SCHEMES PREY ON THE MOST DEBT-BURDENED CONSUMERS STRUGGLING TO RECOVER FROM ECONOMIC DOWNTURN

November 20th, 2012

What a Half Million Unwary Consumers Don’t Know:  Schemes Only Work for 1 in 10 Who Pay for Them; Consumer Alert:  Debt Settlement Programs Seen as “#1 Threat to America’s Most Indebted Consumers.”

WASHINGTON, D.C. – October 17, 2012 – As few as one in 10 unwary consumers who are lured into so-called “debt settlement” schemes actually end up debt free in the promised period of time, making the risky schemes the No. 1 threat facing America’s most deeply indebted Americans, according to a major new consumer alert issued today by the nonprofit National Association of Consumer Bankruptcy Attorneys (NACBA). Available online at http://www.nacba.org, the NACBA consumer alert notes:  “Already struggling with home foreclosures, harsh bank and credit card fees, and other major financial challenges, America’s most deeply indebted consumers are now falling victim to a major new threat:   so-called ‘debt settlement’ schemes that promise to make clients ’debt free’ in a relatively short period of time.  Unfortunately, most consumers who pursue debt settlement services find themselves facing not relief but even steeper financial losses. Even the industry acknowledges – though not in its ever-present radio and online advertising – that debt settlement schemes fail to work for about two thirds of clients. Federal and state officials put the debt-settlement success rate even lower – at about one in 10 cases – meaning that the vast majority of unwary and uninformed consumers end up with more red ink, not the promised debt-free outcome.”
The private debt-settlement industry remains robust.  More than 500,000 Americans with approximately $15 billion of debt are currently enrolled in debt settlement programs, according to industry estimates.  And there is room for further growth:   One in 8 U.S. households has more than $10,000 in credit card debt.
Durham, NC bankruptcy attorney Ed Boltz, NACBA Board member and incoming NACBA president, said:   “Based on what bankruptcy attorneys are seeing across the nation, we believe that debt settlement schemes are the number one problem facing America’s most deeply indebted consumers today. Bombarded with slick radio and Web advertising falsely promising a smooth road to being debt free in a short period of time, these companies prey on the most desperate victims of the economic downturn.   These particularly vulnerable consumers usually end up getting sued, stuck with outrageous fees, more deeply in debt, and far worse off in terms of their credit score.”
Earlier this year, NACBA focused national attention on the “student debt bomb,” which then was identified as the fastest growing consumer debt problem being handled by consumer bankruptcy attorneys.
Richard Thompson, a Rialto, California, retiree and victim of a debt settlement scheme, said:    “I was told they could settle my $89,000 in debts for a total of $39,000 if I made payments of $1,800 for 22 months.  I was contacted about a chance to settle $15,000 debt for $6,000 but my debt-settlement company ignored the offer.   In fact, I paid them a total of $25,200 as they kept on ignoring settlement offers from creditors.  I thought they were taking care of me by bringing my debt down, but all they were doing was taking my money.   I ended up with $25,000 more in debt than I started out with.   Before I retired I worked 25 years as a manager, now I have had to go back to work as a part-time security guard to help make ends meet.”
Bankruptcy attorney Trisha Connors, a NACBA member from Glen Rock, New Jersey who has testified before the New Jersey Law Revision Commission on debt settlement abuses, said:   “Over the last three years, I have worked with 12 different for-profit debt settlement companies and over 25 clients who came to me after their debt settlement program failed to serve them.  The results with each client were the same:  exorbitant fees being paid, settlement (at best) of one small credit card debt, and mounting late fees and penalty interest charges on the unsettled debts.  When clients informed the debt settlement companies of their desire to exit the program, the firms kept all or most of the accumulated savings for debt reduction as ‘fees.’  Every person I dealt with who had been current on their debts prior to contacting a debt settlement program told me that the sales representative told him the only way to be successful in the program is to stop paying credit card bills.”
Ellen Harnick, senior policy counsel, Center for Responsible Lending, said:   “Debt settlement companies require clients to default on their debts before they will negotiate.  This adds late fees and penalty interest to their debt and frequently results in the client being sued by creditors.  Since only a tiny proportion of debts are actually settled by these companies, clients are typically left worse off than they were when they started.”
In addition to highlighting the stories of three victims of debt settlement schemes, the NACBA consumer alert notes the following:
•    There is now across-the-board agreement on the danger that debt settlement schemes pose to consumers.  The Better Business Bureau has designated debt settlement as an “inherently problematic business.”  Similarly, the New York City Department of Consumer Affairs called debt settlement “the single greatest consumer fraud of the year.” Across the country, the U.S. Government Accountability Office (GAO),  the Federal Trade Commission, 41 state attorneys general,  consumer and legal services entities, and consumer bankruptcy attorneys have all uncovered substantial evidence of abuses by a wide range of debt settlement companies.
•    Debt settlement schemes encourage consumers to default on their debts.  Because creditors frequently will not negotiate reduced balances with consumers who are still current on their bills, debt settlement companies often instruct their clients to stop making monthly payments, explaining that they will negotiate a settlement with funds the client has paid in lieu of their monthly debt repayments.  Once the client defaults, he or she faces fines, penalties, higher interest rates, and are subjected to increasingly aggressive debt-collection efforts including litigation and wage garnishment. Consequently, consumers often find themselves worse off than when the process of debt settlement began:  They are deeper in debt, with their credit scores severely harmed.
•    “Self help” may be the best answer for smaller debt burdens.   If you have just a single debt that you are having trouble paying (such as a single credit card debt) and you have cash on hand that can be used to settle the debt, you may be able to negotiate favorable settlement terms with the creditor yourself.  Creditors typically require anywhere from 25 to 70 percent on the dollar to settle a debt so you will need that much cash for a successful offer.  Be sure to get an explicit written document from the creditor spelling out the terms of the debt settlement and relieving you of any future liability.  Also be prepared to pay income taxes on any of the forgiven debt.
•    Nonprofit credit counseling agencies can help, but must be vetted carefully.  If, like most people, you owe multiple creditors and do not have the cash on hand to settle those debts, you may want to consult a non-profit credit counseling agency to see if there is a way for you to get out of debt.  But make sure to check it out first: Just because an organization says it’s a “nonprofit” there is no guarantee that its services are free, affordable or even legitimate.  Some credit counseling organizations charge high fees (which may not be obvious initially) or urge consumers to make “voluntary” contributions that may lead to more debt. The federal government maintains a list of government-approved credit counseling organizations, by state, at www.usdoj.gov/ust.  If a credit counseling organization says it is “government approved,” check them out first.
•   Bankruptcy will be an option for some consumers.  Bankruptcy is a legal proceeding that offers a fresh start for people who face financial difficulty and can’t repay their debts.  If you are facing foreclosure, repossession of your car, wage garnishment, utility shut-off or other debt collection activity, bankruptcy may be the only option available for stopping those actions.  There are two primary types of personal bankruptcy:  Chapter 7 and Chapter 13.  Chapter 13 allows people with a stable income to keep property, such as a house or car, which they may otherwise lose through foreclosure or repossession.  In a Chapter 13 proceeding, the bankruptcy court approves a repayment plan that allows you to pay your debts during a three to five year period.  After you have made all the payments under the plan, you receive a discharge of all or most remaining debts.  For tax purposes, a person filing for bankruptcy is considered insolvent and the forgiven debt is not considered income.  Chapter 7 also eliminates most debts without tax consequences, and without any loss of property in over 90 percent of cases.  To learn more about bankruptcy and whether it makes sense for you, go to http://www.nacba.org/Home/AttorneyFinderV2.aspx.
NACBA urges consumers to steer clear of any companies that:
•    Make promises that unsecured debts can be paid off for pennies on the dollar. There is no guarantee that any creditor will accept partial payment of a legitimate debt. Your best bet is to contact the creditor directly as soon as you have problems making payments.
•    Require substantial monthly service fees and demand payment of a percentage of what they’ve supposedly saved you. Most debt settlement companies charge hefty fees for their services, including a fee to establish the account with the debt negotiator, a monthly service fee, and a final fee– a percentage of the money you’ve allegedly saved.
•    Tell you to stop making payments or to stop communicating with your creditors. If you stop making payments on a credit card or other debts, expect late fees and interest to be added to the amount you owe each month. If you exceed your credit limit, expect additional fees and charges to be added. Your credit score will also suffer as a result of not making payments.
•    Suggest that there is only a small likelihood that you will be sued by creditors.  In fact, this is a likely outcome.  Signing up with a debt settlement company makes it more likely that creditors will accelerate collection efforts against you.  Creditors have the right to sue you to recover the money you owe. And sometimes when creditors win a lawsuit, they have the right to garnish your wages or put a lien on your home.
•    State that they can remove accurate negative information from your credit report. No company or person can remove negative information from your credit report that is accurate and timely.
Boltz emphasized:  “Many different kinds of services claim to help people with debt problems.  The truth is that no single solution works in all cases.  Bankruptcy is an option that makes sense for some consumers, but it’s not for everyone.  For example, the National Association of Consumer Bankruptcy Attorneys and its individual consumer bankruptcy attorney members do not encourage every person who looks at bankruptcy to enter into it.   What makes sense for each consumer will depend on their individual circumstances.  We encourage everyone to get the facts and do what makes the most sense in their situation.”

Modifiable maintenance granted at divorce is terminated when all of the reasons it was awarded have changed

November 13th, 2012

Reiter v. Reither, No. 74360 (Mo. App. W.D., August 7, 2012), Mitchell, J.

An action to terminate modifiable maintenance was granted. The case is fact-specific, but deserves reporting simply because of the dearth of appellate cases in which modifiable maintenance is terminated.

At the time of the parties’  divorce (dates not noted in opinion, but approximately 2003-2004), the Husband ran a business which earned him approximately $190,000 annually. The Wife had worked for the business, but that ended with their separation. Her stated needs at divorce were $2,490 per month. She intended to go to school full-time and become self-sufficient thereafter. She requested and obtained $2,000 per month in modifiable maintenance.

Fast forward to 2010 at which time the Wife had graduated from college and gotten a job with the IRS earning approximately $34,000 annually. She had also inherited a half-interest in a piece of real estate worth $63,000 and her residence was paid for and worth $200,000. The Husband filed a motion to terminate the maintenance. His request was granted, and this appeal followed.

Held: Affirmed. “In determining whether an increase in income renders the prior decree unreasonable, the court may consider a number of factors, including the purpose of the award of maintenance, and the current financial needs of the receiving spouse.” Here the Wife’s increased income (from -0- to $3,000 per month), the attainment of her college degree, the acquisition of full-time employment and ownership of substantial unencumbered assets all indicated her ability to support herself without the need for maintenance. These were reasons sufficient for the trial court to exercise the discretion to conclude the monthly maintenance was now unreasonable.

Courtesy of The Missouri Bar.

Treasury, IRS Announce Special Relief to Encourage Leave-Donation Programs for Victims of Hurricane Sandy

November 8th, 2012

WASHINGTON — As part of the administration’s efforts to bring all available resources to bear to support state and local partners impacted by Hurricane Sandy, the Treasury Department and the Internal Revenue Service today announced special relief intended to support leave-based donation programs to aid victims who have suffered from the extraordinary destruction caused by Hurricane Sandy.

Under these programs, employees may donate their vacation, sick or personal leave in exchange for employer cash payments made to qualified tax-exempt organizations providing relief for the victims of Hurricane Sandy.

Employees can forgo leave in exchange for employer cash payments made before Jan. 1, 2014. Under this special relief, the donated leave will not be included in the income or wages of the employees. Employers will be permitted to deduct the amount of the cash payment. Details on this relief are in Notice 2012-69.

The IRS continues to monitor the situation and will provide additional relief related to Hurricane Sandy as needed.

Child custody judgment set aside because custody routine the parties had used pendent lite led the father to believe a judgment consistent with that schedule would be entered. Lewis v. Lewis, No. 31663

November 6th, 2012

This was an action for dissolution of marriage in which a default was taken against the Father. He sought to have the judgment set aside, but the trial court denied his request. The Parenting Plan entered gave the parties joint legal and physical custody with the cornerstone physical custody of the Father being every other weekend. However, he had to work on Friday, Saturday and Sunday in alternating months. During the pendency of the case, his work schedule had been accommodated. He was led to believe a Parenting Plan would be set in similar fashion. The Parenting Plan of the default judgment effectively eliminated his weekend time for six months of the year unless the Mother acceded a variance therefrom.

Soon after the entry of the default the Mother refused to work around the Father’s work schedule. The trail court noted that the Father could always seek a modification of the judgment if this persisted. The Father’s request for the judgment to be set aside was denied. Father’s appeal followed.

Held: Reversed. “A work schedule that does not allow for meaningful parental contact six months of the year constitutes a meritorious defense.”

Moreover, the parties had a previous agreement under which they were working, thereby causing the Father to assume the judgment would be consistent with it. “If the (trial) court’s assessment of the situation indicated that, as a matter of law, agreements between the parties was not a valid reason to default in dissolution, then we disagree. In this case, where the parties had voluntarily maintained a custody schedule and a child support schedule, where Father was not served with a different Parenting Plan that would have put him on notice that the parties did not have an agreement, where Mother knew that Father received his mail at a post office box and not the address where he was physically served, where the motion to set aside the default judgment was entered, and where the entered judgment differed significantly from the status quo, Father’s behavior in failing to file an answer was not intentionally or recklessly designed to impede the judicial process.

Courtesy of The Missouri Bar.