THE EIGHTH CIRCUIT COURT OF APPEALS ISSUED AN OPINION ON FEBRUARY 5, 2021 THAT SHOULD BE OF CONCERN TO ANYONE WHO HAS PUT INTO PLACE A TRANSFER ON DEATH DEED
The name of the case is “Strope-Robinson v. State Farm Fire & Cas. Co.” and is case number 20-1147. Briefly, David Strope owned a house. He signed and recorded a transfer on death deed to his house on August 11, 2017. The transfer on death deed said that upon his death that the house would automatically go to his niece, Dawn Strope-Robinson. A few days after David Strope died, his ex-wife burned down the house! (Apparently there were some hard feelings between David Strope and his ex-wife. Just guessing there.) Dawn Strope-Robinson was appointed as special administrator of David Strope’s estate (equivalant to an “executor”) and made a claim against State Farm for the value of the house. State Farm turned her down and refused to pay. Their legal argument was that ownership of the house passed to Dawn Strope-Robinson at the instant that David Strope died, and therefore the estate did not have an “insurable interest” in the house. This is a scary case. Who knows how many transfer on death deeds have been issued over the years and no thought at all about adding the grantee beneficiary to the insurance policy? If you have a transfer on death deed in force, please check with your own insurance to see if your grantee beneficiary would be covered. As always, if I can be of help, call me at 320-252-4473.
THERE ARE SEVERAL MYTHS ABOUT WILLS.
One common myth is that you can write out a will in your own handwriting. This is usually called a “holographic will”, (not to be confused with the holodeck on the Starship Enterprise). A holographic will may be valid in some states, but is NOT VALID in Minnesota. So, don’t try it! In Minnesota a will must be signed by the person who makes the will (the “testator”) and must be witnessed by two witnesses. We often add a notarized section to a will. This is not because of the will itself, but because of something called a “self-proved affidavit”. A “self-proved affidavit” is intended to help in the probate process because at the time you have the court approve the petition for probate and appoint the personal representative, you do not need to find the witnesses and have them testify to the court that they saw the will being executed. In effect, the witnesses to a self-proved will testify in advance. Finding the witnesses could be hard, or perhaps impossible, so this can be a very valuable add-on to a will. The statutory cite is Minn. Stat. 524.2-504. I should add that due to the Covid-19 pandemic, the legislature has temporarily allowed some wills which are technically defective to be probated anyway. However, I think it is much better to comply with the statutory requirements than try to convince a judge that it is “close enough”. A second common myth is that a person who benefits under a will cannot be a witness. Minn. Stat. 524.2-505 says: “(b) The signing of a will by an interested witness does not invalidate the will or any provision of it.” Frankly, I think it is better practice to have someone other than a beneficiary witness your will, but in a technical sense it is okay. Let me know if I can help you with a will and other estate planning issues by calling me at 320-252-4473.
TODAY, THE FEDERAL HOUSING FINANCE AGENCY (FHFA) ANNOUNCED THAT FANNIE MAE AND FREDDIE MAC (THE ENTERPRISES) WILL EXTEND THE MORATORIUMS ON SINGLE-FAMILY FORECLOSURES AND REAL ESTATE OWNED (REO) EVICTIONS UNTIL FEBRUARY 28, 2021
Washington, D.C. – Today, the Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac (the Enterprises) will extend the moratoriums on single-family foreclosures and real estate owned (REO) evictions until February 28, 2021. The foreclosure moratorium applies to Enterprise-backed, single-family mortgages only. The REO eviction moratorium applies to properties that have been acquired by an Enterprise through foreclosure or deed-in-lieu of foreclosure transactions. The current moratoriums were set to expire on January 31, 2021. “To keep our communities safe, and families in their homes during the COVID-19 pandemic, FHFA is extending Fannie Mae and Freddie Mac’s foreclosure and eviction moratorium,” said Director Mark Calabria. Currently, FHFA projects additional expenses of $1.4 to $2 billion will be borne by the Enterprises due to the existing COVID-19 foreclosure moratorium and its extension. FHFA continues to monitor the effect of the foreclosure and eviction moratorium on borrowers, the Enterprises and their counterparties, and the mortgage market and extend or sunset its policies based on the data and health risk. The Enterprises continue to offer comprehensive loss mitigation programs for borrowers with eligible hardships. These programs, which were established pre-pandemic and have helped more than 4.5 million families stay in their home, will remain available even when COVID-19 forbearance flexibilities end. Under the comprehensive loss mitigation programs, qualified borrowers with a financial hardship that affects their ability to pay their mortgage may be eligible for temporary forbearance of up to 12 months, whether their hardship was caused by COVID-19 or not. Qualified borrowers can also obtain loan modifications to assist their ability to resume regular monthly payments once their hardship is resolved.” According to https://www.makinghomeaffordable.gov “To find out if Fannie Mae or Freddie Mac owns your loan, use their respective loan lookup tools or contact your mortgage company to ask who owns your loan. FANNIE MAE, 1-800-2FANNIE (8am to 8pm EST), KnowYourOptions.com/loanlookup If you mortgage is owned by Fannie Mae, visit Know Your Options to learn more about foreclosure assistance options. FREDDIE MAC, 1-800-FREDDIE (8am to 8pm EST), FreddieMac.com/mymortgage If your mortgage is owned by Freddie Mac, visit My Home to learn more about foreclosure assistance options.
BUSTED! DON’T BELIEVE THESE BANKRUPTCY MYTHS!
Filing for bankruptcy is not as bad as many people make it look. While it isn’t a high point in any person’s life, it doesn’t have to be the lowest of lows either. Bankruptcy gives you the opportunity to put all your affairs in order and move on with a successful repayment plan. Unfortunately, there are a plethora of misconceptions that people harbor against bankruptcy, which affects their judgment. As one of the best bankruptcy lawyers, in St. Cloud, Minnesota, I want to help you distinguish between fact and fiction, and to do so, I’ve debunked three of the most widely believed myths about bankruptcy. Myth 1: Bankruptcy ruins your credit forever. The fear of bankruptcy is so crippling that people believe they will never be able to get credit because their creditworthiness is damaged forever. While bankruptcy can reflect on a person’s credit record for up to ten years, you are often creditworthy within four years, sometimes sooner. Hiring a bankruptcy professional will help protect your interests during bankruptcy proceedings and also provides a clear strategy to help you to overcome financial distress thereby improving your credit score in the least possible time. Myth 2: Filing for bankruptcy makes you lose everything that you own. Bankruptcy does not entail selling or losing everything that you own to bring you out of financial woes. Instead, it is about finding solutions to help you to meet your financial obligations. Bankruptcy laws have been structured to protect your interests as you go through this trying period in your life. By hiring a proficient bankruptcy attorney, you will gain an insight about your rights and an understanding of how the law protects most of what you own such as equity in your home, a certain amount of equity in your vehicle, household goods, etc. Myth 3: The bankruptcy filing process is complex, takes up too much time and there is no positive outcome. An inadequate understanding of the bankruptcy filing process consumes considerable time and adds to the burden of the client who is already facing financial concerns. A bankruptcy attorney can drastically reduce the time taken to navigate the bankruptcy process and find an optimal solution through the application of his or her legal and negotiation skills. Hiring a bankruptcy attorney helps a client not to lose hope because irrespective of the complexity of the case a professional finds a positive outcome that protects the client’s interests. If you’re looking to steer clear of these myths and gain the benefit of advice from an expert who is proficient in all aspects of bankruptcy, reach out Sam Calvert, Attorney At Law. With over thirty years of experience as one of the best bankruptcy attorneys in St. Cloud. Minnesota, I represent people in financial distress and individual or small business creditors. I have a proven track record of assisting clients with a range of bankruptcy-related issues. My committed staff and I ensure that clients are not overwhelmed by the bankruptcy filing process. For a complete list of the services offered by me, please click here. If you have questions or need guidance on how to obtain a positive outcome for your bankruptcy related needs, please contact me by clicking here.
MANY OF MY CLIENTS ARE MARRIED AND HAVE CREDIT CARDS THAT AT LEAST LOOK LIKE THEY ARE JOINT CARDS
Many of my clients are married and have credit cards that at least look like they are joint cards. It can be confusing to figure out which of the two of them is obligated on a credit card. If you have a credit card with someone else, the second person can be either a “joint account ownerr” or an “authorized user”. An “authorized user” is a someone who is allowed to make purchases using your credit card. Usually that someone has their own card with their name on it. However, they are not legally responsible to pay the account, because they are not the account owner (although if they sign the credit card slip or terminal at the merchant I suppose it is possible the merchant could pursue them. I think that is unlikely.) If you, as the authorized user, don’t have a credit history, or if you want to improve your score, being an authorized user on someone else’s card might improve your own credit score if you are current and if the card issuer reports to the credit reporting agencies (as most do). This is because the card issuer will report your usage to the credit reporting agency in your name as well as in the name of the account ownerr. However, as the account owner, adding an authorized user exposes you to the frolics and mistakes of the authorized user. If they go out and have a party on your card, or if you trust them to make the payments on the card and they “forget”, your credit score can be dragged down. Worse, you are legally responsible for the permitted use of your card, so the card issuer can sue you. If you are the authorized user, and if it is the account owner who is messing up, you can ask to have your name removed from the card. Minnesota law provides that if you are joint account owners with your spouse “Either spouse may close a credit card account or other unsecured consumer line of credit on which both spouses are contractually liable, by giving written notice to the creditor.” Minn. Stat. 519.05, subd. (b). If you are in financial trouble, feel free to contact me at 320-252-4473.
WHAT IS THE MEANS TEST?
There are two types of bankruptcy usually used by individuals — Chapter 7 and Chapter 13. Either can help you deal with your finances. Chapter 13 is a payment plan type bankruptcy, that lets you pay your bills, or a portion of your bills, over three to five years. Chapter 7, on the other hand, wipes out your dischargeable debt without a payment plan, and usually takes about four months. However, in 2005 Congress, after a massive lobbying campaign, enacted something called the “means test”. In the means test we add up all your income for the six months (not including the month of filing) before your case is filed. We then divide by six, and the result is your “current monthly income”. If your “current monthly income” is less than the median income in Minnesota for a household of the same size as yours, you “pass” the means test. If on the other hand your “current monthly income” is more than the median income in Minnesota for a household of the same size as yours, we go on to substract specific monthly expenses, such as mortgage payments, car payments, tax withholding, and living expenses. Some of these expenses are what you actually spend; some of these expenses are limited to amounts specified by the Internal Revenue Service. If there is a surplus after completing the means test there is a presumption that your case is a substantial abuse and the US Trustee may ask the court to force you into a chapter 13. The median income is adjusted periodically according to Census Bureau information. For example, in December, 2020 (when this post is written), the median income is as follows: Household of one — $61,811 Household of two — $81,478.00 Household of three — $100,430.00 Household of four — $118,646.00 For each household member over four, add $9,000.00. As always, if you have questions, feel free to call me at 320-252-4473 to set up a meeting by Zoom, telephone or in person.
PRIORITIES IN ESTATE PLANNING
Do you have a will or an estate plan? For about half of Americans, the answer is “No”. The website The Motley Fool says that estate planning is an opportunity to provide for loved ones and protect your own interests in the face of life’s uncertainties. Many people think only the rich need to do any estate planning. But, if you have a family (most especially if you have a blended family – children with someone not your current spouse) you should consider having an estate plan. For instance, if you have children from a prior marriage, if you die without a will you may “disinherit” them. When done properly, an estate plan can help you resolve issues ranging between designating a guardian for children to passing on a family-owned small business and hopefully avoiding or reducing any intra-family conflicts. Even if you already have a will, family changes like marriage, divorce, births and deaths happen. These life events can render an estate plan obsolete. Also, estate planning does not mean only what happens after your death. You may want to include a Health Care Directive (often called a living will) and a durable power of attorney. The Health Care Directive is in case you cannot communicate your health care wishes; the durable power of attorney in case you are no longer able to make your own business decisions. You may have individuals who rely on you, such as minor children or incapacitated adult family members. An estate plan can help provide that their care and maintenance continues even if you are unable to provide it yourself. You can name a guardian for your children in your will and someone to take care of your minor child’s money. If you want to talk more about estate planning issues, call me at (320) 252-4473 to talk about it.
WHY FILING YOUR OWN BANKRUPTCY IS A BAD IDEA
Debt can be a handy tool for purchasing property or assets that you cannot finance in a lump sum. At the same time, it can become a burden if your income is reduced, you lose your job, or take on more debt than you can handle. In the event of excessive debt and absolutely no way out, your last resort is to apply for bankruptcy. When you file for bankruptcy, you are no longer liable to repay certain debts, You don’t have to pay taxes, and you don’t have to stress about being sued by creditors. If you are deep in debt with no other alternative, filing for bankruptcy makes sense. However, it’s essential to get a professional to help you with this. Filing for bankruptcy on your own may seem like a great money-saver, but if you carry it out on your own, you need to understand how it’s done. If not, you could end up with a severe disadvantage. To show you exactly what could go wrong, bankruptcy attorney Sam Calvert has explained why filing your own bankruptcy is a bad idea. 1. You may make the wrong choicesThere are several traps for the unwary when filing for bankruptcy. For instance, you have to select which set of exemptions you use to protect your assets – federal or state. If you make the wrong choice, you could cause yourself a world of trouble. 2. You could lose your propertyIf you choose the wrong set of exemptions, you could lose property that would otherwise be protected. This makes it essential to work with a professional as they will help you make the right decisions, which will prevent you from getting into unfavorable situations. 3. You may incur additional costsIt may be possible to “fix” your bankruptcy, but it will cost you more to fix if you make the wrong moves on your own. A bankruptcy lawyer will charge you more if your situation is challenging. As a result, it’s best to leave the situation to a professional to avoid making it worse. Do things right – Hire a professionalWhile technically you are free to do your own legal work, it’s best if you choose an expert for assistance if you are unaware of the requirements. If you decide to handle your bankruptcy yourself, you’ll need to invest in research. The less you know about filing for bankruptcy, the more research must do to understand exemptions available and figure out which ones to use. On the other hand, with an experienced bankruptcy attorney, you can quickly size up your assets and maximize the amount protected. They will be aware of the exemptions suitable for you and help you with all your paperwork and the filing process to ensure you experience as little stress as possible. Moreover, they will do everything they can to minimize your penalties. A “typical” bankruptcy for a wage earner generally starts at $1400.00. But the costs can vary depending on the circumstances of the case. To ensure you have everything you need, and you’re following the correct steps, attorney at law Sam Calvert is here to help. As a leading bankruptcy attorney in St. Cloud, Minnesota, he represents individuals and small businesses in financial distress. Being a former member of the private panel of bankruptcy trustees for chapter seven and a chapter twelve trustee, he has ample knowledge and experience to represent his clients and acquire for them a good deal. Sam’s bankruptcy practice currently focuses on representing people in financial distress and individual or small businesses instead of large corporations. Additionally, he is also a Real Property Specialist, certified by the Real Property Section of the Minnesota State Bar Association. To learn all about the services offered by Sam Calvert and his team, please click here or get in touch with us by clicking here.
SURPRISE: SOMETIMES LYING WILL GET YOU IN TROUBLE.
Updated Dec. 3, 2020: I am in Minnesota; the guy I was talking about is in Pennsylvania. To my astonishment he called me today and asked to take down this post. He said he had just gotten out of prison. Because I have no reason to wish him ill, I have updated this entry to delete the guy’s last name. He did say that if I had a client who was contemplating lying he could talk to the client and tell them how badly it turned out! I recently saw a news report about a man in Pennsylvania who got caught in some serious lies in his bankruptcy. XX was sued in the Court of Common Pleas in Philadelphia, along with a number of other entities. He lost, and in April 2014 a judgment for about $2,400,000 was entered against him. The bankruptcy case is xxxxx, the criminal case is xxxxx, and I believe the state court case is xxxxxx. According to the criminal indictment: On or about April 12, 2014, defendant XX purchased a 2009 BMW X3 for approximately $26,085. On or about April 14, 2014, defendant XX purchased a 2014 Porsche 911 for approximately $118,176. On or about April 15, 2014, defendant XX purchased a 2014 Porsche Cayman for approximately $68,267. Defendant XX charged all three cars to his American Express Centurion Card. ( I don’t know about you, but I don’t know if American Express card would let me charge $212,000 worth of cars in one week!) Mr. XX then filed Chapter 11 bankruptcy (a reorganization) on April 21, 2014. He “forgot” to list the BMW and the two Porsches in his bankruptcy paperwork. He “forgot” to list a lot of other stuff, too, including $214,000 of cash, a 21 foot ski boat, $30,000 of tax refunds, etc. He was asked at his trustee meeting if he owned any vehicles (other than a $4,000 Harley and a leased Honda) and he flatly denied owning other vehicles. I don’t know who “turned him in”, but someone did or somehow the justice system found out about it. A grand jury issued an indictment dated April 20xx; and the case wound its way through the system for a while, and in August 20xx there was a plea hearing. Mr. XX pled guilty to two counts, involving hiding the BMW and the two Porsches and making false oaths in his bankruptcy papers. He has now been sentenced to a year in jail, three years of supervised release, a $50,000 fine, and some other conditions. In the meanwhile, American Express sued him in his bankruptcy, and he wound up agreeing that he would not get a discharge of his debts. It is probably true that some people lie in their bankruptcy paperwork. (For that matter, it is probably true that some people lie in reporting political contributions, and about how many fish they caught last week, and lots of other things). But this case shows that if you get caught lying in bankruptcy or hiding assets that there may be some serious repercussions. Mr. XX got his bills back, even though he filed bankruptcy, and he gets to spend time in prison, and he gets to spend three years on supervised release, and he gets to pay a $50,000 fine. There is a saying: “Bulls make money, bears make money, pigs get slaughtered”. Don’t be a pig!! As always, if you have questions about bankruptcy, feel free to contact me. Sam Calvert1011 2nd ST N STE 107St. Cloud MN 56303320-252-4473
401(K) CONTRIBUTIONS IN A CHAPTER 13 MAY CONTINUE
Minnesota is in the Eighth Circuit, which includes the Dakotas, Nebraska, Iowa, Missouri and Arkansas. Nevertheless, cases from other circuits may be helpful in understanding the law. A recent case out of the Sixth Circuit (Michigan, Ohio, Kentucky and Tennessee) dealt with a person who filed chapter 13 bankruptcy but wanted to deduct her voluntary 401(k) contributions from her bankruptcy budget. She had been making the contributions for more than six months before filing bankruptcy. The court formulated the issue as follows: Davis proposed a bankruptcy plan that would pay her unsecured creditors a total of $19,380—equal to sixty monthly payments of $323. To obtain court approval, her plan needed to provide for payment of all her “projected disposable income” to her unsecured creditors. Davis believed that $323 represented her monthly disposable income. Although she reported gross monthly income of $5,627, she claimed $5,304 in allowable monthly expenses. One of those claimed expenses was a monthly retirement contribution. Long before her bankruptcy, Davis had authorized her employer to withhold $220.66 from her monthly wages as contributions to a 401(k) retirement plan. Davis sought to continue those contributions during her bankruptcy. The Trustee objected to Davis’s plan. The Trustee contended that wages withheld as voluntary 401(k) contributions are considered disposable income under the Code; as a result, Davis’s proposed plan would not pay all her projected disposable income to her unsecured creditors. The bankruptcy court sustained the Trustee’s objection. In other words, the bankruptcy court said that Davis should pay $543.66 per month to her creditors instead of $323.00. The Sixth Circuit Court of Appeals, in a 2-1 decision, noted that there are “four competing views of whether voluntary retirement contributions constitute disposable income in a Chapter 13 bankruptcy.” The court went on to rule that Davis could continue to make her 401(k) contributions, saying” “Here, Davis’s employer withheld $220.66 in 401(k) contributions each month from Davis’s wages for at least six months prior to her bankruptcy. We hold only that a debtor in like circumstances may deduct her monthly 401(k) contributions from her disposable income under § 1325(b)(2). See 11 U.S.C. § 541(b)(7)(A).” It is important to note that this pertains to Chapter 13 cases, not Chapter 7 cases. But this decision may give comfort to those who need to file a Chapter 13 case that they will not have to stop contributing to their retirement plans while in the Chapter 13. The case in question is In Re Davis, 960 F.3d 346 (6th Cir., 2020) As always, if you have bankruptcy questions, feel free to contact me.