Month: August 2010

Creditors can run after debtors’ properties to satisfy their unpaid debts. However, many debtors are under the mistaken impression that creditors can just go after their assets or garnish their wages the moment their credits are left unpaid. That is not so.  

In order to attach a property or garnish a debtor’s wages, Creditors must first file a lawsuit in court and win that lawsuit against the debtor. Only after so many months of failed collection efforts, do creditors normally file a collection action in court. You, as the debtor, will then have 30 days to file an Answer in court. Depending on which county the court action is filed, it will then take a few more months before a case can be set for hearing. A judgment, if any, will then have to be issued against the debtor.  Once judgment is issued against a debtor there is another 30 more days to appeal before the judgment becomes final.

Thus, at the very least, debtors will have 6 to 12 months of warning that a judgment against them is coming and their properties taken to pay that judgment. This gives the debtor a lot of time to do something before their property is attached or wages are garnished. As long as debtors do not ignore their problem at the early stages, there is really no reason for their properties to be attached or their wages to be garnished as there is more than enough time to prepare and prevent their properties from being taken.  For example, the debt can be disputed, or, payment arrangements can be made with the creditor, or, bankruptcy protection can be sought in cases where debtor can no longer afford to pay the debts.

There is an exception, however, in cases of secured debts. The vehicle in a car loan, for example, can be taken by the creditor immediately even without a court judgment if a debtor is delinquent. Thus the car can be repossessed by the lender even without going to court.

In cases where the court issues a judgment against the debtor, all may still not be lost as the law still allows a debtor to claim some properties as exempt from execution. When a debtor receives a notice that his property is being attached, the debtor has 10 days to deliver a Claim of Exemption to the Sheriff. The form describes the property and explains why the property cannot be attached. Among others, you can claim exemption for:

– up to $75000 in equity in your home if you are part of a family unit ($50,000 if you are single) and $150,000 if you are 65 or older, disabled or on a low income
– A $2,300 equity in one or more cars
– Up to $6,075 in tools and other items that you need for work
– 75 percent of your salary for the last 30 days of wages that have not yet been paid
– Up to $2,525 each in a bank account in which your social security payments have been directly deposited
– You and your spouse may also claim exemption for household furnishings and clothing that the family needs
– A cemetery plot
– All or part of retirement, disability and health insurance, workers compensation, welfare unemployment, union and other benefits that are needed to support your family.

Thus attachment and garnishment of their properties and wages is not something that needs to happen as long as debtors do not ignore the problem. Debtors in financial trouble just need to be aware of their rights and the available remedies that the law gives to them.

(DISCLAIMER: material presented above is intended for informational purposes only. It is not intended as professional advice and should not be construed as such. Rey Tancinco is a partner at Tancinco Law Offices, a professional corporation with offices in San Francisco, Vallejo, and Manila. The law office website is at: tancinco.weareph.com/old.  Rey Tancinco can be contacted at (800) 999-9096 or (415) 397-0808 or via email at: attyrey@tancinco.com

Last month, US congress passed the financial reform package which included a $1 billion emergency mortgage relief program for unemployed homeowners. The money in this program will be made available to the US Department of Housing and Urban Development on October 1.  Under this program, eligible homeowners who are at least 3 months delinquent on their mortgages can get help with up to 12 or 24 months of mortgage payments to a maximum of $50,000 in federal loans.  According to the bill, the assistance can be loans, advances of credit or emergency mortgage relief payments. As this program is rolled out in the next few weeks, our readers can get more details by visiting the website of the US Department of Housing and Urban Development.   

This latest program of the government follows two other federal programs already providing assistance to unemployed homeowners.

The first program started last August 1, where the US Treasury Department offered extra help for unemployed homeowners struggling with their monthly mortgage payments under their Home Affordable Unemployment Program (HAUP).  This unemployment program offers homeowners a forbearance period to temporarily reduce or suspend their monthly mortgage payments while they seek employment. This is a forbearance program, which means that the unpaid amount can be added to the balance or repaid in other ways. The minimum forbearance period is 3 months although the lender may extend it depending on the guidelines.  During the forbearance period, a homeowner’s monthly mortgage payment must be reduced to no more than 31 percent of their gross monthly income. The lender can also decide to temporarily suspend payments in full.  .
Servicers under this program may not initiate foreclosure proceedings while a homeowner is being evaluated for the unemployment program or in the forbearance period.  To qualify, homeowners must not be more than 3 months delinquent and must meet other requirements. To determine if you qualify for the unemployment program, you need to contact your mortgage servicer. You should learn your eligibility within ten days of submitting complete documentation to your servicer.

The second program also involves the US Treasury department providing $2.1 billion to struggling homeowners in the hardest hit states. $1.5 billion was awarded to 5 states in June and will award $600 million later. The California Housing Finance Agency got $700 million from the Hardest Hit fund and will start taking applications by November 1.   This CAL-HFA program involves the following:

(1) Unemployment Mortgage Assistance – CAL-HFA will provide mortgage payment subsidy to unemployed homeowners who are in imminent danger of foreclosure due to short-term financial problems.
(2) Mortgage Reinstatement Assistance Program – CAL-HFA will provide limited financial assistance in the form of funds to reinstate mortgage loans that are in arrears in order to prevent foreclosures.
(3) Principal Reduction Program – provides assistance to homeowners in who have severe negative equity. CAL-HFA will provide matching capital with financial institutions to reduce outstanding principal balances of qualifying homeowners with negative equity.
(4) Transition Assistance Program – provides homeowners with relocation assistance when it is determined that they can no longer afford their home.

With foreclosures and unemployment still a huge problem in the current economy, it is hoped that some of our readers will be made aware of and benefit from the government programs currently available.     
    
(DISCLAIMER: material presented above is intended for informational purposes only. It is not intended as professional advice and should not be construed as such. Rey Tancinco is a partner at Tancinco Law Offices, a professional corporation with offices in San Francisco, Vallejo, and Manila. The law office website is at: tancinco.weareph.com/old.  Rey Tancinco can be contacted at (800) 999-9096 or (415) 397-0808 or via email at: attyrey@tancinco.com
 

A will is a document that gives instructions on how you want certain things to be carried out after your death. A will would name the beneficiaries (spouse, children, family member, friends, charitable organizations, etc.) who will receive your assets after your death. If a person dies without a will, the laws of succession where the decedent lived will govern how the property will be distributed. Dying without a will is known as dying “intestate”. You have no say over who receives your assets and may leave your heirs dealing with the court system to sort out who receives what.

In general though, the laws of succession will leave your property to your spouse and kids but the ratio of distribution may vary from State to State.  If you do not have spouse and children, then property may go to your nearest kin which also varies from State to State. Thus, if one wants to dictate how the property is to be divided among his survivors, then it is necessary to make a will.

A will may be important for some people with young children because a will is the best place to designate the guardian of your minor children.

A will also names an executor who will be tasked carrying out your final wishes. An executor would normally collect and manage the decedent’s assets, pay debts, and, with the court’s approval, distribute the assets to the beneficiaries named in the will. If you want a particular trusted person to carry out your final wishes, then making a will is necessary in order for you to name and designate that person as your executor.

In general, the will only covers assets that are titled in your name at the time of your death. However, not all assets are included. The assets that are not affected by a will includes the following: (1) Life insurance proceeds are paid directly to beneficiaries designated in the insurance policy; (2) retirement plans assets such as 401(K) and IRA are transferred to whomever you designate as beneficiary in the plan documents; (3) assets owned in joint tenancy will pass to the surviving joint tenant upon your death; (4) assets held in Living trusts are transferred to the named beneficiaries in the trust document; (5) Your spouse’s half of the community property still belongs to your spouse and is not affected by your will.

A will can be changed or revoked at any time. It should, in fact, be reviewed periodically as your estate may not be distributed according to your wish if it is not up to date when you die.  You may also establish a new will and, in doing so, revoke your old will. When there are changes in your family such as marriage, divorce, births, deaths then it may be time to review your previously made will to update the changes in your family life. Likewise, it is also necessary to periodically review your existing will when there are significant changes in the value of your assets, or when it is no longer appropriate for your proposed guardian or executor  to act in that capacity.  

For some people, a will may still be useful even if they already have a trust. A trust is a legal document that lets a person put conditions on how assets are distributed after death and it lets them minimize gift and estate taxes. Most trusts, however, deal only with specific assets such as a piece of property, but not necessarily all the assets of an individual. Hence, a will, may still be necessary for all other assets that are not included in the trust.

(DISCLAIMER: material presented above is intended for informational purposes only. It is not intended as professional advice and should not be construed as such. Rey Tancinco is a partner at Tancinco Law Offices, a professional corporation with offices in San Francisco, Vallejo, and Manila. The law office website is at: tancinco.weareph.com/old.  Rey Tancinco can be contacted at (800) 999-9096 or (415) 397-0808 or via email at: attyrey@tancinco.com