5 Common Individual Bankruptcy Myths

  • September 6, 2018

Facts v Myths BankruptcyBelow are five of the most common reasons people give for reasons as to why they think they have to avoid filing bankruptcy when their lives are in financial turmoil.

People in financial distress commonly will delay or not seek relief under the United States Bankruptcy Code, due to common myths and misperceptions.  As a result, such persons and their families continue to suffer needlessly, and in many cases, make their situation worse by delaying or not filing bankruptcy.

1. I am married, and so my spouse has to file bankruptcy with me. 

False.  In many cases, it may make sense for both spouses of the marriage to file bankruptcy jointly, but there is no legal requirement that you have to do so.  In fact, there are situations where it may make more sense for only one spouse to file bankruptcy, such as when all of the debt or a vast majority of the debt is in one spouse’s name only.

2. A bankruptcy filing will stay on my credit report forever.

False.  Under the Fair Credit Reporting Act, credit reporting agencies may not report a bankruptcy case on a person’s credit report after 10 years from the date the bankruptcy case is filed.  A Chapter 13 bankruptcy case may be removed from reporting on your credit reports after seven years, according to the policies of the members of the Associated Credit Bureaus, as an effort by them to persuade individuals to file a Chapter 13 bankruptcy rather than a Chapter 7 bankruptcy.

 

3. I will not be able to obtain credit after filing bankruptcy.

False.  Many debtors start receiving credit offers very shortly after they received their bankruptcy discharge of debts. This includes credit cards and auto loans. Initially, the terms of the loans or credit may result in a higher than the average interest rate, lower credit limit, or other less than favorable terms; but assuming his or her credit is maintained, a debtor discharged in bankruptcy can return to receiving more commercially reasonable credit terms, including housing loans after a few years.

4. My tax debts to the IRS can never be discharged in bankruptcy.  

False.  While generally speaking, tax liabilities cannot be discharged in bankruptcy, under certain circumstances, older personal income taxes that have not been paid for a period of time after filing an income tax return can be discharged.  Otherwise, tax liabilities can be paid in full under a Chapter 13 repayment plan, over a period of time of up to 60 months.

5. You lose everything if you file a personal Chapter7 bankruptcy.

False.  A Chapter 7 bankruptcy is referred to as a bankruptcy liquidation, which can result in certain assets of a debtor having to be turned over and liquidated in the bankruptcy.  However, certain assets are exempt from bankruptcy proceedings and allowed to be retained by the debtor.  For example, individual retirement accounts and certain qualified retirement plans that have a value of $500,000or less are exempt for each debtor in Nevada.  Equity in a debtor’s primary residence can be exempt up to $550,000 in Nevada.  Nevada also allows each debtor to retain a vehicle with equity value equal to or less than$15,000 and household furniture equal to or less than $12,000.  Such valuations are determined by the current fair market value of the asset, namely, the reasonable market price that a debtor could obtain for the asset if the debtor were to sell it.  Nevada law also allows for other exemptions to protect certain other assets from bankruptcy.

Instead of doing nothing or needlessly delaying and making matters worse for themselves, people with acute financial problems should not hesitate to contact a bankruptcy attorney to ask questions and explore options available to them both in and outside of bankruptcy. An informed bankruptcy lawyer can be an excellent tool to assist one in navigating the turbulent waters during times of financial distress and confusion.

Leases and Medical Marijuana Tenants

  • March 15, 2018

The State of Nevada legalized the use and cultivation of medical marijuana in 2014 and began allowing cannabis businesses to operate in 2015.  While California voters approved the use of medical marijuana some two decades ago, California law makers only put into place a regulatory scheme in 2015 thereby allowing dispensaries to operate legally.

Medical Marijuana and Leases

Cannabis law is currently a very fluid and rapidly changing area of law.  The legalization of medical marijuana at the state level presents significant conflicts with federal law in numerous areas including drug policy, banking laws, criminal law and so much more.  Under federal law, the use, cultivation and sale of marijuana – medical or not – is illegal.  As a result of the past war on drugs, federal law provides some very severe penalties for violations of federal drug law, including forfeiture.

The federal government does have the right to seize property used in the cultivation, manufacturing or selling of cannabis.  This can include real property where the owner of the real property is merely a landlord who does not participate in the cannabis business.  While the federal forfeiture laws do have an “innocent owner defense” many state cannabis laws require the lease to specifically state that the lease is for purposes of cultivation, manufacturing or selling.

As noted above, this is a rapidly changing area of law.  Just two days ago (October, 2015) the Federal District Court for the Northern District of California issued a ruling (a somewhat scathing decision, in fact), based on the 2015 Appropriations Act, halting the Department of Justice from expending funds to enforce federal laws that interfere with state laws that authorize the use, distribution, possession or cultivation of medical marijuana.

Until the conflict between the state and federal laws governing the use and sale of marijuana are entirely resolved, providers of services, goods and property, including landlords (both commercial and in some cases residential) are advised to seek legal counsel and to address new contract and lease provisions such as “escape clauses” and stated compliance with state cannabis law.

(this post was originally published in 2015)

Ready Your Small Business for Success in 2018

  • February 15, 2018

Ready Your Small Business for Success in 2018

Whether you are ready or not, year-end is here!  Incline Law Group LLP has compiled a list of small business resolutions that we feel can help position your business for a successful year ahead in 2018.

  1. Tax Planning: Year-end is a good time to meet with your account and/or CPA to assess the year behind and plan for the year ahead. This is a good time to review profit & loss statements and cash flow in order to best budget and plan for your business in the coming year. Don’t forget to review year-end retirement account contributions.
  2. Charitable Giving: Charitable giving is both tax deductible and a way to spread the spirit of the season and support organizations that you believe in. Did you know that most non-profits receive up to 30% of their annual fundraising income during the month of December?
  3. Business Registrations: All types of business entities, whether a corporation, LLC, LLP or other type have annual or bi-annual renewal filing requirements. Likewise, state and local business licenses may also need to be renewed. Do you know when your registration and license renewals are due? If not, you should take the time to find our and calendar them. If Incline Law Group serves as your Registered Agency, we will track and handle these renewals for you.
  4. Trademark Renewals: Trademark registrations have expiration dates. Is yours coming up? Is it calendared for on time renewal?
  5. Health Insurance: The Affordable Care Act (“Obamacare”) open enrollment period has been shortened for 2018 coverage and ends on December 15, 2017. Your current employee health care plan is also likely to have year-end renewal dates regardless of when you used to renew. Make sure you know your enrollment periods and have coverage in place before your current coverage expires.
  6. Employment Policies: When was the last time your business updated your employee handbook? If you are in a state with Medical Marijuana, have you created a policy? Social media becomes more prevalent each year – do you have a policy in place? Year-end is a good time to review, revise and/or add new policies that can be effective as of January 1.
  7. Leases: New leases or commercial lease renewals can take more time than anticipated. If yours lease expires in 2018, you should begin negotiations and planning now.

Bonus tip #8 (because, you know… it’s 2018)

Review your client list, and make sure all contact information is up-to-date: This is not just to achieve a clean holiday card list but can also help grow and engage your client base if you use digital communication channels such as an enewsletter. You might consider segmenting your contacts during this review based on the type of relationship, product or service they have or purchase with you to better segment your marketing and growth opportunities.

 

Avoiding Probate in Nevada and California with a Heggstad Petition

  • February 15, 2018

Avoiding Probate in Nevada and California with a Heggstad Petition.

The use of revocable inter vivos trusts, also known as living trusts have gained in popularity. A wide range of estate, tax and wealth planning objectives can be achieved by the use of living trusts.  A primary objective of the living trust is the avoidance of probate.

Problems can arise, however, when a trust is created but assets are not transferred into the trust, whether inadvertently or because of an ineffective transfer document.  When real estate assets are inadvertently not transferred to the trustee of the trust, it may still be possible to avoid a lengthy and expensive probate.

Under California law, a trust can be created by a written declaration by the owner that the real property in question is held subject to a trust, and no separate transfer by deed is required to fund the real property into the trust. (Estate of Heggstad (1993) 16 Cal. App. 4th 945.)  This ruling provides an opportunity to have a court declare real property to be subject to a trust through the filing of a petition that has become known as a “Heggstad petition”.  A successful Heggstad petition can allow the parties to avoid a more lengthy and costly probate proceeding.

Several provisions in the Nevada Revised Statutes (NRS) dating back to 1999 authorize a Heggstad-like petition in Nevada. The most recent addition to the NRS in this regard was enacted by the 2015 Nevada Legislature in Senate Bill 484, Section 64. The new amendment of NRS 164.015 confers additional explicit authority upon the Nevada District Courts in cases involving non-testamentary trusts to hear and act upon “petitions for a ruling that property not formally titled in the name of a trust or its trustee constitutes trust property…”

For more information on California or Nevada probate, and the possibility of avoiding probate, the attorneys at Incline Law Group, LLP may be able to assist.

Bright Line Rule on “Date of Separation”

  • February 15, 2018

Date of SeparationThe “date of separation” is a pivotal issue in many California divorce cases. This date signifies the end of the community estate. It is used to determine everything from the characterization of community and separate property assets and debts to determination of the length of the parties’ marriage to determination of the length required for the payment of spousal support. It also develops a date to utilize for the calculation of the entitlement to reimbursements for payment of community expenses. It is an extremely important question and is often one of the most hotly contested issues in California divorce cases.

For the past 65 years, there has been much to argue about on this issue in any particular case. Determination had been determined largely on the interplay of various intentions, communications, facts and circumstances, unique to each case. Parties who lived under the same roof could still be “separated” under the prior case law just as parties who have lived in separate homes, sometimes for years, could still be deemed not to have separated. The determination in each case was unique to the facts and circumstances of each case and the flexibility provided for fairness.

Not anymore. The California Supreme Court just radically changed the landscape surrounding this issue. In re Marriage of Davis (2015) 61 Cal.4th 846 established a public policy bright-line rule requiring two people to actually cease living under the same roof in order to be considered living “separate and apart”.  While the intention may be to simplify things and give clarity to a confusing issue, it may likely have the opposite result.

People at the end of their marriages feel trapped in many directions and are facing a great deal of uncertainty. A bright line rule on an issue with such importance may prove to be quite limiting in a time that already feels very hopeless.  At first blush, having a clear rule may avoid the “he said, she said” that confounds lawyers and judges, making their jobs easier. However, it can only create more confusion and stress for family law litigants or those contemplating a divorce.  How will this rule impact parties who cannot afford to move out, especially with young children?  In order to file a Dissolution (e.g. divorce) in the State of California, the Petitioner must allege the date of separation. Do we now require that a person must move out of the home before filing for divorce?

I can’t even begin to imagine the strangulation effect this will have on stay at home mothers or disabled spouses who do not have the means to move out and must petition the court for the funds to do so. The time period between the decision one makes to leave his or her spouse and the time the Court first makes interim orders to protect the parties can already seem like an eternity. I have no doubt that the Davis decision will only add further complexity and stress during this period of transition and may create problems in its practical application to the realities of contemporary families.

Incline Law Group’s Family Law attorneys can help you navigate the application of this bright line rule and related issues.

Do you hire employees or independent contractors? The answer is probably both.

  • February 15, 2018

Do you hire employees or independent contractors? The answer is probably both.

Employers routinely consider a number of factors in whether to hire an employee or an independent contractor as their business grows.  It is important for businesses to be able to explain why the “independent contractor” the company just hired is actually an “employee” under the law or vice versa.  SB 224, recently passed by the Nevada legislature and signed by Governor Sandoval went into effect on June 2, 2015.  This law provides much more clear guidance on what qualifies for “independent contractor” status and what doesn’t.  SB 224 creates a conclusive presumption that an individual is an independent contractor for Nevada wage and hour claims if certain conditions are met. Do you hire employees or independent contractors?

This is yet another list of “factors” that business owners and their respective counsel must become familiar.  Of potentially greater importance will be determining which law will apply and when.  There is a different test in determining the employment classification of a person in each of the follow circumstances: (1) wage and hour claims under Nevada law; (2) wage and hour claims under federal law; (3) workers compensation claims; (4) and unemployment claims.  It is entirely possible that under the wage and hour law in Nevada an individual could be considered an independent contractor, but if terminated, the individual could file for unemployment and be classified as an employee.

While some of the factors in each test overlap, using all the factors in each test will, in many cases, result in different classifications for the same individual.  It is now more important than ever to consult your legal counsel to protect your business so that you can properly structure job descriptions for your employees and/or independent contractors to benefit your business as well as plan for the changes in classification that may occur in the event of injury (worker’s compensation claims) or termination (unemployment claims).

If you need more information or have any questions regarding how the new law may affect your business, do not hesitate to contact Incline Law Group, LLP for some clarity on the subject.

PROPOSED LAND SWAP – CRYSTAL BAY LAKE ACCESS AND INCLINE FLUME / BULL WHEEL

  • July 28, 2014

By Andrew N. Wolf, Attorney, Incline Law Group

The owners of the Ponderosa Ranch and the former Stack Estate on the Crystal Bay waterfront have proposed a land exchange with Washoe County. The Ponderosa Ranch contains a portion of the Incline Flume Trail and remnants of the Bull Wheel that was reputedly part of the Great Tramway of Incline used to hoist logs from what is now Incline Village up to the fluming system that sent logs to Virginia City.  The Incline Flume Trail — running from the Third Creek area of the Mount Rose Highway, through the Diamond Peak Ski Resort and all the way to Tunnel Creek Road — still contains remnants of the box flume that was constructed circa 1870s.

The county owns a number of public alleyways that project from County roads to the Lakeshore. One of the public alleyways extending from the County road to the lakeshore in Crystal Bay, eight feet wide by 200 feet long, lies between 44 and 61 Somers Loop, properties that are owned or controlled by the same group which controls the Ponderosa Ranch on the West side of Incline Village.  Several years ago, an attempt was made to abandon this particular alleyway to the adjoining parcels and the request was denied by Washoe County. The current owner has proposed a land exchange in which the alleyway would be traded for a parcel to be split off the Ponderosa Ranch property containing a portion of the Incline Flume Trail and the historic Bull Wheel.

To be clear, the alleyway that is proposed to be traded is not the public stairway that is located between parcels located at 22 and 90 Somers Drive.

There have been strong sentiments expressed on both sides of the issue.  On one side, opponents of the exchange note that public lake access is a limited and valuable commodity that cannot be replaced.  They point out that if public agencies want ownership of the privately held portions of the Incline Flume Trail or Bull Wheel, they have powers of eminent domain which can be used to acquire those lands for fair value.  On the other side, supporters of the land exchange would like the recreational resource of the Flume Trail and the historic resource of the Bull Wheel to be placed in public hands, so that the trail can be kept open, and properly marked and maintained. Over the years, the owners of the Ponderosa Ranch land have blocked access and/or posted no trespassing signs upon the portion of the Flume Trail that crosses private property.  Supporters of the exchange also note that the Crystal Bay alleyway to be swapped is extremely steep and may not be capable of any formal use, development or improvement.  Washoe County currently keeps it closed for safety reasons.

Washoe County has taken the initial step of exploring the concept of an exchange by authorizing appraisals of the affected lands and other investigative studies which are apparently being funded by proponents of the exchange.

Opponents of the exchange also argue that a decision to abandon a scarce Crystal Bay public lake access should not be mixed together with an analysis of whether the Incline Flume and Bull Wheel area should be acquired for public use, such as via eminent domain. They argue the questions are completely separate.

This is an important local issue.  Interested and concerned citizens can follow and attend public meetings and write their elected officials. The Washoe County staff report of May 13, 2014, and various public comments concerning the proposed land exchange can be found here:
http://www.washoecounty.us/large_files/agendas/051314/28.pdf

MEDICAL MARIJUANA DISPENSARIES TO OPEN SOON IN NEVADA

  • July 28, 2014

By Jeremy L. Krenek, Attorney, Incline Law Group

The legalization of marijuana has become a hot topic over the past decade as campaigns to legalize have gained serious support. States like Colorado and Washington have legalized marijuana for recreational use. Currently, 22 states, including Nevada and California have legalized marijuana for medical purposes if prescribed by a licensed physician. While Nevada passed its first medical marijuana law in 2000, it just recently passed a law (2013) allowing for medical marijuana dispensaries to open causing great debate.

Opponents of legalization are concerned with increased crime rates, increased substance abuse among both adults and adolescents, and a potential increase of dangerous drivers on the road (DUIs). Even though there are numerous states that have legalized medical use of marijuana, it is still too early to tell whether these concerns will actually come to fruition.

On the other hand, proponents are concerned because, while marijuana may be legal at a state level in some circumstances, it is still a federal crime. Since federal law preempts conflicting state law, those who have a medical marijuana card issued by a state can still be arrested and charged with a federal offense. This example has been on display for the entire nation to witness over the last couple of years in California where the federal government has made it a priority to crack down on an over billion dollar a year pot industry.

While both sides of the debate may have legitimate concerns, Nevada residents should take comfort in the fact that Nevada is familiar with regulating a product that not everyone wants to see legalized. Nevada has a regimented process for approving gambling licenses across the state. Many of the same guidelines will likely be utilized when it comes to marijuana dispensaries. Strict guidelines regulate those who can open a dispensary as well as oversee their management. The application process for opening a dispensary has numerous guidelines and checks that must be followed carefully in order to have an application considered. Counties also have the ability to impose further restrictions and guidelines including regulations as to where dispensaries can be located within each county.

Those with the goal of opening a dispensary have many legal hoops to jump through. Only time will tell the effect legalization of marijuana will have on our nation. Until then, hopefully the rules and regulations that are in place will help circumvent any negative effects the new legislation will have across our nation.

IS YOUR INHERITED IRA PROTECTED FROM CREDITORS?

  • July 20, 2014

By John C. Rogers, Attorney, Incline Law Group

This question is important to those who receive an IRA as a beneficiary, but more important to those who plan to pass an IRA to children or other beneficiaries. The latter have the opportunity to plan so that the inherited IRA includes protection from creditors.

In a recent landmark decision, the U.S. Supreme Court held that an inherited IRA does not qualify for the “retirement funds” exemption under the bankruptcy code Clark v. Rameker, 573 U.S. ___ (2014).

In that case, IRA beneficiaries filed for Chapter 7 bankruptcy protection and claimed about $300,000 in an inherited individual IRA as exempt “retirement funds.” (See 11 U. S. C. Sec. 522(b)(3)(C).)

The court decided that funds in an inherited IRA were not “retirement funds” intended to be protected by the exemption.

The court pointed to three legal characteristics of inherited IRAs that clearly distinguished them from protected “retirement funds.” (1) Inherited IRAs can never be increased by contributions from the inheriting holder. (2) Holders of an inherited IRA must withdraw funds from the account no matter how far they are away from retirement. And finally, (3) the holder may withdraw the entire balance of the account at any time, for any purpose, without penalty.

The policies that allow original IRA holders to exempt “retirement funds” from the reach or creditors help assure that IRA funds will be available to fund necessities during retirement years. Because of the distinguishing characteristics described above, an inherited IRA operates in opposition to those policies.

If you are the holder of an IRA and you anticipate naming children or others as beneficiaries, and if you want to provide creditor protection for those beneficiaries, there are a number of mechanisms that may achieve this goal.

If you already hold an inherited IRA, you may want to consult with an attorney regarding the pros and cons of liquidating that IRA and investing in other protected assets.

FANNIE MAE CHANGES MORTGAGE ELIGIBILITY RULES AFTER SHORT SALE AND DEED IN LIEU

  • July 15, 2014

By Cassell von Bayer, Attorney, Incline Law Group

One of often cited selling points for homeowners to undertake a short sale rather than a foreclosure sale is the ability to purchase a new home with financing in a shorter period of time. While all lenders have different eligibility requirements, most lenders current guidelines fall within a 2 to 5 year waiting period after a short sale or deed in lieu of foreclosure. While FHA guidelines may allow a borrower to obtain a new mortgage within one year of a short sale, those guidelines provide for several restrictions and FHA loans require significant and very costly mortgage insurance premiums.

Fannie Mae continues to be one of the largest mortgage holders and has up until now provided borrowers with mortgage eligibility two years after a short sale. Aside from FHA and VA loans, Fannie Mae has maintained the shortest wait periods after a derogatory credit event such as short sale or foreclosure. As of August 16, 2014 that will change. For all loan applications taken on or after August 16, 2014, Fannie Mae will impose a four year waiting period after a short sale and seven year waiting period after a foreclosure sale. Equally as important, for loan applications taken before August 16, 2014, the lender must document that the short sale or deed in lieu was completed two or more years from the disbursement date of the new loan. Similarly, where your credit report shows a “charge off”, meaning a lender, such as a second mortgage holder after a short sale, has reported the account charged off for accounting purposes, borrower’s may be subject to a four year waiting period. The new rules were issued on June 17, 2014, and as noted go into effect August 16, 2014. For the specifics please see: https://www.fanniemae.com/content/release_notes/du-do-release-notes-08162014.pdf

It is difficult to imagine that these new restrictions will aid the housing recovery or the reconstitution of the American Dream.

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