Timeshare Dragging You Down? Consider Donating It!

In my bankruptcy practice, I often see debtors who own timeshares that they no longer want for a variety of reasons. In many cases, the debtors owe more than the unit is worth and can no longer afford yearly maintenance fees. With timeshares selling for as little as $1 on eBay, debtors are often stuck between the proverbial rock and a hard place.

One option that debtors might consider is an organization called Donate for a Cause. Donate for a Cause is a non-for-profit organization based in Washington D.C. that accepts timeshare donations and sells the unit to raise money for local charities. According to its website, Donate for a Cause supports a wide range of charities such as the American Cancer Society and the American Red Cross.

Donate for a Cause will provide you with a receipt for your donation. You should consult with an accountant or other tax professional for advice on how to claim the deduction when you file your income tax return.

About the Author: Carl H. Starrett II has been a licensed attorney since 1993 and is a member in good standing with the California State Bar and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.

Self-Employed Debtors: The Bankruptcy Means Test Dilemma

When Congress amended the Bankruptcy Code in 2005, one of the biggest changes was the addition the "means test" to create objective standards for determining which individuals are "abusing" the privilege of filing for relief in a Chapter 7 bankruptcy. The test only applies to individuals with primarily consumer debts (as opposed to business debts) and begins with a review of the debtor's average income for the past six months to determine the debtor's approximate income.

If the debtor's income is below the median income for households of the same size where the debtor lives ($77,014 for a household of 4 in California), then the debtor "passes" the means test and is eligible for Chapter 7 bankruptcy. Debtors who earn above the median must go a through an analysis to calculate the debtor's ability to fund a Chapter 13 repayment plan.

For most debtors, the income documentation comes from their paychecks stubs. The income and mandatory deducts for items like taxes and FICA are easy to identify and analyze. But what about self employed debtors?

For debtors who are self employed/sole proprietor, as a general rule, the bankruptcy trustee is interested in the net income of the business, which consists of gross income of the debtor's business minus necessary business expenses. This usually requires completion of a Profit and Loss Statement showing gross income and gross expenses for the six (6) months prior to case filing, with enough specificity to allow the Trustee to fully analyze the business. Surprisingly, many business owners do not know how to produce a Profit and Loss Statement.

Small business owners should use an accounting program such as QuickBooks or Microsoft Money. The business owner should track their expenses with the same level of detail that might be used when applying for a mortgage or completing a tax return. The more legitimate business expenses that that the business owner can document, the easier it is to pass the means test.

Some business owners resist this requirement due to the time required or the potential cost if they require assistance from a bookkeeper or an accountant. However, the fiscal discipline necessary to produce proper financial statements is often required for a small business owner to succeed. Most Chapter 7 debtors really have no idea where their money goes, which is often the source of their financial difficulties. Being able to properly track income and expenses is the first step to helping a struggling business owner take control and get the full benefit the fresh start from a discharge in bankruptcy.

If you are located in Southern California and have additional questions about bankruptcy or need further assistance, please contact us.

About the Author: Carl H. Starrett II has been a licensed attorney since 1993 and is a member in good standing with the California State Bar and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.

Consumer Tip: Avoid Purchasing Electronics From Staples

On October 7, 2008, I purchased a Compaq Presario CQ50-130US Notebook PC for my 11-year-old daughter from Staples. The laptop is now defective and Staples refuses to take the merchandise back and exchange it for something that works properly.

The laptop worked fine for the first 2 weeks. Things started to go bad when my daughter returned from sixth grade camp this past weekend. Both network cards have failed (i.e. no Internet access) and the sound card is defective as well. It makes a loud popping sound, much like a Geiger counter that you might see in a bad sci-fi movie from the 1950s. After spending most of Sunday either on hold or chatting with Hewlett-Packard tech support, HP finally decided the laptop needed to be "repaired".

Staples apparently has a 14-day return policy on "technology items" that was not made known to me until after the purchase. While I wait for HP to send me a shipping box (arriving in 5-7 days) to return the laptop for repair a laptop that is less then 30 days old, Staples will not stand by the products it sells. Their offer of a $20 coupon to be sent via email in about 2 weeks shows how out of touch they are with quality customer service.

Consumers shopping early for Christmas who make electronics purchases at Staples run a huge risk if the merchandise is found to be defective on Christmas day because it is not Staples' problem according to their policy. They will attempt to direct you to the manufacturer for enforcement of your warranty.

If you are considering an electronics purchase in the near future, you might be better off selecting vendors with better customer service and return policies such as Walmart or Costco.

About the Author: Carl H. Starrett II has been a licensed attorney since 1993 and is a member in good standing with the California State Bar and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.

What if I Cannot Afford a Bankruptcy Attorney?

A dilemma often faced by debtors is the ability to pay for an attorney to guide them through the bankruptcy process. After all, if they cannot afford to pay their bills, how can they afford legal fees? When totalling up legal fees, court filing fees and other costs such as the mandatory credit counseling and debtor education classes, the costs for filing for bankruptcy often exceeds $2000.

One of the most common ways that debtors will save money for legal fees is to simply stop paying on debts that will be included in their bankruptcy petition. Most debtors struggle to make their minimum credit card payments when they could be using the money to hire an attorney. However, you should consult a qualified bankruptcy attorney before you stop paying your creditors.

Most bankruptcy attorneys will take payments over time so long as the fees are paid in full before the case is filed. For the most part, legal fees in a Chapter 7 case must be paid in full prior to the filing of the case. Otherwise, the money owed to the attorney is discharged like other debts.

Some creative attorneys will take a deposit and send a letter of representation to all of the debtor's creditors. This usually stops most creditor harassment for a period of time. In some cases, the creditors might violate state or federal fair debt collection laws and this could to lead to a monetary settlement that could provide the funds necessary for your bankruptcy legal fees.

Finally, a Chapter 13 bankruptcy is often an option to pay legal fees over time while still receiving the benefit of the automatic stay. In one current case, my client is 3 months behind on his car payment and he does not have the fees to pay for a Chapter 7 bankruptcy yet. His $2500 car has a $6500 loan against it, so we plan on filing a Chapter 13 bankruptcy to not only deal with the past due car payments, but to strip the lien from his vehicle down to the current value and pay his legal fees over time.

If you are struggling with how to pay for filing a bankruptcy case, please contact us to discuss your options.

About the Author: Carl H. Starrett II has been a licensed attorney since 1993 and is a member in good standing with the California State Bar and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.

Don't Get a Christmas Debt Hangover

According to Wikipedia, "Consumerism is the equation of personal happiness with the purchase of material possessions and consumption" or "retail therapy" as my wife calls it. This results in an odd phenomena I often see debtors go through this time of year: guilty over not being able to purchase Christmas presents for friends and family. We often end up counseling clients that regaining control over their finances is more important than buying Christmas presents.

When January rolls around, will you be suffering from the guilt of a Christmas debt hangover? These tips should help prevent a holiday financial catastrophe:

1. Reduce your gift exchange list. Do you really need to to purchase gifts your 3 aunts, 2 uncles, 10 cousins and the odd assortment of nieces and nephews? Probably not. Just be honest with your friends and family and exchange greeting cards instead.
2. Budget, budget, budget: Make a list of who you really must purchase gifts for, set a dollar limit and stick to your budget. After you make your list, refer to Rule No. 1.
3. Don't use credit cards to purchase gifts. Unless you are the type of person who is extremely disciplined and pays off the credit card bill each month after accumulating airline miles, avoid the temptation to delay paying for the purchase. If you do purchase a Christmas gift on a credit card, refer to Rule No. 1.
4. Shop online instead of at the mall. Shopping at a mall can often lead to those impulse purchases that you end up regretting later. Take the time to research your purchase carefully. If you shop online, only use a well-established website such as Amazon.
5. Host a holiday pot luck instead of exchanging gifts. Christmas memories of pleasant times with friends and family will last longer than a forgotten trinket.
6. Buy smarter. Clip coupons, search the Internet for bargains and watch your Sunday paper for holiday sales.
7. Start buying now. If you purchase your gifts early and a few at a time, you'll be under less pressure closer to Christmas and less likely to overpay for an impulse purchase.
8. Avoid Starbucks. Instead of spending money on a $5 latte, save that money for Christmas gifts. You would be surprised how quickly the cost of self-indulgence adds up.
9. Buy gift cards. You typically spend less on a gift card than a present and the recipient can choose choose something they want.
10. Avoid the extras. Christmas is the time of year for "extras"...that one little extra decoration, the stocking stuffers, the last minute gift that seems so perfect. Refer to Rule No. 1 and Rule No. 2.

True friends and family don't want you be stressed or overcome by holiday debt. Spend wisely and without guilt.

About the Author: Carl H. Starrett II has been a licensed attorney since 1993 and is a member in good standing with the California State Bar and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.