QUESTION: I operate a computer BBS, and it is running at a loss. Is it possible for me to claim a tax deduction for the losses? THE ON LINE LEGAL ADVISOR SUGGESTS: If the BBS is an adjunct to a separate business (for example, if you own a restaurant and it takes orders via your BBS), then it is already tax deductible as a business expense. Therefore, if you are the owner of a business and you use a BBS to further the business (for example, by running ads for your business or taking reservations), the BBS is a tax-deductible business expense, even if there is an incidental element of pleasure in the operation of the BBS. If you don't use the BBS as an adjunct to another business, then the IRS is primarily bound by whether or not the BBS is operated as a true business. For example, are accurate records kept? Does management take steps to reduce losses? If the owner is not personally qualified to run the business, does the owner seek the advice of experts and follow this advice? There are many misconceptions about the deduction of business losses. For example, although a business which is continually losing money ultimately may not be allowed to continue taking the deductions, there is no rule that a business must be profitable for a specific number of years in order for losses to be taken. In order to establish the right to take the deduction, you must show that the BBS was undertaken in a good faith effort to earn a profit. The substance of the deal, and the form that the business takes, is much more important in proving the deduction is a legitimate business loss, than whether a profit is ever made. The tax code recognizes businesslike operation as the ultimate test. QUESTION: How long do I have to keep IRS tax returns, and how far back can the IRS audit my taxes? THE ON LINE LEGAL ADVISOR SUGGESTS: If the return is filed on time, the general rule is that the return can not be audited after 3 years. There are a few exceptions: a) if the return contains a material misstatement of income (more than 25%) b) other serious fraud is committed In these cases, there is no limitation. A few important points: --if you close a business, send in a return marked "final" (with zeros or with your final return). This will close the file, and trigger the 3 year time period. --if you have a year in which you have no income, or a loss, file the return anyway. This will prevent the IRS from trying to reopen the case years later when you may not have the records needed. Most state income tax (or other tax return) rules are similar. QUESTION: I have a new car that is driving me nuts with repairs. What are my rights? THE ON LINE LEGAL ADVISOR SUGGESTS: There are several different ways that a consumer who is dissatisfied with a vehicle may obtain compensation or replacement of the vehicle. The bad news is that although all vehicle manufacturers have created processes to sound like things can be worked out, certain manufacturers are presently abusing their dispute resolution procedures, hoping that the processes will tire out the car's buyer and they will go away. The better news is that some manufacturers are increasing their percentage of conflicts successfully resolved. The owner's manual of all new vehicles is required to contain a complete explanation of their dispute resolution procedure. The first is negotiation with the dealer and manufacturer. After talking with the dealer (and hopefully with the general manager or owner of the dealership) the next step is usually to involve the manufacturer. The manufacturer will have a regional officer that will meet with you upon request, usually at the dealership where the car was purchased. This representative is supposed to be neutral. Again, it varies by the maker of the car. Most problems with the fairer manufacturers will be worked out at this stage. However, if you are dissatisfied with the regional officer's solution, the manufacturer can be contacted directly. It is important to remember that the steps have to be followed. If you are dissatisfied with the car and go directly to the home office of the manufacturer, the manufacturer will kick it back to the regional office. Finally, virtually all vehicle manufacturers have set up a semi-binding arbitration panel. The arbitration panel's ruling binds the manufacturer. However, if the consumer is dissatisfied with the arbitration panel's ruling, the consumer may go to court under lemon laws, or standard breach of contract lawsuits. The objective of arbitration is that a panel which has (generally) 3 members, one who is a mechanic, one an independent lawyer/C.P.A./insurance adjustor, and the final, a representative of the manufacturer, will render a fair decision. Again, this varies on whom you are dealing with. IN MOST CASES A CONSUMER MUST GO THROUGH ALL OF THE STEPS, INCLUDING ARBITRATION, BEFORE THEY MAY LEGALLY GO TO COURT. Some suggestions: (1) With foreign cars, after going to the dealer, and through a zone office, if you are still dissatisfied, then you might find writing to the home office of the company, in the foreign country, in English, will get amazing results. That is especially true for the Japanese. (Your local reference librarian can help you get the name and address of the foreign head office of the car maker.) However, your letter should completely and fairly state what has happened, and in particular should avoid generalizations or opinions. Remember to get a large envelope and put all papers and work orders for the vehicle in one place, and send copies of these to arbitration, the zone office etc. QUESTION: I am having a lot of problems paying my bills. What can you tell me about bankruptcy, or, avoiding bankruptcy. THE ON LINE LEGAL ADVISOR SUGGESTS: If your area has a NOT FOR PROFIT consumer credit counseling service, please consider going to them first. Almost every major creditor across the country has agreed that if a person is in consumer credit counseling, then they will accept partial payments as set by the consumer credit counseling. WARNING: With just a few exceptions, for- profit consumer credit counseling is worthless. Repeat, worthless. Not-for-profit consumer credit counseling will assist you in determining if you need to file bankruptcy. There are 4 types of bankruptcy available to consumers, although only three are commonly used. These are: Chapter 7. Under chapter 7 you are released from all debts except some taxes, child support, criminal fines and certain other unusual situations like embezzlements. In exchange for release from your debts, all property, except that which is exempt (varies from state to state but usually includes your home, an automobile and other personal belongings) is sold and the funds distributed to creditors. Many consumers do not have assets above their exemptions. In this situation, they are then discharged without the seizure of any assets. Chapter 13. Originally called a wage earner's plan, in Chapter 13 a person must establish a budget and then pay the excess to unsecured creditors. In Chapter 13, home mortgages can be reinstated in many cases, and, if a debt is over secured (the collateral is worth less than the debt), in many cases the debt will be split into an unsecured part, and a secured part, effectively reducing the monthly payments. There aren't a lot of Chapter 13's filed because most persons simply do not have the money to make a significant payment on their debts. Chapter 11 is for individuals who have more than $300,000.00 in unsecured debt. Chapter 12 is reserved for family farmers. QUESTION: I am writing or have written a book/created a work of art or a computer program. What is a copyright, what does it offer me, and what do I need to do to obtain a copyright? THE ON LINE LEGAL ADVISOR SUGGESTS: The first point is to be sure that the item involved is a proper subject for copyright laws. An idea, plot, invention or process is not a subject for copyright. A short phrase or trade mark is also not the subject for copyright. A poem, story, non- fiction work, book, artwork or computer program is the proper subject of copyright. Before March of 1988 the copyright code required that the work have a PROPER copyright notice on it, or the work was subject to becoming part of the public domain. However, since March, 1988, the United States became a signatory to the Berne Convention, the leading international copyright protection treaty. Since then notices, although strongly recommended, are not required. It is not necessary to first register a copyright before sending a work to third parties. Copyright protection inheres upon the creation of the work. Prior registration is not necessary when submitting works to reputable publishers. Although there are copyright pirates, the publishers listed in such works as The Writers Market are highly unlikely to appropriate copyright work, in whole or in part. Frankly, professional publishers think letters from authors which state that the work is copyright are amateurish. It is recommended that all copies of works which are publicly distributed bear a notice, EXACTLY as follows: Copyright 1993, Your Name This should be on the first page of the material. Do not use (C). There are some pre-Berne convention cases holding that (C) which is not a C in a circle is improper. Registration of a copyright is strongly recommended. If the work is worth more than $ 20 (the price of copyright registration), then registration is highly recommended. No search or permission is required to make a registration. (Unlike a patent.) You may obtain copyright registration forms (Form TX) from the Library of Congress but it is faster to get them through your Congressman or Senator's office. The instructions provided on the form are self-explanatory. If you are going to register, do so within 90 days of completion or publication. The copyright code provides significant advantages to those who register early. QUESTION: I have a will. How often should I update it? And, if I update my will, can you point out things I should check. THE ON LINE LEGAL ADVISOR SUGGESTS: Wills should be checked if a substantial change in financial circumstances, for better or for worse, occurs. A marriage, divorce or birth of a child should also trigger a review. When reviewing a will, try to avoid specific bequests (for example, "I give to my child my tuba") whenever possible, as these cause the greatest problems in estate administration, besides taxes. A specific bequest is a bequest only of that particular item. If the item is sold, then the gift probably lapses. If there are several such bequests, the resulting lapses can result in the estate being very unequally distributed. General percentage bequests are recommended. Also try to avoid bequests of specific sums of money. These have drawbacks, such as being eroded by inflation, or possibly effectively disinheriting someone whom you intended to share in the estate. QUESTION: What is a living trust, and, how does it differ from a will? THE ON LINE LEGAL ADVISOR SUGGESTS: A living trust is a testamentary disposition tool. Like a will, it contains a disposition of one's assets upon death. Unlike a will, it may provide for management of assets during a period of the testator's incapacity, including the use of professional fiduciaries like bank trust departments. Living trusts avoid traditional probate of wills. Under a living trust, a person's assets are conveyed to a trust. Often the trustee is the same person as the owner. However, upon death or incapacity, alternate trustees automatically take over and either hand out the assets or administer them. Although there is no probate of a living trust, it is nevertheless quite possible for disappointed heirs to sue anyhow. The living trust has taken on almost a magical quality. Popular books proclaim that living trusts are perfect substitutes for wills and that all problems related to the management of property go away, as if by sorcery, if people will just use living trusts instead of wills. Nothing that sounds too good to be true, is. That includes living trusts. Living trusts have advantages, but they are also significantly more costly to create and administer than a will. In cases in which estates are not substantial (less than a quarter of a million dollars), wills usually are so much more effective than living trusts that they are preferable. QUESTION: I am going into the hospital. I desire that I be allowed to "die with dignity" if I am suffering and have a terminal condition. What can you tell me about living wills? THE ON LINE LEGAL ADVISOR SUGGESTS: Under recently passed federal law, and many state laws, if there is a terminal diagnosis, and you are comatose with no chance of revival, or suffering in pain, then unusual medical means may be discontinued and you simply receive drugs to stop pain or make you more comfortable IF YOU DESIRE. This is NOT mercy killing. No affirmative measures are taken to end a person's life. Instead, natural processes (other than pain) are allowed to control. Although some persons desire being kept "alive" (but not sentient) by the numerous marvels of modern science, most persons prefer a death with dignity. Hospitals are now required to offer "living wills" to patients who might need them, using either a state or federally approved form. QUESTION: I (may be) (have been) arrested. What do I do? THE ON LINE LEGAL ADVISOR SUGGESTS: "You have a right to remain silent. You have a right to have an attorney. One will be appointed for you, if you can not afford one." The best advice is given, free, by the police. The On Line Legal Advisor has spoken to numerous defense attorneys (and has been an appointed federal public defender). Every lawyer has horror stories about persons who would have walked out of a courtroom, free, had they kept their #$%@# mouths shut! In addition, persons who were guilty of, let's say, assault and battery in the 4th degree, have been convicted of more serious crimes because they gave statements. Why? Anyone, even the most hardened con, is going to be in a state of agitation if they are under arrest. Minds are not at their clearest when handcuffed and facing jail cells. If a confession/statement is appropriate, then doing so with a COMPETENT ADVISOR PRESENT is suggested. It may be hard for honest citizens to believe, but, statements are often made without tape recording them. At trials or hearings, the police will state their recollection of the confession/statement. It is often slanted very heavily towards the government. A recent run of cases (over 100) in Jacksonville, Florida, all hinged on confessions. None were taped. No one had an attorney present. An internal investigation (after some drug evidence was unaccounted for) revealed that a gang of police officers had concocted cases, including confessions, against dozens of innocent people. Had the guiltless insisted on their rights, many or all of them would never have been framed. It does happen to good people! Remember, good people can be involved in unfortunate situations. The U.S. constitution grants you the absolute right to remain silent and the right to legal advice upon arrest. Be sure to exercise your rights. YOU WILL NOT BE TREATED WORSE FOR INSISTING ON YOUR CONSTITUTIONAL RIGHTS! Question: What is the limit for estate tax liability? THE ON LINE LEGAL ADVISOR SUGGESTS: A gross estate of $ 720,000 or below is not subject to estate tax. Although that sounds like a great deal of money, it isn't. A home, life insurance (yup it is counted), and IRA's can add up to $ 720,000 very quickly. If your estate is over $ 720,000 then the federal government confiscates (taxes?) 60 or 70 per cent of the excess. With a little bit of planning, all married couples can effectively change the limit to $ 1,400,000, by equalizing estates and using "credit-shelter" estate planning. A regular life time "gifting" program will also reduce the taxable sum of the estate, or eliminate it entirely. If an estate is comprised mostly of life insurance it is possible to place the life insurance in a "irrevocable life insurance trust" to avoid adding it into the estate. QUESTION: Credit repair services promise that they can "fix" the credit of persons with bad credit. Can this be done? THE ON LINE LEGAL ADVISOR SUGGESTS: Unfortunately, most "credit repair" services promise things which they cannot deliver. For example, you are significantly late on a credit card bill. No credit repair company can (legally or practically) change that. After 7 years, it will go off you record automatically. That's the problem. Correct information cannot be removed from a credit record, even if it is derogatory. And, incorrect information will be removed from any credit bureau report upon presentation of some sort of proof that it is incorrect. No third party intervention is required unless a creditor (who is asking for a lawsuit in that case) provides false or incorrect verification of a challenged item. You may obtain a free copy of your credit bureau report if you are turned down for credit based on your credit bureau record. A written notice must be sent to you by creditors in this case. Or, upon payment of a low fee (about $ 5) a copy of your report will be sent to you by the credit bureau. QUESTION: I've been called for jury duty. How can I get out of my civic duty? THE ON LINE LEGAL ADVISOR SUGGESTS: This depends on whether the case is in state court or federal court. There are extraordinarily few reasons which will allow a person to avoid federal jury service. So, if you receive an invitation to serve on a federal grand jury or petit (trial) jury, you probably will have to report for the first day. Below, we'll discuss how to deal with the court systems when you arrive. In state court, the odds are excellent that if you write a letter, or (in a small community) call the Judge's office, with a good reason why you cannot serve, they'll excuse you. In most states and in the federal system, if you have served on a jury then you are absolutely exempt from serving for 2 years. If notified to serve you must send a letter to the Court advising them of the fact that you served. Remember the word "most." In Court, if you are bound and determined not to serve, you will have numerous opportunities to leave. In virtually every case there will be "voir dire" which is old French for "the telling of the truth." Voir dire is where the attorneys or the Court, or both, can ask jurors if there is any reason why they cannot serve on the jury. If called on a drug felony, and you are strongly against use of drugs, say so when asked. Judges have a tendency to say, "Well, Miss Smith, I understand that; but could you be a fair juror?" If you say yes, then you are likely to remain on the jury. If you say "no" you will be excused. Unfortunately, people will not admit that it might be a bad idea for them to be on the jury. Speak up. The point to the more cynical is that in every case during the questioning of the jury, there will be the "get off the jury question." Listen for it, speak up and make it clear that you are not going to want to stay, and can't assure the court that the strong feelings that you have can be put aside. Either appear to be firm, or serve on a jury. By the way-- the persons on the On Line Legal Advisor team involved in the court system would far prefer that a potential juror who doesn't want to serve is excused, then they not let it be known. QUESTION: I have a dispute with my stock broker. Now what? THE ON LINE LEGAL ADVISOR SUGGESTS: Every office of a stock broker is required to have a designated securities principal. There are many designations, but generally the person will be known as an "operations principal" or "office manager." You would be surprised to find out that often going to the office manager is enough to resolve most problems. Securities law is so complicated that even attorneys have to pass difficult examinations to become licensed as supervisory securities dealers. The problem, pure and simple, is that the area is so complicated that most "account executives" do not know the bulk of the many requirements for dealing in securities. In the majority of customer disputes, the account executive feels (and is) rather blocked in by standards and limitations. The office manager is not. The same logic applies if the problem cannot be worked out locally. The next higher ups have considerably more authority, and more experience with failure modes. Although people doubt it, the securities industry tends to be harsher on itself than the public. If something isn't fair the account executive or the local manager may believe that they can't fix things. However, their boss can. For many years, the securities industry has had customers sign consents to submit their disputes to arbitration. In these arbitrations, the "public," that is non-securities affiliated members, are the majority of the panel. The On Line Legal Team has spoken with both public and non-public members of securities arbitration panels and expert attorneys in the field of securities law. The vast bulk of these persons find securities arbitration to be a fair and relatively inexpensive means to settle disputes. There are those who do not agree, but they are the minority. Several states have now made securities arbitration strictly voluntary. However, in general, arbitration of disputes will be less costly than litigation. Statistics show that after the filing of arbitration that 60 to 70% of the cases are settled prior to submission to the panel. The On Line Legal Advisor recommends following through internal channels and then the use of arbitration in securities disputes. QUESTION: I have a claim pending with an insurance company, and I can't get it taken care of. I need to get the claim resolved quickly. Help! THE ON LINE LEGAL ADVISOR SUGGESTS: These problems split nicely into separate categories: (a) Your own insurance company- dispute as to coverage (b) Your own insurance company- dispute as to the amount of the claim (c) A third party's insurance company- dispute as to coverage (d) A third party's insurance company- dispute as to the amount of the claim By coverage we mean whether or not the policy was in effect; or if the policy was in effect, whether or not the provisions of the policy require a payment on the type of claim in question. Type (a) your own company, dispute as to coverage: Unless it is an open and shut case, if an adjustor is relying on an exclusion in the policy to refuse payment, you may insist on having a written denial, and, that the file be passed on to the home office or regional office for review. Members of the On Line Legal Advisor team have represented many insurance companies. Our experience is that attorneys and supervisors are usually much more interested in working things out than their subordinates. If this does not work, lawyers are the only way out. Filing a case pro se ("on one's own behalf," without a lawyer) is not a wise way to attack this kind of problem, since the insurance companies will be well represented. Type (b)-- your own insurance company, dispute solely as to amount of damages. You may not like to hear this, but often the holdup is that you have not documented the loss sufficiently. Have you provided receipts, estimates, pictures or any other proof that will give the adjustor back up for their file? If the answer is no, try submitting an additional estimate, or ask the adjustor plainly what they need to pay the claim. If this doesn't work---- Do that dreaded deed-- READ the full insurance policy! Make a photocopy of it, and highlight every section which explains the duties of the insured when a claim is made. Reading the policy will be an empowering experience! For example, on almost all property insurance policies, if there is a dispute as to the amount of a claim, you may demand an outside appraisal which must be done within a short period of time. Virtually all policies also require that the company play a claim if a formal proof of loss is submitted, or, the company must submit to either an outside appraisal or binding arbitration. Upon a written (we recommended writing!) request for a proof of loss, it MUST be provided by your company, or there are substantial penalties that the company will face. Adjustors don't like their insureds to submit a proof of loss, because the company must pay the claim, or order an appraisal. It means that the adjustor has lost control and that payment will occur, perhaps on an outside appraiser's ruling. Settlement, or an arbitration/appraisal will follow, and at least you know the outside time limit of some payment! Do not agree to extensions of time. Time is the enemy of a less than scrupulous adjustor! Many persons file complaints with the state insurance commissioner if things do not work out. This can or can't help. Better companies have all complaints which are filed answered by a senior officer at the home office. Others view a complaint to the insurance commission as another chance to delay. If you are going to complain, be sure to fully document your complaint. Complaints which are long on facts and short on adjectives work best. When dealing with your own company, remember that if an adjustor won't settle the claim to your satisfaction, you have many choices. You can file a lawsuit, demand arbitration, go to the insurance commission or even hire your own counsel, who in many cases will be paid by the insurance company-- follow through! With complaint type (c), where another party's insurance is involved, you will probably require an attorney's services. Coverage issues are complex, and all legal. Most insurance companies, when coverage is in dispute, submit the facts to their own counsel for an interpretation. If the issue is close, an ethical insurance company will file a lawsuit to determine whether or not there is coverage. In this case, again you will need counsel. With issue (d) the other side is covered, but the amount is in dispute, be sure that you have completely documented the payment of the amount that you seek. If you have already submitted proof, perhaps one more estimate or appraisal will push the adjustor forward. If after a reasonable amount of effort you aren't getting anywhere, employing counsel is warranted. Every insurance company I know codes all of its files with a letter to indicate whether the adverse party has an attorney. Even a single letter by an attorney brings with it the implication of a possible suit, and expenses and problems for the adjustor and company. An attorney will probably write a letter and follow up for a small fee. Well worth it! QUESTION: My latest credit card bill is wrong, or, I was charged for something I didn't buy. What next? THE ON LINE LEGAL ADVISOR SUGGESTS: If you have a charge on the bill that you did not make, call the company at once AND THEN WRITE THEM A NOTE. It is not strictly necessary to get a return receipt. Smart consumers have used "certificate of mailing service" for years. For a very low fee (under $ 1.00) you get an official receipt from the post office proving that you in fact mailed a letter to that company. The possession of one of the (usually) small brown slips stops arguments about whether or not the credit card company was notified. The company will provide an affidavit form for your execution. After sending in the affidavit, which states that you did not make the charge, it is off your bill. You have an additional set of rights if you have a dispute as to the quality or delivery of goods. If the charge is for a merchant which is located in your state, or within one hundred miles of your residence, then after making a good faith effort to resolve the charge dispute, you may contact the credit card company to request a charge back. Documentation of the dispute will help, so be sure to keep the merchandise receipts and any correspondence. Now a more sinister part of "charge backs." The federal regulations related to credit card charges limit the right to charge back to your home state and 100 miles. However credit card companies do not always check so a charge back is sometimes given even if the law does not require it. Also, some credit card companys' merchant agreements allow them to back charge other disputes. Federal laws require that credit card companies, after written notice, may not report a person disputing a charge as delinquent, or charge late fees until the dispute is resolved. QUESTION: A creditor who claims that I am late on a bill has called at work. Can they do this? THE ON LINE LEGAL ADVISOR SUGGESTS: Under federal law, until a judgment is obtained on a debt, a creditor may not contact a person at his work AFTER WRITTEN NOTICE! Complaints and any number of verbal demands do not work. However, a written notice to a creditor or their representative is effective, and after receipt, any further contact is unlawful. Consult an attorney if it continues. QUESTION: I am buying (or selling) a piece of real estate. How do I protect my interests? THE ON LINE LEGAL ADVISOR SUGGESTS: The answer is quite similar whether you are the buyer or the seller. First of all, real estate transactions will be the largest transactions that most persons will ever make. On a $ 100,000 transaction, if a person can't afford $ 400 to $ 1,000 for an attorney, then they can't afford to do the deal at ALL! The advice of a lawyer is necessary before offers are made or offers to purchase are signed or accepted. Once the offer to purchase is signed by both parties it is a legally enforceable deal, and the seller's and buyer's rights are fixed. Therefore, before you zero in on the best potential purchase, or, if you are selling, before you get to bargaining over the last few dollars, you need a lawyer first. Remember, the innocuous looking form which the nice smiling real estate agent offers to you is in fact a binding, $ 100,000 or more deal. Prior to signing anything that could turn into a binding contract, the offer or acceptance of the offer should be reviewed by counsel. In selecting a lawyer, find one who is willing, on a reasonable time frame, to review any formal offers (sometimes called a "Deposit Receipt" or "Binder") before you sign them. This can be done by you faxing the agreement to your attorney before signature, with a timely fax return of the agreement. There are a few other tasks to complete. First of all, you must obtain title insurance. Opinions of title are not as good as title insurance. Title insurance from a reputable insurance company means that you will be able to obtain restitution if there is a technical (or real) flaw in the title to your property. Even if Miss Smith has owned the property for the past 30 years, a prior forged deed, or a probate which wasn't done right, could "cloud" the title on any piece of property. QUESTION: What are the advantages of incorporating a business? THE ON LINE LEGAL ADVISOR SUGGESTS: There are virtually no small businesses which could not profit by incorporating. Example: You reupholster furniture. You need health insurance. In most cases, for a sole employee you could not deduct health insurance premiums from your taxes. However, by incorporating the same business, the premiums are deductible. Liability is limited in the event of financial problems. Banks and some savvy creditors will usually insist on a personal guarantee of debt; however, many companies do not. Quite obviously there are filing fees and other administrative costs involved in establishing the corporation. In almost every case, the costs of incorporating will be less than savings through tax deductions or other financial planning that the establishment of a corporation will cause. Many persons establish small corporations and elect to be taxed individually (a small business corporation; sometimes called a Subchapter "S" corporation). This can be an advantage if the corporation is throwing off losses. Electing to be taxed as a corporation may be the best bet if the earnings of the corporation are substantial, since there are ways to warehouse the profits, or, convert them into retirement plans. A discussion with competent accounting and legal advisors can do wonders! Converting ownership of some items into leases, establishing retirement plans, and other similar financial planning tools will almost always save money over the long haul. But the biggest advantage is that in the event of a lawsuit or other bump that life may give you, the corporation may fail-- not you. QUESTION: I inherited (bought) a piece of property and have co- owners. We do not get along. What are my rights? THE ON LINE LEGAL ADVISOR SUGGESTS: Unless there is a written agreement among the co-owners of a piece of real estate, any party, even one who owns 2% of the property, may demand an appraisal of the property through court procedures. Unless they are paid the fair value of their property, they may insist on a sale of the property and their share of the proceeds, after liens or other debts related to the property are paid. This action may have different names from state to state, but lawyers will recognize the generic term "partition." If it goes into litigation, partition actions tend to be contentious and arouse bad feelings. However, it is the only way which co-owners can work out difficulties if they cannot agree on a buy out. QUESTION: What can you tell me about child support problems? THE ON LINE LEGAL ADVISOR SUGGESTS: Child support law varies from state to state and the District of Columbia. However, there are some constants. Let's divide the question into two different parts--- setting child support and collecting child support. First, the collection gambit. Every state is required to provide, at no cost, under several federal titles, means of collection, for both instate residents and out of state residents. Therefore, if a person in Wyoming is due child support from a person now residing in Alaska, the person in Wyoming will have a local agency which will refer the collection to the other state. If the persons involved are in the same state, there will nevertheless be a program to assist in collection of child support. Private attorneys will frequently take on cases for collection of child support, since in almost all cases, the attorney will be compensated by the party who is behind on their support. For those who are behind on support, in the vast majority of cases, you should notify the court as soon as possible. So long as getting behind in child support is not the result of improper actions, like failing to look for work, most court systems will permit temporary reductions in child support, so long as a realistic plan is offered. This usually includes a time limit when full payments will resume, and odds are that the court will be sympathetic. The trick is in acting as quickly as is possible. Requesting a temporary reduction when you first have problems is much easier than once a substantial arrearage balance builds. QUESTION: I am planning on have some home repairs and improvements made. What do you suggest? THE ON LINE LEGAL ADVISOR SUGGESTS: To be safe, home repairs must be done pursuant to a contract with a licensed and bonded contractor. Unfortunately, most people find that having a job done by a licensed contract with a bond on the project is too expensive. However, if you have a fully licensed contractor with a performance bond, if there are ever any problems on the job, you can call the bonding company, who will see that the problems are fixed. Typical jobs go too far to the other extreme. Often, an owner who knows nothing at all about contracting "pulls the permits" for someone else to do the job who does not have a license. There is a happy medium between the owner pulling the permits for an unqualified contractor and having a bonded job. Experts on home repairs and remodeling suggest that the parties have a detailed written understanding on the exact scope the work to be performed with a fixed price, not cost plus contract. This understanding needs to be microscopic, including the exact materials to be used and the brand names involved. The more that is agreed at the start, the less arguments down the road. Sit down with the contractor and decide on the work to be done and price out the items that will be used, the labor overhead and profit separately. Joint checks must be used to pay for materials. In other words, since you know what materials are going to be bought, then you should make out the checks to both the contractor and the supply house. This will prevent the contractor depositing the money into his business account, and acquiring the materials on credit. If materials used on a job are not paid for, the supply house can obtain a lien against the house and force its sale. By issuing joint checks it is harder for the bills not to be paid. Another secret of contract management is to pay often, but to withhold a sufficient amount to encourage completion of the job. Weekly checks with a 15% retainage will prompt a good work rate! Never pay more than the work and materials provided! There are contractors who will not finish the work, or, will drag their feet if they're already paid. As in boxing, "protect yourself at all times." Most difficulties in contracting law are caused by change orders or extras. Therefore, this is an area for especial concern and caution. The parties must insist from the start that any extras or changes are written, with a specific dollar figure addition or deletion, and a restated total contract figure. It cannot be emphasized enough-- each change order should reflect the resulting total price. Good luck. If you can afford to do so, the extra expense incurred in using top quality contractors and bonding leads to a simpler world! QUESTION: Any quality thoughts on landlord/tenant disputes? THE ON LINE LEGAL ADVISOR SUGGESTS: As to landlords, if you are having many problems with tenants, it may be that a new approach to tenant relationships is called for. Reputable management companies earn every cent which they charge. Other property owners can often help identify the better management services. Being a landlord is a hard job. Many persons insist on going it alone. However, a talented professional property manager through experience and training can make the impossible look easy. Tenants occasionally find a truly awful landlord. The basic problem when these disputes head to a small claims court is lack of proof. Tenants may in fact have called dozens of times to complain about the plumbing. However, phone calls usually do not result in written records. Therefore, when you have called 8 times without the leak being fixed, send a letter to the landlord reminding them that it is your 8th request. In fact, a daily complaint letter (keep a copy, carbon paper isn't expensive) is useful. Invite over a friend or two to have someone who can verify that the window never was fixed after numerous notes and calls. Unfortunately, one real estate lawyer summed up the reality of the situation. It's often better to move than to endure a truly awful landlord. QUESTION: A mailorder purchase I made is way late arriving. What can I do? THE ON LINE LEGAL ADVISOR SUGGESTS: Under the rules of the Federal Trade Commission a mail order must specify a time frame for delivery. The time is limited to thirty days unless otherwise stated in the offer, or when the order was taken. If the order is not filled within either 30 days or the stated time period, then the seller is entitled to a single extension of time, but must notify you of the revised shipping date. Unless you cancel the order (which you may), it's presumed that you consent to the extension. If there is a further delay, you must be notified of the new expected shipping date. However, unless you agree to the delay, the vendor must refund your money. In the case of a second extension, the vendor is required to mail you a post paid reply envelope. Unless you sign for another delay, a refund is automatic. All of this said, it is possible for you to deal with an unscrupulous or perhaps overwhelmed business. Resources for handling these complaints include the postal inspectors if the mail was used (a highly recommended course of action) and the F.T.C. itself. QUESTION: I'm contemplating marriage. What can you tell me about pre-nuptial agreements? What can the parties agree upon in a pre- nuptial contract? THE ON LINE LEGAL ADVISOR SUGGESTS: Rather than the exclusive tool of the rich, pre-nuptial agreements are becoming more prevalent. This is because of re- marriages and parties having children from multiple marriages. The most common reason for a pre-nuptial agreement is sorting out inheritances among children of parties who have children from prior relationships. A pre-nuptial agreement may remove property from "community property" regimes, or, even waive the right to inherit altogether. A pre-nuptial agreement may govern any aspect of the financial relationship between husband and wife. The usual topics include: disposition of property which the parties came into the marriage with, and relative inheritance rights; title to property which will be purchased during the marriage; and title to any property which the parties may have purchased jointly before legal marriage. The laws regarding these agreements usually do not require a full disclosure of financial standing; however, a full and complete disclosure, and the use of independent advisors is always best. Often, the best advisor for the actual terms, rather than the writing of the agreement itself, will be a C.P.A. rather than an attorney. QUESTION: I am considering lending some money. What do I do to protect myself legally? THE ON LINE LEGAL ADVISOR SUGGESTS: Many friendships have ended over loans. Generally, a person borrows money from friends only because they cannot qualify for bank financing. This means that they are usually poor credit risks. However, if you are bound and determined to go forward with a loan, remember you are in the banking business. Therefore, you need to act as a bank would. Banks are careful about documentation, keep good records of payments and credits, and follow up on past-due amounts. Banks also charge interest. The I.R.S. now imputes interest even if you don't charge it, so, be sure to set a fair interest rate. The loan must be fully documented with a promissory note, and a closing statement showing that the funds were disbursed. The poorer the credit risk, the more collateral that a bank demands. Since you are probably lending to a borrower with poor credit, then you should see if you can get collateral. The borrower shouldn't mind putting up collateral-- after all they are going to pay the money back! If you do take collateral, then proper documentation is required to "perfect" the lien. With automobiles, the certificate of title must be endorsed with the lien, and usually the lien holder will also hold the title. On very easily sold, small items like jewelry, physical possession is probably the only way to perfect a lien. Possession, for example, on a diamond ring is perfection of the lien. The mere act of possession is a notice of a claim on the item, or "perfection" of the lien. Once a note and security agreement are executed, then there is a valid lien between the parties. "Perfection," mentioned above, is giving notice of a lien so that it is valid as to the world and the creditor. For example, an automobile which has a certificate of title needs to have the lien noted on it, or else another creditor can accept that same car as collateral, get his lien added to the car's title, and go ahead in priority of your lien. Perfection of a lien is a technical matter, often involving regulatory filings. An attorney's advice is essential. Also, adequate insurance needs to be purchased to protect both the lender and borrower from theft or destruction of the collateral. By taking reasonable, business like steps when lending money, the risk of a default decreases. Hopefully the loan will not end your friendship! QUESTION: I am having intractable problems with the Internal Revenue Service. What can I do? THE ON LINE LEGAL ADVISOR SUGGESTS: When dealing with the IRS, it is vital to be sure that the person with whom you are dealing has the authority to deal with your problem. Therefore, when discussing a problem with a person at the IRS, be sure that you know what division that they work for, and their name, address and telephone number. When we say telephone number, we mean their local number, not a 800 line or extension number. After talking to the IRS person, if they tell you to do something or pronounce their decision on your case, you should reduce it to writing, and then mail a letter to the person to whom your spoke confirming your message. Problems with the IRS fall into several categories. Some are now much easier to deal with than in the past. One of these is a first-time payment problem. If you have an otherwise clean IRS record, you are now permitted to file an income tax return, without payment. You must also file a form 8825 and a proposal for repayment. In the event that the I.R.S. is unwilling to accept the proposal, you may have to provide a financial statement to them. The IRS may then make further inquiries. Most repayment plans are approved. On other issues, persons should go through normal channels. Once recourse within the IRS has come to an end, if the problem is legal rather than administrative, consultation with a C.P.A. is recommended. If the problem is administrative, there are two ways out, one within the IRS, the other outside of the IRS. Once you have made attempts to solve a problem, and get conflicting advice, or, can not obtain a timely response to your inquiries, ask for the forms necessary to refer your problem to the PROBLEMS RESOLUTION OFFICE (PRO). PRO has jurisdiction between the various (often competing) branches within the IRS, and in many cases can solve intractable problems. The other way, is to go through the your congressman. All Congressmen have staffs whose job is to work on constituent problems. The IRS must respond to an inquiry from a congressman within 1 working day. However, the use of PRO or a congressman should only occur if the ordinary channels have failed. These are extreme measures, and, if you're on the wrong end of the dispute, the IRS will respond extremely. QUESTION: How can I select a good attorney? THE ON LINE LEGAL ADVISOR SUGGESTS: If your problem is business related, the most efficient way to find a good attorney is to ask others who are in the same business for the names of law firms that they use. For example, if you are a contractor, other contractors are a good source for referrals. In larger cities firms and attorneys generally specialize. With business litigation it is critical that the legal counsel you employ have adequate background in the type of business which you operate in order to give you adequate representation. Therefore, if you are an electrical contractor, other electrical contractors can assist in identifying attorneys who are familiar with construction disputes. Another way to find an attorney who may be a specialist is to think of the names of major companies in the same area. Then, take a trip to the courthouse, and see if these companies are involved in litigation. This will let you see who the attorneys are on both sides. If the company or person who you want to sue has been involved in litigation, then the courthouse records will also show who the other side has used for legal counsel, which is also important information. Libraries may have several books which may significant help in finding attorneys. If you are looking for an attorney out of state one of the oldest and best known referral sources is Campbell's list. The list will be provided to libraries upon request, or you may contact Campbell's list at 1-407-644-8298 for a referral. The Martindale Hubbel list is one of the oldest law lists in the United States and is also one of the most detailed, containing statements of the attorney's preferred areas of practice (and hopefully expertise.) Martindale Hubbel is useful because if there is a person whose practice is limited to representing fish hatcheries, you'll find them in the list. To find attorneys for personal matters, referrals from friends is one way handle that. But, you must then ensure that the attorney can handle the matter. This requires that you interview the attorney carefully to ensure that he or she has the expertise to handle the case. Be sure to discuss fees in great detail with any attorneys you propose to retain. Frankly, as the market for attorneys is a buyer's market, more and more attorneys are being forced to cut fees and finance the fees that they are charging. In these days where many attorneys have little or no work to do, except for certain attorneys who have more work to do than they can handle, if a client has the ability to pay fees, even over time good counsel is available. QUESTION: I might want to give a friend or family member a power of attorney to handle business for me. What can you tell me about powers of attorney? THE ON LINE LEGAL ADVISOR SUGGESTS: There are many different kinds of power of attorney. Therefore, a basic understanding of the types of power of attorney is important. One of the most important distinctions is between a durable power of attorney and a "standard" power of attorney. Under common law, a standard power of attorney is automatically revoked upon the incapacity of the person granting the power of attorney (the principal). Therefore, someone could be using a power of attorney which appears to all to be a properly completed form, but may or may not be valid, depending on the current mental or physical health of the principal. You wouldn't know for sure unless you had just seen the principal yourself. This would make reliance in business affairs conducted on a power of attorney risky. As a result, modern laws have created the "durable power of attorney." A "durable power of attorney" continues in effect if a person becomes disabled. The durable power of attorney was also created so that persons could designate a person to handle their affairs once they became disabled. This is a "springing" power of attorney which only becomes effective once the principal is disabled. Powers of attorney can be used so that another person may do any legal act which the principal might have done. Many persons grant a "general power of attorney" to trusted friends or relatives so that during their absence, or in case of disability, the person with the power can manage their affairs. As convenient as these general powers of attorney may be, they are also dangerous. Such general powers, if granted to a person who is not good at business, or who does not deal in good faith for the principal, can result in disaster. Many states have made laws creating "family durable general powers of attorney" which allow a person to give to a blood relative the right to handle their affairs if they are physically or mentally disabled. So long as there is a high degree of trust, these types of powers are quite useful and will make handling a relative's affairs if they are ill as simple as possible. An attorney's advice is recommended for such matters, and should be inexpensive. Unless a person is willing to entrust all of their affairs in another, "special powers of attorney" should be used rather than general ones. A special power of attorney permits the person who receives the power to just certain limited acts. The need for special powers of attorney, for example, to have someone sign a deed for a third party is no longer as great as in the past. With overnight delivery services and fax machines, most transactions anywhere in the world can be executed by those who are performing the transactions. From time to time, special powers of attorney may be needed for business deals. All of such powers must be narrowly drawn, and should be prepared by an attorney. QUESTION: Can an employer require me to take a polygraph examination? THE ON LINE LEGAL ADVISOR SUGGESTS: A federal law, The Employee Polygraph Protection Act, generally forbids polygraph examinations. Exceptions are provided for those working for companies contracting with the government in the national defense industry, atomic energy, the National Security Agency and the F.B.I. A general exception also is given for armored car and private security, alarm and other quasi-law enforcement companies in the private sector. The final exception is given for investigations within any industry, provided that the employer gives written notice of the charge, and retains records regarding the polygraph examination. The purpose of this legislation was to limit polygraphs to those in critical security professions and to those situations in which there is a reason for an investigation; further, the employee is required to be notified of the nature of the investigation first. The Secretary of Labor enforces these regulations. The law office of the Wage and hour division will assist. QUESTION: What should I do if I get injured on the job? THE ON LINE LEGAL ADVISOR SUGGESTS: You should be aware of your status, that is whether you are an employee or independent contractor. Although it varies from state to state, if you are an employee, then the odds are you are covered by worker's compensation. You are definitely an employee if withholding is taken out of your pay. However, there are some states in which small companies are exempt from worker's compensation. If you are an independent contractor then you must handle such expenses yourself, and are not covered by worker's compensation. If you are covered by worker's compensation (and most persons are) then it is vital that all injuries, however slight, are reported to your employer. This may include filling out an accident report. We repeat, any injuries must be reported to your employer, even if they are slight. Sometimes injuries may seem so slight that there is no purpose in letting the employer know. However, if the injury turns out to be worse than expected, then the entitlement to worker's compensation can be affected. The idea behind worker's compensation is simple. If you are injured on the job, regardless of fault, your medical bills and a percentage of lost wages will be paid to you by the worker's compensation system, which may be an insurance company, state agency, or in the case of large corporations, the corporation itself. If there are disputes in regard to payment of compensation, an attorney will probably be needed to advise you. If you are a member of a union, the union may have staff to assist you with worker's compensation problems, or, may assist in referrals to legal counsel. One of the most difficult areas in worker's compensation is the determination of "maximum medical improvement" and then, ascertaining if there is a permanent disability rating. In general both you and the insurance carrier/employer will be bound by the decision of the treating physician as to whether there is a permanent disability and whether or not the employee may return to work. Although many of us are taught not to complain and to "grin and bear problems," the strong silent approach is not in a person's best interests. That is, it is vital to report to the treating physician any and all pain or limitations. Doctors rely upon their patient's reports to them in making such important decisions like whether the employee has a permanent injury, or, exactly how bad a concededly permanent injury is. Compensation is directly tied to the degree of injury which is suffered. So any effort to minimize the problems that a person is suffering will boomerang back! In addition, for as long as the injury persists the insuror will provide care, including 'palliative care', or that care needed to ease pain or care for a person who cannot care for himself. In some cases the employer will arrange for retraining if physical limitations prevent you from returning to previous duties. Although most states attempt to discourage it, in some cases, when there is a high degree of impairment, lump sum settlements are made. An attorney's advice is mandatory on lump sum settlements, since these settlements, in some states, may bar all future claims, even if the conditions worsens. QUESTION: What are my legal rights regarding foreclosure? THE ON LINE LEGAL ADVISOR SUGGESTS: There are several different ways which real estate foreclosures are handled. In some states, a foreclosure is strictly through judicial means. In many states, foreclosures are accomplished privately, without the necessity of a lawsuit being filed. Unfortunately, regardless of the reasons, if payments are not made the lender will have the right to begin a foreclosure. Recent press reports have shown that "escrows" estimates are often way too high, and that many escrows can be reduced if they are audited. However, the core of foreclosures is failure to pay. And if a person doesn't pay, a court will allow or confirm a non- judicial foreclosure. A lender is not required to allow reinstatement of a loan which is in default. In some states if a lender accepts late payments then they waive the right to foreclose unless they first demand that all future payments are made on time, and then reject subsequent late payments. In almost all cases, the best advice when a foreclosure is imminent is to sell the property. If there is equity in the property, the best bet, almost always, is to cash out, even at a discount. In virtually every population center in the country, there is an entire industry of "foreclosure vultures" who scan the courthouse or newspapers for foreclosures, evaluate the property, and try to buy any property in which there is equity at some sort of discount. Although these persons may demand, in essence, a good chunk of the equity in the property, foreclosures are emergencies. Depending on the timing, it is quite possible to try to market the property for full value and to negotiate with the vultures. The point here is that pride has prevented some persons who have $40,000 in equity from taking $30,000, and left them with nothing. Like in boxing, protect yourself at all times. There is one judicial alternative in foreclosures. That is use of bankruptcy, usually Chapter 13, to reinstate an accelerated mortgage. Provided that the problem truly is that the mortgage is behind, but you can catch up, Chapter 13 is a boon for many households, since it gives a chance for persons to force creditors to work out financial problems. QUESTION: What advice do you have to offer about driving while intoxicated? THE ON LINE LEGAL ADVISOR SUGGESTS: The most common interplay between the court system and the public (other than traffic/parking tickets) is passing bad checks. The second most common is drunk driving. Many states have changed the drunk driving limit from .1% to .08%. Until folks start calling cabs, picking designated drivers or learning not to drink so much, many persons will become familiar with criminal law through DUI. Obviously it would be foolish to say anything other than don't drink and drive. However, for those persons who might interact with the law this way, here we go. The U.S. Supreme Court has held that in the case of a very serious accidents involving critical injuries or death of a driver, the police may involuntarily take blood samples to establish a blood alcohol level. In cases other than serious accidents, a motorist accused of drunken driving is permitted to refuse to allow the police to take a blood or other alcohol level test, and accept the penalty for refusal. Although this may rankle some civic minded readers, the truth must be told. Although it may result in a suspension of driver's license, it is harder for a prosecutor to prove a DUI case if there is no blood alcohol test. In many jurisdictions it is an offense to operate a vehicle with a blood alcohol level above a certain reading. Therefore, if the reading is too high, the offense is ipso facto proven unless some doubt can be cast on the results. Although many jurisdictions have DUI squads that video tape persons charged with DUI for back up evidence if a blood level test is refused, but it is a harder case to provide. In all cases those charged with this offense should obtain legal counsel, whether paid privately or through the public defender. QUESTION: How do you fight city hall? THE ON LINE LEGAL ADVISOR SUGGESTS: Is this legal advice? It is at least partially. Not only can you fight city hall, you can win. It is a sad commentary on the state of the public's participation in the political processes, but in most cases, even a small amount of organization can result in stunning political victories. In all but the largest cities, participation by even 10 or 20 persons in a public hearing in an organized fashion is enough to gain the attention of the city council, and affect proposed rules or statutes. It is simple old fashion elbow grease that makes all of this possible. Many successful neighborhood associations can mobilize the troops quickly with "telephone trees" in which each person calls 3 others, until everyone knows about the problem. Go get 'em. QUESTION: What are the most common legal mistakes that small and medium size businesses make? THE ON LINE LEGAL ADVISOR SUGGESTS: If a business is owned by multiple parties, then many businesses have no adequate plans for the death or divorce of a married co-owner. Assume that A and B own a business. If A divorces, A might be forced to sell his or her share of the business as part of a divorce property settlement. If A passes away, then B may discover that A's children are now co-owners of the business. The subject of estate and divorce planning is too often ignored by business persons. Life insurance and other planning can insure continuation of a business without disruption. Many small business persons do not adequately "compartmentalize" their businesses. For example, if someone owns an auto parts store and then opens a second store, the second store should be in a separate corporation (you are incorporated, right?). Why? If someone slips and injures his back in store # 1, and insurance is insufficient to cover the loss, then both stores are in peril. Another unfortunate story should help explain this point. A family had a greeting card and gift shop, and then opened a new shop at a new mall. The old store started dropping off in sales. Ultimately as the new mall "took over" things were so bad that the original store had to be closed. Due to the losses, the new store had to be sold to pay debts from the old one. This would not have happened if the stores were two different corporations. Large multi-national corporations separately incorporate each arm of their businesses just for this reason. Many small businesses do not adequately insure themselves. In these days of rampant litigation, $500,000 limits are probably too low for any business dealing regularly with the public. $1,000,000 of coverage can be purchased for much less than 2 times the premium for $500,000. QUESTION: What are the rights of an employee who is dismissed? THE ON LINE LEGAL ADVISOR SUGGESTS: At one time, when an attorney had a question about labor law, he or she looked in law books under the unlikely title of "Master and Servant." That is no longer where to look, but it's a clue about how the law views employment. In many states the common law about employment contracts still applies. This means that unless there is a written contract, an employee is hired "at will." An "at will" employee can be fired at any time, for a good reason, bad reason, or no reason at all. So, in most states employees start off at a disadvantage. If an employee is not given a contract, but is given an employee manual, then the courts will require that the employer follow the manual's procedures literally and in all detail. For example, if the employee is given the right to have management review of a dismissal, or, if grounds for dismissal are stated, a court will review a dismissal. To counteract this, employers now strain to inform employees that they may be dismissed at will by including multiple references to at will employment in the manual. However, regardless of the manual or contract, many states now imply duties of good faith, or, will strain to find a way to modify the common law rule by turning virtually any statement or printed material talking about "career positions" or "career opportunities" into an obligation to deal fairly on dismissals. To dampen the enthusiasm of those who want to take legal action over dismissal even further, the law requires that if you are wrongfully dismissed, that you must take all efforts to "mitigate damages," that is you need to do all that you can reasonably do to get a new job. If the earnings in the new position are the same or higher than the previous position, damages will be allowed just for any time in which you were looking for work, even if the dismissal was illegal. There is one exception to this scenario. If any civil rights or discrimination laws are violated by a dismissal then minimum damages and attorney's fees for the employee's attorney are provided. If a dismissal could be construed as violating civil rights laws, then legal counsel is required. Virtually all cases for employment discrimination are so complicated, and the initial filing of administrative complaints so vital, that a person can severely affect their own case if they fail to follow all procedures. Any case which has merit will interest an attorney, who will almost always accept the case on a contingent fee. (Where the attorney is only paid if there is a settlement or judgment which is paid.) Even if a former employee has no legal rights as to being fired, many employees have sued their former boss for libel based upon references given to prospective employers. As a result, many employers now decline to give references except for the dates of employment and job titles of former employees. If you are an employer, there are several steps which you can take to make post-termination litigation less likely. First, be fair and decent to your fellow human beings. This startling advice is not given often enough by attorneys! Every employer, even if you only have 1 or 2 employees, should have an employee manual, and follow the procedures stated in the manual. Many insurance companies now require that employers have a manual as a precondition of obtaining insurance coverage. Experts in personnel matters agree that accurate documentation of difficulties with employees is the key to either avoiding or limiting liability. Each time that an employee commits a misdeed, it should be documented, and in most cases, the documentation provided to the employee. The fairer the process and the more closely the procedures are followed, the less potential liability. QUESTION: I have suffered bodily injury in an automobile accident. What can you tell me about my legal rights? THE ON LINE LEGAL ADVISOR SUGGESTS: State laws vary greatly in this regard. However, there are several factors which tie together. For example, if you are injured and the other party has neither assets nor insurance, or, if the injury is serious and the other party's insurance limits are low, then your own policy may cover you, if you have "uninsured/ underinsured motorist" on your own policy. In fact, most of the extremely serious injury cases which befall honest citizens occur with the other party being intoxicated, and usually without insurance. In this case, legal counsel is advisable. Therefore, one of the most important questions is what insurance is carried by the other party. Again, states vary in your ability to find this out. Some states allow an injured person to obtain the insurance coverage information, including policy limits of the other party upon request. In other states, suits for automobile negligence are started solely to determine the insurance policy limits of the other party. In any case with serious injuries, legal advice at least insofar as this aspect of the case is mandatory. One common misconception is that the other party needs to be entirely to blame before you may collect. Most states use an approach known as "comparative fault" in which a person suffering bodily injury is compensated to the extent that the other party is negligent. For example, in a case where only one person is negligent, if the court finds that they were partially to blame, for example 70%, then the damages will be set and reduced to 70% of the award. A few states still cling to "contributory fault" in which the other party supposedly must be entirely at fault. This, like many other laws, is ignored in practice. If a person is hurt seriously enough, the jury will probably award compensation so long as there is enough liability that the jury feels comfortable. In pure comparative fault states, if you were 65% at fault, you may still recover 35% of your injuries from the other party subject to an offset for 65% of their injuries. However, if one party is injured and the other isn't (let's say due to one car being large and the other a sub-compact) the party who is injured may recover for a percentage of his losses. (All subject to the fact that in some states if a person is more than 50% at fault, they may not recover.) In some states "no fault" insurance applies, and unless your injury is of a type that meets a "threshold" for removal from no fault, you will receive medical benefits and wage loss through your own carrier. In many states your own insurance policy will have a "medical payments" clause which regardless of fault allows payment for medical expenses incurred as a result of an automobile accident: quasi "no fault" benefits. Although some persons settle automobile accident claims without the assistance of counsel, this is usually not advisable. The hardest part of a case is estimating its value. It is very easy to either highly overestimate or underestimate the value of a case. Ordinarily a claims adjuster, judge and attorney will determine losses the same way. Out of pocket costs and medical bills to date and wage losses are easily quantifiable. Future wage loss, and future medical expenses are difficult to determine. Pain and suffering are impossible to assign a dollar value, despite the fact that this is done on a daily basis by juries and claims examiners throughout the United States. Usually the way that these matters are resolved is through multiplication of existing losses and then reduction to present value of estimated future injuries. Old formulas like "3 times specials" (that is, damages which are incurred to date multiplied 3 times) don't work, although they are still used. From experience some generalizations can be made in any given area, and a certain threshold value is placed on each percentage point of disability which is suffered as a result of the accident. A value for this impairment of life, plus estimations of wage and medical losses are added together to reach a gross value. Comparative fault of the parties involved in the accident is then used to determine what percentage of the total amount is owed by whom and to whom. However, there is a problem in a lump sum settlement. This includes the fact that accident victims often horribly manage their lump sum benefit, resulting in an injured person having their injury but no funds to handle their injuries. Therefore, many state laws now require that injuries over a certain threshold not be compensated in lump sum, but rather in a structured settlement. In a "structure," an annuity is purchased that provides an income replacement, and special health insurance is purchased to provide whatever health care may be required by the injured party. Often the income replacement is indexed to provide inflation protection. In settling automobile accident claims, be sure to consider medical and legal advice, and remember that the settlement of your claim will be the end of the your claim, and you must live with the results of the case. TITLE: Powers of attorney One of the most common legal documents is a power of attorney. What can you tell me about it? THE ON LINE LEGAL ADVISOR SUGGESTS: Powers of attorney are very convenient. For example, when you are out of the country, someone can handle your affairs. However, they are also very dangerous. If written properly (usually very easy to do so- just go to the library- your state statutes probably have full forms in them) the person holding the power of attorney can do ANYTHING that you could do, and without your approval! With overnight mail and faxes, powers of attorney should be used much less often. In fact, many business deals are completed with multiple faxes being the signatures used to start the deal, and ending with simultaneous over-night delivery of signature pages. (The Uniform Commercial Code and other laws regarding signatures on contract do NOT require that everyone sign on the same page. On a two party contract, each party can sign a page and then deliver the pages to one another and form a valid contract. In fact, the Uniform Commercial Code is quite clear that the only person who needs to sign a contract to be enforceable is the party against whom a contract is to be enforced. (This result can be avoided by the addition of a clause which requires that both parties execute a contract by a certain date and time; in this case the contract is not formed until both signatures are made on a timely basis.)) Getting back to powers of attorney, in normal transactions they are unnecessary solely because of distance. However, powers of attorney become important when a person is incapacitated and this is the time that they should be used. These terms are important: Principal: The person who gives a power of attorney. Attorney in fact, or attorney: A person who is acting on behalf of another pursuant to a power of attorney. Here are the primary types of POA: Simple Power of Attorney: This grants to the attorney in fact the ability to act on the principal's behalf, so long as the principal is still alive and competent. The power is revoked the instant the principal dies or is declared incompetent, regardless of whether the attorney in fact knows it or not. Durable power of attorney: At common law all powers of attorney expire when the principal dies or becomes incapacitated. Accordingly it was impossible to grant a power of attorney to be effective when the principal became incapable of acting for themselves. Modern statutes have created "durable" powers of attorneys. Such powers of attorney are immediately valid, and not revoked when the principal becomes disabled. Springing power of attorney: A power of attorney which only becomes effective when the principal becomes disabled. A springing power of attorney is also a durable power of attorney. The final type of power, a "springing power of attorney" is the one which should be made by everyone. This is because it allows you to pick the person who will handle your affairs in the event of your temporary or permanent disability, which is much better then having a court appoint a guardian. This springing power of attorney should be one that grants that person broad powers. Many states have laws for "durable family powers of attorney" which allow someone to handle virtually any transaction which the principal could do on their own. Good financial planning must cover the three major contingencies of life: retirement, death and disability. Temporary disability will strike virtually all families. responsible planning to protect yourself and your family are necessary- this includes having a carefully drawn springing power of attorney. Your state may have a form in their statutes which provides the greatest possible power to the attorney. So long as you know a person who can handle your affairs for you, this is a good bet. However, if the person who you choose is not a good manager, then the possibility exists that they will do a terrible job on your own affairs. Therefore, choose well. If you have doubts about your family's ability to manage your affairs, you may wish to establish a springing power of attorney which has a professional fiduciary, like a bank's trust department. Or, you may require that your family member obtain concurrence from the fiduciary of your choice. Sleep better tonight! Take care of this at any age since accidents happen... TITLE: Purchasing automobile insurance What do I need to know when I buy automobile insurance? THE ON LINE LEGAL ADVISOR SUGGESTS: First of all, know your company. Call your state insurance commissioner's office, and see if they have a list of the numbers of complaints against each company in the state. Naturally, the companies which have the largest number of policies in force will have many more complaints than smaller ones. For example, do not be surprised if Allstate or State Farm have many more complaints than other companies. This is simply because they have large parts of the market in many states. However, you may find that small companies have as many (or more) complaints than companies who have written 10 or 20% of the market. Also, be very wary of companies that only write low limit or "statutory minimum" policies. Although some are fine companies, many of the "outlaw" insurance companies write low limits and have extremely poor claims handling records. By the way, smaller companies are often much better than larger ones in handling claims and customers. Bigger does not mean better. If you have the time, check AM Best's Insurance Reports (Property and Casualty) at your public library for ratings. There are dozens of companies who do not advertise heavily which have an outstanding record of handling claims. Coverage limits need to be realistic. If there is an accident, the injured party will not settle for policy limits of $25,000 if it is a serious case (almost any permanent disability will exceed $25,000 and is a serious case). The other party may be able to claim against their own insurance ("uninsured motorist" coverage -- remember this term, we will discuss it further) and then you will have the other parties' insurance company suing you. Insurance companies are always more than willing to file a suit and take a chance on perhaps collecting 10 years down the road. Protect your personal assets and pay a bit more for insurance. Minimum limits for a person with any savings or property to protect should be $250,000 and $500,000 in states such as California or New York. It is unfortunate that most death or other serious claims are between "solid citizens" and uninsured persons. Regretfully the person who is following all of the laws and hit by a drunk driven and killed, usually has heirs who find out that the person who caused the accident is penniless. This does not mean that the family will receive no compensation. Your own insurance company offers coverage called "uninsured motorist" coverage. Under uninsured motorist coverage if you are injured and the responsible party does not have insurance, or, their limits are below the amount of your loss, your own company will pay up to its limits for uninsured motorist coverage. In many states your limits for uninsured motorist coverage is the same as your liability limits. In other words if you have $500,000 in limits for your liability, then you receive similar limits of $500,000 in the event that you are injured or killed by an uninsured or underinsured motorist. This is also a good reason to have realistic limits for your own coverage. Companies tend to not want to write uninsured motorist because it is an "unknown." Therefore you may find various subtle, and perhaps not so subtle suggestions not to buy uninsured motorist, or, to buy lower limits for uninsured motorist. It is a bad way to save. TITLE: Tax Shelters, A La the 1990s The tax rates are going up! What are we going to do, except pay more? Are there any tax shelters left? THE ON LINE LEGAL ADVISOR SUGGESTS: First of all, whether you can deduct it from your income or not, an IRA is a great tax shelter, since it allows you to put away $2,000 yearly and have the dividends and capital gains not taxed. With the distinctions now made in the tax code between passive and active business ventures it is more and more difficult to take write offs at all. (Passive losses can only be offset against passive gains.) Real estate, so long as you are active in the venture, still remains a viable tax shelter. The key in real estate is to attempt to get positive real cash flow, and possible capital appreciation, while receiving a tax benefit at the same time. For example, if you purchase a building for $100,000, by putting down $20,000, at 10% with 20 year amortization, the monthly payment will be $770. It is possible that you might rent the property for $1,000 (1% of the purchase price) and until the mortgage's "lines crossed" (when the mortgage was more for principal than for interest) you would have $230 in actual positive cash. But the tax reality would be: $230 "income" per month less depreciation (let's use 20 years) of $416 per month- a tax loss of $186 per month, although you actually get $230 cash in your pocket. In addition, even though real estate has not performed well, over time, there should be some capital depreciation on the real estate itself. On the other hand, if you are not comfortable with real estate investments and don't want TNT (Tenants and Toilets) you can still participate in real estate as a tax shelter. For example you can find property and then have a professional management company handle the tenants. Or, you can purchase property with partners and have one of the partners take charge of day to day management. What about REITs? (Real Estate Investment Trusts) REITs are often publicly traded and provide similar tax advantages. The discussion of the relative merits and past problems of REITs are beyond the scope of this program, which after all, is about the law, not about investments. Consult your financial advisors. TITLE: A Kinder and Gentler IRS. Question: What's all this about a kinder and gentler IRS? THE ON LINE LEGAL ADVISOR SUGGESTS: The IRS officially announced that it is now officially on record as running like a business. And, given the economic downturn, the IRS must be more realistic as to its demands in collections. Like all businesses, this means compromising on receivables to get the money in. Or, alternatively, that means maximizing the intake of money over time by compromising, when it would speed collection. Does this actually mean that the IRS is now committed to changing from using collection as a means of terror rather than money raising? Or that in negotiations regarding disputed issues it would rather try to make a good settlement than to go to the wall on all issues each time? The reports from the field are mixed. For example, in most cases where a person was assessed $1,000,000 of taxes, had no assets, but could borrow $25,000 to settle the claim, the IRS would not accept the $25,000, preferring to instead try to collect the $1,000,000 -- as quixotic as that task might be. Under the new "kinder and gentler" policy that settlement should be accepted. In some recent cases, certain local offices would accept a settlement from someone who was otherwise unable to pay, others would not. TITLE: Creditor Proofing Question: Popular books and lecturers are talking about the need to "creditor proof" assets. What can you tell us about protecting our assets from seizure in lawsuits? THE ON LINE LEGAL ADVISOR SUGGESTS: What is creditor proofing? This refers to the fact that creditor's claims, such as a judgment due to a lawsuit, could drain your savings, real estate holdings etc. However, each state has a series of exemption laws. If a person goes bankrupt (and it happens to over a million persons each year) they may retain either the federal exemptions, if their state law allows it, or state exemptions. In addition, certain assets and claims are independently exempt from bankruptcy regardless of state laws, such as social security benefits and certain types of retirement benefits administered by the federal government. Creditor proofing is the process of taking advantage of these laws, so that if a claim is made against you due to business deals, debts or tort claims, you may retain assets. A person with a substantial sum of money in a bank CD has a great deal to lose in a law suit. So you say you won't get involved in a law suit? One traffic accident, one person slipping and falling in your home can earn you a lawsuit. If you are in business it is almost inevitable that you will see litigation. In most cases, this litigation is annoying, but covered by insurance. But what if your insurance is not enough to cover the losses? Most death claims or claims for serious injuries exceed $1,000,000. The first part of creditor proofing is to be sure that your limits for automobile insurance, home insurance and business insurance are adequate. Would you spent $1,000 to save $1,000,000? Of course you would. [There are people who are so resistant to spending money that they are unable to understand that last sentence. In that case, I guarantee that they will pay later......] Get together with your insurance agent and see about getting "umbrella insurance." An umbrella policy kicks in when you have exhausted other coverage. Usually these policies are in multiples of $500,000 and start at $1,000,000. Sleep better! "You can pay me now or you can pay me later." The second part of creditor proofing is to examine your state's exemption laws and to use them to your greatest advantage. For example in some states cash value of life insurance may be exempt up to a certain amount. Certain amounts of retirement plans and value of homestead real estate are examples of other exemptions. You can learn what your state's exemptions laws are by visiting an attorney. Or, if there is a law library with a copy of Collier's on Bankruptcy or The Lawyer's Edition, Bankruptcy Reporters, you will be able to find volumes in these services which contain the exemption laws of each state. However, persons may not want to invest in the type of investments that the exemption laws permit. This is again an idea of spending $1,000 to save many times that. As a sound financial planning tactic, a certain part of your total finances should be creditor proofed. On the other hand, if you are in a business in which lawsuits are a fact of life, then you should consider placing all of your assets in exempt items, even if it means a lower return or inconvenience. It is obviously better to retain money invested at a lower rate than to lose it altogether. Is it true that Florida (where part of the OLA team lives) is a great place to owe money? You bet. Florida allows an unlimited amount in homestead exemption, unlimited amounts in annuities and unlimited cash value of life insurance. In fact, as to the person who is the head of household, their wages are exempt and savings from such wages are also exempt if properly identifiable. Therefore it is quite possible to have substantial assets and retain them in the sunshine state. TITLE: I didn't pay withholding. Now what? Question: I ran a business and didn't pay in withholding from my employees pay checks. Now what? THE ON LINE LEGAL ADVISOR SUGGESTS: Changing your name and moving to another town is strongly suggested. Here are the ramifications of this, and they are not good. The Internal Revenue Code provides for a "100% penalty" against the "responsible individuals" who fail to pay the tax. In the case of a corporation, the corporate officers and employees who had control over payments of wages are responsible for payment of the taxes individually. This liability can be paid in full through a chapter 11 bankruptcy. But that's it. There is no discharge in bankruptcy from withholding taxes which are unpaid. Incidentally, besides interest a 15% penalty for the failure to deposit and up to a 25% penalty for the failure to pay can be assessed. It is very expensive borrowing. The Internal Revenue Service is NOT bound by state exemption laws. therefore, even if your home or wages are exempt under your state's laws, the IRS may take them to pay the withholding. The best advice is not to allow these to get behind by any amount. If you are behind-- sell assets, borrow or liquidate, YES, liquidate and pay those taxes as quickly as possible. This is so important because the IRS should it so choose can leave someone with about $600 a month or so to eat and take anything else which the person who is subject to the penalty earns. Although it is an issue that is subject to debate, the IRS has no statute of limitations applicable to such taxes, although after 10 years of payment the tax may no longer be collectible. Persons with some level of income and a 100% penalty to pay can expect to give regular sworn financial statements to the IRS, and if their financial situation improves, a higher payment. Re-read the paragraph above that says "The best advice....." Its exactly what we say it is. TITLE: Environmental "toxic" liability and purchasing real estate Questions: I'm buying real estate. What is my liability for previous environmental contamination? THE ON LINE LEGAL ADVISOR SUGGESTS: Excellent question! In the recent past persons have suddenly found that their property had toxic waste. Under the Superfund law, many persons with connections to the property can be forced, without regard to their liability. Thus, the owner of the property can be forced to foot a bill for millions of dollars despite the fact that they did not commit any illegal acts themselves. To make things worse, other persons may also be presented with the bill, such as previous owners (without regard to their fault) and creditors can also be forced to participate in paying the bill. Therefore, no one should buy real estate without an environmental audit. Until you have seen such an audit, it's hard to understand that there are many warning signs that can result in your deciding not to close a real estate sale due to potential toxic waste. (Your real estate contract DID provide that you could refuse to close the transaction if there was any hint of an environmental contamination!!!) An environmental audit uses historical records, like business licenses, phone books, and aerial photographs to determine if the property or any nearby property ever had owners or occupants who were engaged in an industry or use which has a potential waste problem. In addition, a physical review of the property is made to look for any signs of difficulties on the premises. By insuring that previous uses of the property were not risks for contamination and performing an inspection, the odds for buying a toxic waste dump are significantly lowered. TITLE: Mediation Question: What is mediation? If I am involved in a lawsuit should I consider mediation? THE ON LINE LEGAL ADVISOR SUGGESTS: In many states "mediation" may be required prior to a case being assigned to trial. Mediation is not arbitration. Arbitration is a process which results in a ruling of some kind. Courts use both binding and non-binding arbitration. In "binding" arbitration either a panel or single arbiter acts like a Judge and issues an award. Arbitration, even if non-binding, is an adversary process in which the parties each present evidence and try to fight out their dispute. Mediation is a negotiating process, only. The mediator does not rule on either facts or law, and usually does not comment on the legal issues in the case. It is improper for Judges or Arbiters to meet with parties privately, or for the parties to meet with the Judge or Arbiter without the other side. Mediation, since it does not result in a decision, except for a settlement, has no such restraints. In most cases, mediation is a process similar to "shuttle diplomacy" as practiced by Henry Kissinger. The parties are separated and then the mediator, usually a retired Judge, or attorney with a long time practice, travels between the parties. Often mediators will suggest entirely new ways of settling the case (one of the many advantages of mediation is that the parties are not constrained as a Court is -- a court can only enter a money judgment). A mediator can get the parties to trade product, make installment payments or any other type of settlement. Another advantage of mediation is that the parties do not need to play telephone tag. Proposals and counter-proposals are immediately acted upon, without delay. Clarification on a point is within seconds or minutes, not days or weeks. What are the results? A poor settlement is better than going with a lawsuit any day. Any attorney who has litigated more than one case can tell stories of walking away from settlements which were much better than the results of trials. (In fact there are many attorneys who could have retired on settlements they walked away from.) Settlements are reached in excess of 70% of cases. Of the remainder, quite a few are settled within a two week period after mediation. Delay is one of the most annoying aspects of litigation and mediation has proven to be a good antidote. TITLE: Home Equity Loans Question: Home equity loans are advertised as a great way to go, with interest tax deductible. Are there drawbacks? THE ON LINE LEGAL ADVISOR SUGGESTS: If a loan is at an 10% interest rate, and you are in a 30% income tax bracket, the value of the deduction for the loan is 30% of the interest. With supposedly lower tax rates, many persons find that they are paying more in actual taxes because many tax shelters and deductions were abolished. One deduction that you can still take is for interest on your residence. Many persons in order to reduce their taxes borrow money with their home as collateral. Banks are advertising auto, college or bill consolidation loans through home mortgages. The odds are, that even though it will result in tax deduction it is not worth risking your home to get the deduction. If you borrow $20,000 at 11% (a relatively high rate these dates) using your home as collateral to buy a car, the interest for the first year is $2,200. At a 30% bracket, your great tax deduction is worth the sum of $660 in the first year. Is $55 a month worth losing your home? The tax deduction will be less in later years as you pay the principal down. So, you won't lose your home since you will always be able to make the mortgage payment? The largest corporations in the world like IBM are making massive layoffs. Are you certain that you will be able to pay the taxes, first mortgage and the extra $323 required to pay the loan (we assume a 92 month amortization; 7 years 8 months which would be appropriate for a car loan). Think about that one. TITLE: Joint titles to real estate. Question: Should I title property jointly with my children to avoid probate? THE ON LINE LEGAL ADVISOR SUGGESTS: No. 1,000 times no. Hypothetical number one: The child marries someone who you detest. You die, and then soon thereafter your child's detested spouse in most cases ends up with the property. Hypothetical number two: The child ends up in substantial tax problems. Will the IRS tie up the property? It sure can. Hypothetical number three: Your child does something to trigger a total breakdown in your relationship. Will your child willingly sign off removing them from the deed? Hypothetical number four: You decide to mortgage the property. Will your child execute the mortgage with you? Hypothetical number five: You decide to sell the property. Your child must sign the deed, and, unless your child waives the right, they can demand the present value of their interest-- which will be the greater part of the purchase price. All too often at real estate closings, or based on some off hand comments, the deeds to property are executed to provide for a testamentary disposition. Usually, this is done as a life estate. In order words, To Mr. X for life, with the reversion to Mr. X, Jr., his son that does not mean that you own the property for your life and can do as you see fit. Mr. X, Jr. is the vested owner of the property. You are a "tenant." Certainly a special tenant, but the "owner" is your child. A will or living trust is a testamentary disposition. As such (unless you make an irrevocable living trust) you may change it at any time without notice to anyone. A deed of real estate, even if it is for a future or contingent interest, is a "done deal." Since there are many inexpensive and effective alternatives to making a deed with a future interest, don't do so. In our discussion so far we have been emphasizing a deed with a life estate, with the "remainder" or "reversion" to a child. However, some persons also make other "testamentary deeds" such as a "Joint tenants with right of survivorship" which is even worse, since it means that your child is a half owner. Bad, bad bet. TITLE: Private adoptions QUESTION: I've read about adoptions being challenged and set aside. Are adoptions final? THE ON LINE LEGAL ADVISOR SUGGESTS: If done properly, then an adoption is final with the following exceptions: (a) lack of jurisdiction [for example, a court which is only allowed to hear traffic tickets and misdemeanors enters a decree of adopting] (b) fraud committed by the parties The word "if" is a very powerful one. If I were rich, then I wouldn't need to write BBS doors. (Sorry, bad joke.) The adoptions which have been challenged in recent times have apparently been done incorrectly, and have also generally been private adoptions. A "private adoption" is one in which the parties deal directly with one another; adoptions which are done through non-profit agencies or the government have generally fared better. One case in point. A recent adoption was set aside (causing a great deal of consternation) when it was discovered that the father had not given consent. Here were the facts: a MARRIED woman separated from her husband; she decided when she became pregnant that she did not want the child. A private adoption was arranged. The private parties accepted an affidavit which stated that the husband was not the father of the child. A divorce and birth ensued. The ex-husband did not consent to the adoption. A mistake! The common law presumes that when persons are married the child is the product of the marriage. Testing later showed that the ex-husband was the father of the child. Had the parties obtained the consent of the ex-husband, the adoption would have been secure. Many attorneys familiar with the law of adoptions were shocked to hear that a court condoned an adoption when an obvious claimant had not given consent. Many attorneys and professionals note that state agencies or non-profit organizations who are either statutorily or practically in the adoption business full time avoid some of the difficulties which are involved in private adoptions like the parties knowing or dealing with each other directly. We recommend that persons who want to adopt children go through channels other than private adoptions. TITLE: Privacy and the federal government QUESTION: I know that the federal government keeps many records. What are my rights? THE ON LINE LEGAL ADVISOR SUGGESTS: In the aftermath of Watergate the Congress passed several laws related to the abuses of Watergate. These include the Privacy Act. The Privacy Act has several provisions. The first is that the government must warn persons when it collects information how the information will be used, and if the information has to be provided. In addition, the Privacy Act requires that except for law enforcement, information should be gathered, if at all possible, from the person himself. No records which states how citizens of the United States exercise their First Amendment rights may be kept, except for law enforcement, and then only if related to an actual crime being investigated. (Remember the White House enemies list, and the political dossiers kept by J. Edgar Hoover and the FBI?) If information which is collected identifies individuals, then access must be restricted to the purposes stated in the Privacy Act notice. In the event that another agency is given any information a record must be kept of the disclosure, for the LONGER of 5 years or the length of time that the record is kept. However, disclosure is strictly limited to legitimate and stated needs to know. Perhaps the right that is of the greatest interest to individuals regarding whom records are kept is the right to see your own file. This right is very broad: except during investigations regarding charges against a person, the investigative material is not available, but all other information is. If a person disagrees with the record, then on a very quick time schedule (10 days) the information must be verified or changed. Extensive appeal rights are provided in the event that the government refuses to change the information. Look for "Privacy Act" notices when you fill out government forms and remember your right to challenge information in your record. TITLE: Guaranteeing debts, leases or other obligations of others QUESTION: I am thinking of guaranteeing the debt of another person. What should I be concerned about? THE ON LINE LEGAL ADVISOR SUGGESTS: A great deal! A phone call today with a friend told an all too familiar story. Two persons who owned separate businesses decided to rent a building that was too large for them both together. The lease agreement provided that each party guaranteed the performance of the other, which is a typical clause. Several years later, our friend moved out, his lease paid in full. The other side stayed, and got behind in the rent. Way behind. $120,000.00 behind. The result -- a suit for $120,000 representing many months of rent. If our friend had known about the delinquency, he might have moved his business or done something to protect himself. However, the law does not require a guarantor to get notice that the other party is late. Truth be told, except for a business arrangement like the one discussed above, there is no reason for a person to guarantee someone else's debt. First of all, if the guarantee is required, it means that the creditor doesn't think that the person for whom you are co-signing is credit worthy. Not good. The typical bank loan agreement for a guarantee allows the bank to go so far as to release the other side totally and sue the guarantor. Really not good. In fact, just reading the guarantee aloud should be enough to discourage you from doing so! Guarantees allow the bank to release collateral and still keep guarantors on the hook, allows the bank to extend the loans repayment terms (and interest running) over and over again. These agreements mean that the bank can charge the loan off, wait several years and then come calling, which often happens, since bad loans have a tendency to be put on the bottom of the work to do pile. The guarantees are so absolute that there is virtually nothing that the bank can do which would prevent them from going after the guarantor. Re-read the paragraph above. Typical bank loan agreements allow the bank to even excuse the borrower from repayment or settle with them for pennies on the dollar and visit you with a demand for full repayment. The best way to protect yourself is not to guarantee debts of others, except if you get a direct benefit, and in that case, you might as well sign directly, because that way you will know that the debt is in arrears before years and $120,000 run up. Alternative suggestion (although banks will not like it!) is to insert a clause requiring that the guarantor be notified if any payment is late. Usually the first notice that someone who is a guarantor gets that there is a problem is a demand for payment in full. Good luck and try to avoid guarantees.
