The great debate in Washington is over the national healthcare system. To many Americans this is a confusing issue because it seems like the politicians have debated and twisted the subject to such a point that we don’t know what they are fighting over. Is it reducing healthcare costs, insuring everyone, raising taxes or something else? Despite this confusion there is one thing that is certain, don’t get sick or hurt because it is going to cost an arm and a leg to get healthy again.
Medical bills are the fastest growing reason for causing individuals to file for bankruptcy. If it’s not the medical themselves that are overwhelming it’s the other bills that individuals fall behind on because of the medical bills that cause them to have to seek relief.
In Grand Rapids and West Michigan we have seen the medical field boom. New technology, new buildings and new people seem to be pouring into the area pretty steadily. This influx of medical facilities and medical staff has not caused the price of healthcare to go down. In fact because the doctors are more specialized there has been an increase in expenses.
Medical bills are responsible for over 60% of bankruptcy filings. This is a sharp increase from the percentage of filings associated with medical bills that occurred at the beginning of this decade.
Many people are under the impression that because they are insured that they are immune from this beast. Everyone is subject to attack. Of those that file because of their crushing medical bills, nearly 75% had medical insurance. These are expenses that grow drastically and it’s out of our control usually.
The one light at the end of the tunnel is that bankruptcy can relieve these medical bills. The holders of these claims are unsecured and have no priority. That means that any bills accumulated prior to filing will be discharged.
Some might think that it’s not worth filing bankruptcy for medical bills because you might not be able to file for bankruptcy protection if something else was to come up in the near future. Yes other financial hardships do come up and after filing there is a certain amount of time that is required to pass before you can file again. This is when it is important to consult an attorney and assess your financial situation prior to these health expenses, what it will be like after you file and how long and under what circumstances you would live if you don’t file.
The ongoing debate in the nation’s capital might be over our heads for now but we do know how medical bills can hurt us right now. Any one that is watching these types of expenses pile up or is trying to unbury themselves should consider bankruptcy as a possible solution.
Monday, December 28, 2009
Wednesday, December 23, 2009
Michigan Business Tax
Growing up I was taught by my father that there were only two guarantees in this life: death and taxes. One is extremely simple and the other is exceptionally complicated. There is only one thing that complicates taxes more and that is the taxation of business entities. And in past year the concepts that surround business taxes in Michigan have become more complicated.
Many people were relieved to hear that the Michigan Single Business Tax (SBT) would no longer be in effect. After making their first filing under the new Michigan Business Tax (MBT) and preparing to have to make another soon, many have the opinion that this new law is more confusing than the old.
OVERVIEW
There are four parts that make up the MBT and there is a fifth for small businesses. Depending on the whether the tax payer is a financial institution, insurance company, small business or none of these will determine which of the five parts the business is responsible for.
The general rule is that a business will be responsible for the business income tax portion (BIT), the modified gross receipts tax (MGRT) and a surcharge. If the business qualifies as a small business, it will be limited to a 1.8 percent tax and no surcharge. Financial institutions and insurance companies are exempt from the BIT and MGRT but they have their own specific industry taxes they must pay.
SPECIFIC ISSUES
Under the SBT a unitary combined filing could only be done by permission which was difficult to receive. Under the new MBT, a combined return is required for any group of taxpayers if (1) the taxpayers are owned more than 50 percent by one person and (2) there is a flow of value between or among the taxpayers.
There is also a prominent difference between how an S Corporation and LLCs are taxed. Usually these two entities are seen as very similar because they are corporations that are taxed as flow-through entities. The difference now comes from the fact that LLCs have to pay a federal self-employment tax and S Corps don’t. Under the MBT, LLCs are permitted to deduct this federal tax payment from their Michigan return.
There is also a new test as to how to determine if a there is a significant nexus between an out of state business and Michigan. If there is a significant nexus the business will have to pay taxes in Michigan. A non-Michigan business will have nexus and be subject to the MBT if it either has (1) a physical presence for more than one day during the tax year or (2) gross receipts apportioned to Michigan of at least $350,000 and actively solicits sales in Michigan.
This is an obvious simplification of all that goes into the MBT. There are other issues surrounding it and more in depth factors to the ones discussed here. A business that operates in Michigan should see these issues and at least recognize that they might be subject to them. If there is a possibility these businesses should contact an attorney to discuss their liability and options.
Many people were relieved to hear that the Michigan Single Business Tax (SBT) would no longer be in effect. After making their first filing under the new Michigan Business Tax (MBT) and preparing to have to make another soon, many have the opinion that this new law is more confusing than the old.
OVERVIEW
There are four parts that make up the MBT and there is a fifth for small businesses. Depending on the whether the tax payer is a financial institution, insurance company, small business or none of these will determine which of the five parts the business is responsible for.
The general rule is that a business will be responsible for the business income tax portion (BIT), the modified gross receipts tax (MGRT) and a surcharge. If the business qualifies as a small business, it will be limited to a 1.8 percent tax and no surcharge. Financial institutions and insurance companies are exempt from the BIT and MGRT but they have their own specific industry taxes they must pay.
SPECIFIC ISSUES
Under the SBT a unitary combined filing could only be done by permission which was difficult to receive. Under the new MBT, a combined return is required for any group of taxpayers if (1) the taxpayers are owned more than 50 percent by one person and (2) there is a flow of value between or among the taxpayers.
There is also a prominent difference between how an S Corporation and LLCs are taxed. Usually these two entities are seen as very similar because they are corporations that are taxed as flow-through entities. The difference now comes from the fact that LLCs have to pay a federal self-employment tax and S Corps don’t. Under the MBT, LLCs are permitted to deduct this federal tax payment from their Michigan return.
There is also a new test as to how to determine if a there is a significant nexus between an out of state business and Michigan. If there is a significant nexus the business will have to pay taxes in Michigan. A non-Michigan business will have nexus and be subject to the MBT if it either has (1) a physical presence for more than one day during the tax year or (2) gross receipts apportioned to Michigan of at least $350,000 and actively solicits sales in Michigan.
This is an obvious simplification of all that goes into the MBT. There are other issues surrounding it and more in depth factors to the ones discussed here. A business that operates in Michigan should see these issues and at least recognize that they might be subject to them. If there is a possibility these businesses should contact an attorney to discuss their liability and options.
Thursday, December 17, 2009
Unfair Competition: Advertising
There only seems to be one place that is more competitive then the world of sports and that is the world of business. Not only are we in direct competition with other companies but we are also competing with businesses in other markets. Everyone wants there business to not only be the best in its given field but wants other businesses from other fields to mimic the plan they follow. With such heavy competition how can we draw a line on what is merely being competitive and what would be unfair business practices?
Google is a great example of a business model to follow. They took a revolutionary idea of how a search engine should work and developed it. For quite a while that single thing was Google’s niche. They mastered it and became a leader in the field of search engines. Then they expanded the brand. Since then Google has become one of the leaders in web applications. I think anyone that has done business or owned a business would love to match the success of Google. Most are striving to achieve the first step made by Google and that is mastering their trade and becoming an industry leader.
That first step is a difficult one and many people work their entire lives and never truly make it there. And then there are those that look to cut corner in order to meet this goal.
One of the biggest mistakes that business can make is in their advertising. When I use the term advertising I am including everything from a television or magazine ad to sending out information about your product to salesmen or talking to customers. One way to easily promote your product is to compare it to the competition’s products. This is an effective way to prove to the consumer that yours is the best out there. The problem arises when businesses using this strategy begin to fudge the facts or attack the competition.
Whenever you make statements about your competitions products and those statements are false or misleading red flags should go up immediately. This can result in your competitor bringing an action against you for defamation, injurious falsehood, and other violations. Advertising should always be truthful and if your product doesn’t look good when compared to the competition’s product then don’t compare them. There are other strategies to promote your products or services that don’t involve a direct comparison or attack of the competition.
Think of Google. How many ads did they run that claimed Yahoo! as being inept or said that Ask.com was so much slower then Google? Google only promoted itself and made strides to better itself. There may have been internal comparisons in order to track progress but Google competed fairly the whole time.
I will post future articles that cover other asspects of unfair competiton.
Google is a great example of a business model to follow. They took a revolutionary idea of how a search engine should work and developed it. For quite a while that single thing was Google’s niche. They mastered it and became a leader in the field of search engines. Then they expanded the brand. Since then Google has become one of the leaders in web applications. I think anyone that has done business or owned a business would love to match the success of Google. Most are striving to achieve the first step made by Google and that is mastering their trade and becoming an industry leader.
That first step is a difficult one and many people work their entire lives and never truly make it there. And then there are those that look to cut corner in order to meet this goal.
One of the biggest mistakes that business can make is in their advertising. When I use the term advertising I am including everything from a television or magazine ad to sending out information about your product to salesmen or talking to customers. One way to easily promote your product is to compare it to the competition’s products. This is an effective way to prove to the consumer that yours is the best out there. The problem arises when businesses using this strategy begin to fudge the facts or attack the competition.
Whenever you make statements about your competitions products and those statements are false or misleading red flags should go up immediately. This can result in your competitor bringing an action against you for defamation, injurious falsehood, and other violations. Advertising should always be truthful and if your product doesn’t look good when compared to the competition’s product then don’t compare them. There are other strategies to promote your products or services that don’t involve a direct comparison or attack of the competition.
Think of Google. How many ads did they run that claimed Yahoo! as being inept or said that Ask.com was so much slower then Google? Google only promoted itself and made strides to better itself. There may have been internal comparisons in order to track progress but Google competed fairly the whole time.
I will post future articles that cover other asspects of unfair competiton.
Wednesday, December 16, 2009
Bad Mortgages
Mortgages are a huge part of the everyday lives of a lot of West Michigan citizens. In most of our lives that mortgage payment takes up a large portion of our budget. But are we actually giving money away to our mortgage holders?
There seems to be a new trend developing in the current legal system. Courts are standing up for the little guy when it comes to mortgage disputes. It might be in response to the public outcry against the large mortgage holders that are being bailed out by the federal government while individuals continue to lose their homes to foreclosure. Or it could be simply the continuing evolution of Michigan Courts. Either way, it should have everyone looking a little closer at their mortgages.
Large mortgage companies put out thousands of mortgages a year. This is a highly technical process that if not followed closely can result in a mistake that may not give the mortgage holder a lawful right to the property. With so many mortgages being created and also with so many changing hands, mistakes are bound to happen. These mistakes were often dismissed as not being equitable before if the court was to invalidate the mortgage.
Recently though this has changed. More courts are beginning to recognize these mistakes as reasons for the mortgage holders to lose their interest in the property. The Bankruptcy Court has not only voided liens on the property but held that those mortgage holders that have had liens voided are not permitted to file a proof of claim because they have failed to do so in a timely fashion.
One Judge in New York actually took this new wave of thought to the next level when ruling on a foreclosure dispute case. He ruled that not only was the foreclosure invalid and the mortgage was invalid, but also ruled that the bank had no claim to the house at all. This gave title to the home to the owners free and clear of any claims.
The mortgages that you have signed are legal contracts and they must be followed and there are specific laws that must be followed in order for them to remain valid. It is important that you hold the financial institutions that you enter into these agreements with to the same strict letter of the law that they do you. If trouble arises or you feel that you are being treated unfairly, it is important to consult an attorney about these things.
There seems to be a new trend developing in the current legal system. Courts are standing up for the little guy when it comes to mortgage disputes. It might be in response to the public outcry against the large mortgage holders that are being bailed out by the federal government while individuals continue to lose their homes to foreclosure. Or it could be simply the continuing evolution of Michigan Courts. Either way, it should have everyone looking a little closer at their mortgages.
Large mortgage companies put out thousands of mortgages a year. This is a highly technical process that if not followed closely can result in a mistake that may not give the mortgage holder a lawful right to the property. With so many mortgages being created and also with so many changing hands, mistakes are bound to happen. These mistakes were often dismissed as not being equitable before if the court was to invalidate the mortgage.
Recently though this has changed. More courts are beginning to recognize these mistakes as reasons for the mortgage holders to lose their interest in the property. The Bankruptcy Court has not only voided liens on the property but held that those mortgage holders that have had liens voided are not permitted to file a proof of claim because they have failed to do so in a timely fashion.
One Judge in New York actually took this new wave of thought to the next level when ruling on a foreclosure dispute case. He ruled that not only was the foreclosure invalid and the mortgage was invalid, but also ruled that the bank had no claim to the house at all. This gave title to the home to the owners free and clear of any claims.
The mortgages that you have signed are legal contracts and they must be followed and there are specific laws that must be followed in order for them to remain valid. It is important that you hold the financial institutions that you enter into these agreements with to the same strict letter of the law that they do you. If trouble arises or you feel that you are being treated unfairly, it is important to consult an attorney about these things.
Monday, December 14, 2009
Breaching the Fiduciary Duty
One of the things that tend to get overlooked in tough economic times is the fiduciary duty that is owed to another. Often the excuse is that if it wasn’t for the current economic situation this wouldn’t have happened. The problem is that both sides will make this same excuse. So when can we actually look to the economy as being at fault and when to we look to someone specifically?
The fiduciary duty is when an individual has placed the utmost trust and confidence in another to manage and protect property or money. What does that mean? Commonly this duty arises in a corporate setting or in the administration of a trust. Corporate directors and officers owe a duty to the shareholders to operate the business appropriately. Also, a trustee owes the beneficiaries of a trust the duty to handle the trust in the appropriate manner. These are not the only situations that a fiduciary relationship arises but they are the most common and can give us a guide post to look to other relationships in order to identify if the fiduciary duty arises.
Our original question was when can we blame the economy and when is someone specifically at fault, so how do we answer this. Very carefully. Obviously is an individual is doing something blatantly wrong, like embezzling money or usurping corporate opportunities, then a breach of the fiduciary duty should be pursued. But when it comes to failing to properly invest money this is a much trickier question.
In a struggling economy there is one thing fiduciaries must do and that is not be lazy. Someone that is placed in the situation should always be able to point out how much work they put in and despite their best efforts the outcome still was unfavorable. It is when we look at a person that is sitting idly by while the property or money they are in charge of protecting is swallowed up by another.
This line is a fine one to walk. But the officer that carefully weighs all his options and makes what he believes is the best possible decision will usually be protected where as the one that simply follows his gut because it would take too long to read a memo on the subject might not be as protected.
The fiduciary duty is when an individual has placed the utmost trust and confidence in another to manage and protect property or money. What does that mean? Commonly this duty arises in a corporate setting or in the administration of a trust. Corporate directors and officers owe a duty to the shareholders to operate the business appropriately. Also, a trustee owes the beneficiaries of a trust the duty to handle the trust in the appropriate manner. These are not the only situations that a fiduciary relationship arises but they are the most common and can give us a guide post to look to other relationships in order to identify if the fiduciary duty arises.
Our original question was when can we blame the economy and when is someone specifically at fault, so how do we answer this. Very carefully. Obviously is an individual is doing something blatantly wrong, like embezzling money or usurping corporate opportunities, then a breach of the fiduciary duty should be pursued. But when it comes to failing to properly invest money this is a much trickier question.
In a struggling economy there is one thing fiduciaries must do and that is not be lazy. Someone that is placed in the situation should always be able to point out how much work they put in and despite their best efforts the outcome still was unfavorable. It is when we look at a person that is sitting idly by while the property or money they are in charge of protecting is swallowed up by another.
This line is a fine one to walk. But the officer that carefully weighs all his options and makes what he believes is the best possible decision will usually be protected where as the one that simply follows his gut because it would take too long to read a memo on the subject might not be as protected.
Tuesday, December 1, 2009
Bankruptcy and the Credit Score
In recent years there seems to be a new fad going around. People are starting to take an active roll in monitoring their credit scores. With the credit crunch, identities being stolen and people looking to save money any way possible it seems like everyone is trying to figure out how that three digit number is calculated.
The other question that gets asked is how much of an impact does a mistake have on your score. Just recently FICO revealed how mistakes can bring down your score.
Filing a bankruptcy had the biggest impact on a credit score. For someone with a credit score of around 680, their score could fall 130 to 150 points. For a prime barrower with a score of 780 it could tumble up to 240 points! Hold on though. Before you say to yourself that bankruptcy is not an option because you can’t take a hit like that to your score let’s look at the deductions for other things.
Maxing out a credit card could bring a score of 680 down 10 to 30 points. A 30-day late payment can bring down that same score another 60 to 80. So if you are experiencing financially hard times and you max out a credit card and you fall 30 days behind on paying it you can experience up to a 110 point slide. That’s almost the same as filing bankruptcy.
A foreclosure on your house has can result in an estimated 85 to 105 point deduction from a score of 680. That combined this with maxing out and falling behind with a credit card it is worse on your score then bankruptcy. And these are things that can be avoided when you file bankruptcy.
All of those debt settlement commercials and advertisements that are so popular recently might pop into your mind right now. “I can avoid the credit card issues and bankruptcy” is probably what you are thinking. Yes you might be able to avoid bankruptcy but here is what they don’t tell you. In order to work out any deal with the credit card company they will tell you to wait for the debts to go to collections. Further FICO has said that a debt settlement will reduce a 680 score by somewhere between 45 to 65 points too. That combined with the 60 to 80 point dip for letting the card become 30 days late is the same as a bankruptcy if not worse.
The other thing the debt settlement advertisements fail to mention to is that credit card companies will avoid giving you a line of credit for a long time because the were burned recently by you and you still have the bankruptcy safety net available if you were to get into trouble. This differs from when you file bankruptcy in that you can get a line of credit because they know you can’t file bankruptcy again for another 8 years.
In the end bankruptcy might be the biggest hit your credit score can take but it might be a necessary evil. Instead of taking lots of little hits that will eventually impact a credit score more, to take one hit and be able to start repairing the damage right away may be the better option. Every individual should weigh these options and discuss the impact with an attorney.
The other question that gets asked is how much of an impact does a mistake have on your score. Just recently FICO revealed how mistakes can bring down your score.
Filing a bankruptcy had the biggest impact on a credit score. For someone with a credit score of around 680, their score could fall 130 to 150 points. For a prime barrower with a score of 780 it could tumble up to 240 points! Hold on though. Before you say to yourself that bankruptcy is not an option because you can’t take a hit like that to your score let’s look at the deductions for other things.
Maxing out a credit card could bring a score of 680 down 10 to 30 points. A 30-day late payment can bring down that same score another 60 to 80. So if you are experiencing financially hard times and you max out a credit card and you fall 30 days behind on paying it you can experience up to a 110 point slide. That’s almost the same as filing bankruptcy.
A foreclosure on your house has can result in an estimated 85 to 105 point deduction from a score of 680. That combined this with maxing out and falling behind with a credit card it is worse on your score then bankruptcy. And these are things that can be avoided when you file bankruptcy.
All of those debt settlement commercials and advertisements that are so popular recently might pop into your mind right now. “I can avoid the credit card issues and bankruptcy” is probably what you are thinking. Yes you might be able to avoid bankruptcy but here is what they don’t tell you. In order to work out any deal with the credit card company they will tell you to wait for the debts to go to collections. Further FICO has said that a debt settlement will reduce a 680 score by somewhere between 45 to 65 points too. That combined with the 60 to 80 point dip for letting the card become 30 days late is the same as a bankruptcy if not worse.
The other thing the debt settlement advertisements fail to mention to is that credit card companies will avoid giving you a line of credit for a long time because the were burned recently by you and you still have the bankruptcy safety net available if you were to get into trouble. This differs from when you file bankruptcy in that you can get a line of credit because they know you can’t file bankruptcy again for another 8 years.
In the end bankruptcy might be the biggest hit your credit score can take but it might be a necessary evil. Instead of taking lots of little hits that will eventually impact a credit score more, to take one hit and be able to start repairing the damage right away may be the better option. Every individual should weigh these options and discuss the impact with an attorney.
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