Legal Tips & Commentary

American Dream, Economic Nightmare

2008-05-09T11:50:00.000-07:00

Many homeowners are at a financial crossroads. A foreclosure epidemic in San Diego and nationwide is causing more and more people to seek credit counseling, foreclosure prevention services and protection in bankruptcy. Attorney Carl Starrett was recently featured two-part series by KUSI News in San Diego discussing some of the options available to homeowners in financial distress. Click here to see the very informative story as KUSI reporter Ed Lenderman examines the crisis.

Property Tax Relief for California Residents

2008-05-03T11:40:00.000-07:00

With housing prices falling all over California, some homeowners are seeking relief to lower their property tax bills. If the current market value of your property (recent comparable sales) falls below the assessed or taxable value as shown on your tax bill, the California law requires Assessor's Office is required to lower the assessment. This type of property tax relief generally applies to recently purchased property. There are two periods during the year in which the taxpayer may appeal their assessed value for a temporary reduction:

(1) Between March through May: During this period, the taxpayer may submit a written request to the Assessor, indicating their opinion of value and providing supporting documentation, such as sales of comparable properties or a recent appraisal. The necessary forms are available from you local Assessor's office. The next deadline to apply for this type of relief is May 30.

(2) Between July 2 and November 30: During this period, the taxpayer must file an application form. Appeal forms can be obtained and must be filed with the Assessment Appeals Board at your local Assessor's office.

If a hearing becomes necessary, the testimony of a real estate professional is recommended. For more information on how to appeal the assessed value of your home and reduce your property tax bill, please contact us for a complimentary consultation.

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

Personal Bankrutpcy and Business Ownership

2008-04-24T10:07:00.000-07:00

Question: I wonder a small S corporation and I serve as president. Will my personal chapter 7 bankruptcy effect the corporation?

Answer: You must list the shares of stock as an asset on line 13 of Schedule B of your bankruptcy petition. When you file for bankruptcy, a bankruptcy "estate" is created that consists of the property that you own.

There are many state and federal laws that determine what property you can keep and what must be given up in a Chapter 7 bankruptcy. Property that you can keep is called exempt, meaning that it exempt from the rights of the bankruptcy trustee to sell it for the benefit of creditors. The decision to sell nonexempt property is generally made by the trustee based on whether it has enough value to be worth selling.

Small corporations are often not valuable enough for the trustee to sell because of corporate debt and other issues. The trustee may file a Notice of Proposed Abandonment and the shares of stock will revert back to you unless your creditors file a timely objection. If the case closes and the trustee decides not to sell your shares of stock, legal ownership will revert back to you.

Credit applications for corporations often ask if any of the officers, directors or shareholders have filed for bankruptcy. While your personal credit history will not impact the corporation's credit rating, it may influence the decision of someone who has been asked to extend credit to the corporation.

The information provided in this article is general information only and is not intended as legal advice. DO NOT use this information as a substitute for obtaining qualified legal advice or other professional help.

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

Seven Mistakes To Avoid Prior to Filing Bankruptcy

2008-04-02T13:43:00.000-07:00

The actions an individual takes leading up to filing bankruptcy can drastically affect his ability to get a "fresh start." By avoiding these seven mistakes, one can travel successfully through the bankruptcy process without losing a pound of flesh.

1. THE CREDIT CARD RUN-UP MISTAKE: Don't use your credit cards once you have made your decision to file bankruptcy. Charges for luxury goods and services owed to a single creditor, totaling to more than $500.00 within 90 days of filing, are presumed nondischargeable and may be found to be due and owing. Cash advances totaling to more than $750.00 for all creditors within 70 days of filing are also presumed nondischargeable and may be found to be due and owing. Don't jeopardize your "fresh start" by running up your credit cards.

2. THE REPAY A FAMILY MEMBER MISTAKE: You cannot treat your family member any better than you would an ordinary creditor with regard to repaying debts. In fact, a bankruptcy trustee can reclaim any amount repaid to a family member within one year of filing bankruptcy, although amounts under $2,000 are generally too small to bother with.

3. THE LIQUIDATE YOUR RETIREMENT ACCOUNT MISTAKE: Retirement accounts are generally protected. You can eliminate your debt and usually keep whatever you have in a retirement account, free and clear. Many individuals drain their retirement accounts in a futile attempt to pay down credit card debt.

4. THE TRANSFER PROPERTY OUT OF YOUR NAME MISTAKE: A bankruptcy trustee can undo a transfer of property that previously belonged to you. This can occur if the transfer was made within four years of the filing of the bankruptcy with the intent to hinder, delay or defraud a creditor, or simply if a fair price was not received.

5. THE LINE OF CREDIT/SECOND MORTGAGE TO PAY DEBT MISTAKE: Don't take a loan against your real estate in an effort to reduce the equity. You can often file bankruptcy and not lose this valuable asset. If you take out a second mortgage to pay credit card debt, you may be putting your house at risk.

6. THE FAILURE TO APPEAR AT COURT PROCEEDINGS MISTAKE: Do not assume that you can avoid a lawsuit simply because you've decided to file bankruptcy. A collection case continues until your bankruptcy case is actually filed, which occurs only after all the fees are paid, you have met with us and provided all the necessary information for preparing the 40 pages of bankruptcy forms, you have reviewed, signed, and returned the forms to us for filing with the Bankruptcy Court, and you have completed the required debt counseling program (by telephone or Internet) which we coordinate for you.

7. THE FAILURE TO TELL YOUR ATTORNEY THE TRUTH, THE WHOLE TRUTH AND NOTHING BUT THE TRUTH MISTAKE: An attorney can only provide advice based upon information provided by the client. Failure to notify your attorney about your assets can lead to the loss of those assets, denial of your bankruptcy case, fines, imprisonment, or all of the above.

About the Author: Jed Berliner has been an attorney since 1976. He began focusing almost exclusively in bankruptcy law in 1982 to make sure his clients could obtain cost-effective bankruptcy advice and services of the highest quality. Mr. Berliner has served as the Chair of the Hampden County Bankruptcy Bench-Bar Committee and studied at Cornell University and the University of Kansas.

Maintaining Your Corporate Status in California - Part 4

2008-03-30T20:38:00.000-07:00

This is Part 4 of an ongoing series designed to provide California corporations general information on how to maintain their corporate standing. In this edition, we will review the roll and function of corporate bylaws.

Next to the Articles of Incorporate, the corporate bylaws are the most important corporate document. They set forth matters affecting the Shareholders' and Directors' rights, as well as corporate Officers' authority. In addition, they establish the basic administrative rules for the day-to-day legal operation of the corporation, including the procedure for altering the number of Board of Directors members; the calling of, conduct of, convening of, and voting of Board of Directors' meetings and Shareholders' meetings; the election, powers and duties of the corporation's Officers; the issuance of certificates representing shares of the corporation's stock; general financial authorizations; and the procedure for amendment of the Bylaws.

While the Bylaws may be viewed as merely the implementation of a number of corporate formalities, they are essential to resolve potential future problems, as well as to evidence the corporation's adherence to its Articles and other legal requirements. As a practical matter, however, they do not impose any significant operational burdens so long as the shareholders continue to be in basic agreement on corporate directions that the Bylaws may be amended by action of the Directors except an amendment to the Bylaws changing the number of Directors which must be made by the Shareholders.

In essence, the Bylaws are the Constitution for the corporation. The Directors should be familiar with the provisions of the Bylaws or consulting an experience corporate attorney for assistance.

The information provided in this article is general information only and is not intended as legal advice. DO NOT use this information as a substitute for obtaining qualified legal advice or other professional help.

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

Improved Credit Counseling Options for Bankruptcy Clients

2008-03-27T18:37:00.000-07:00

In an ongoing effort to improve the quality of service to our clients, the Law Offices of Carl H. Starrett II is pleased to announce a new partnership with Money Management International ("MMI") to provide mandatory Pre-Filing Bankruptcy Counseling as well as the Pre-Discharge Debtor Education to our clients. MMI is a nonprofit corporation that has been approved to issue certificates in compliance with the Bankruptcy Code. Since 1958, MMI and its affiliate, Consumer Credit Counseling Services, have counseled and educated over one million people.

Our clients will benefit from faster and more convenient service. Once we have registered our clients for the pre-filing bankruptcy counseling, we will upload their information to MMI. Counseling sessions are provided by telephone and Internet, 24/7. In addition, Web chat sessions are available from 9:00 a.m. to 9:00 p.m. Eastern time. Our clients only have to review the imported information for accuracy and call in to speak with a counselor to complete the course. After the courses have been completed, certificates will be downloaded to our bankruptcy software, provided by EZ Filing, for transmittal to the bankruptcy court.

Upon the filing of a bankruptcy, we will also be able register our clients for the pre-discharge education class. These classes can take two hours to complete and are offered 24/7 via the Internet. MMI emails the certificates to our office upon completion.

The new partnership with MMI allows us to take an more active role in managing the bankruptcy counseling services our San Diego area clients receive and to ensure that they successfully complete all steps necessary to obtain a discharge of debts for our clients.

Maintaining Your Corporate Status in California - Part 3

2008-03-09T11:10:00.000-07:00

This is Part 3 of an ongoing series designed to provide California corporations general information on how to maintain their corporate standing. In this edition, we will review observance of corporate formalities.

Income Tax Returns. The corporation must file federal and California income tax returns for each of its tax years whether or not it has any income. These returns are due no later than the 15th day of the third month following the close of the tax year unless a timely extension is filed.

Employer Tax and Withholding Responsibilities. As an employer, you will be responsible for certain employer taxes. In some cases, you will have to pay the tax directly. In other cases, your employees pay the tax, but you are responsible for withholding the tax payment from their wages and making periodic deposits of these funds in an authorized bank. See IRS Circular E, Employer's Tax Guide and Tax Guide for Small Businesses, both available from the IRS.

Federal Taxes

Wage Withholding. You must withhold federal income tax from the taxable wages paid to your employees. You will need to obtain from each employee a properly executed Employee Withholding Allowance Certificate (IRS Form W-4). Before January 31, following the close of each calendar year, you must provide each employee with an annual Wage and Tax Statement (IRS Form W-2).

Social Security Taxes (FICA). Social security taxes are imposed on both employers and employees. You must withhold FICA taxes from each employee's wages and pay a tax equal to the amount paid by each employee.

Return and Deposit of Taxes. With some exceptions, employers subject to either income tax withholding or social security taxes must file a quarterly return of federal Form 841 and must deposit the income tax withheld and the FICA taxes with an authorized commercial bank depositary or a Federal Reserve Bank or branch. IRS Circular E will explain when the required deposits must be made.

California Taxes

Wage Withholding. As a California employer, the corporation must withhold California income tax from the taxable wages paid to employees and must deposit these funds with the state. The process is similar to that for federal income taxes.

California Unemployment Insurance Tax. A California employer is generally subject to an unemployment insurance tax on the taxable wages paid to its employees. The corporation must register at the California Employment Development Department within 15 days after paying $1000 of taxable wages during a calendar quarter. This tax is imposed on the employer, not on the employees.

California Disability Insurance Tax. Although California employees are subject to this tax, the employer has the responsibility of withholding the tax from the wages paid to such employees. However, the employer has the alternative of establishing a state-approved private disability insurance coverage plan. If this option is chosen, employees may be required to make contributions directly to this plan in lieu of the tax payment.

General Considerations. The corporation's responsibilities to pay employment taxes, to withhold taxes imposed on its employees, to file tax returns, and to make periodic tax deposits are substantial. Penalties for noncompliance can be severe: CORPORATE OFFICIALS CHARGED WITH TAX-WITHHOLDING RESPONSIBILITIES MAY BE PERSONALLY LIABLE FOR 10 PERCENT OF THE UNPAID TAXES AND ALSO FOR ANY TAX PENALTIES IF THEY NEGLECT THEIR RESPONSIBILITIES. If you have not already done so, we suggest that you consult your accountant promptly to develop proper tax accounting procedures so that timely tax payments are made.

California Sales and Use Taxes

Permit Requirement. All parties engaged in the business of selling tangible personal property as retail in California must obtain a seller's permit form the California State Board of Equalization. As a practical matter, a permit is usually required even though the corporation sells such tangible personal property at wholesale. A separate permit must be obtained for each retail business location and must be conspicuously displayed. A substantial security deposit of up to a maximum of $10,000 may be required. A business having a seller's permit can purchase tangible personal property for resale without having to pay sales tax to the seller, provided it gives the seller a signed resale certificate in a form prescribed by the State Board of Equalization.

Tax Payment Requirements. If a corporation sells tangible personal property at retail in California, it will be subject to the California sales tax unless the property sold is specifically exempted. California also imposes a "use tax" on most retail purchases that occur outside of California but are intended for use within California. Any retailer engaged in business in California is required to collect the sales and use taxes and remit them to the state. A retailer is deemed to be "engaged in business" in California if it has any kind of an establishment in the state or if it has representatives operating in any kind of sales activity in the state. This law applies whether the retailer is involved directly or through a subsidiary or agent.

The holder of a seller's permit must file sales and use tax returns and pay or prepay the taxes collected, generally on a quarterly basis. The corporation should promptly consult its accountant regarding the dates on which these returns must be filed.

Personal and Real Property Taxes. The corporation must pay annual property taxes based on the value of the taxable real and personal property it owns or possesses on the immediately preceding March 1 (lien date). Usually, this tax is paid to the county assessor of the county in which the property is located. The county has a priority tax lien on the property as of the lien date, which is removed by the payment of this tax.

If the corporation owns taxable personal property with a cost of at least $30,000, it must file each year, on or before the date designated by the County Assessor (usually between April 1 and the last Friday in May), a written property statement. In cases in which the cities do their own assessing, a separate written property statement should be filed with the city. If the corporation owns taxable personal property costing less than $30,000, it must file a written property statement only on the County Assessor's request. Real property taxes are payable in two installments, the first due before April 10th and the second due before December 10th of each year. Personal property taxes must be paid by the due date specified in the County Assessor's notice.

You should consult your accountant for advice regarding filing property tax statements because there are substantial penalties for late payment and there are numerous special provision (e.g., an exemption for "intangibles"). This area is very complex, and competent accounting advice is essential to ensure full compliance.

Other Taxes. Depending on the nature of your business, there may be special taxes imposed by federal, state, or local governments, such as those on alcohol, tobacco, gross receipts, and real estate transactions. Your accountant should be able to assist you in preparing the proper tax forms and in making the necessary tax payments.

The information provided in this article is general information only and is not intended as legal advice. DO NOT use this information as a substitute for obtaining qualified legal advice or other professional help.

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

Tax Issues After Bankruptcy & Foreclosure

2008-03-05T18:10:00.000-08:00

Question: I filed for Chapter 7 bankruptcy and then lost my house to foreclosure because I couldn't make the payments. After the foreclosure sale, the bank sent me a 1099 form because they got less then what I owed at the sale. What should I do?

Answer: Any time a debt is forgiven, it might be considered income under the Internal Revenue Code. Debt forgiveness over $600 must be reported to the IRS as income to the borrower -- money not actually received by the borrower, but money that is taxable. However, debt forgiveness received in bankruptcy is not taxable. You filed bankruptcy before the foreclosure, so the debt forgiveness occurred when you received your discharge and not when the foreclosure sale occurred.

The procedure claim the debt forgiveness as not taxable is relatively simple. You should provide a copy of our discharge order to your tax preparer and then ask them to compete IRS Form 982 and attach it to your tax return. You should not have any further problems with this issue.

The information provided in this article is general information only and is not intended as legal advice. DO NOT use this information as a substitute for obtaining qualified legal advice or other professional help.

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

Maintaining Your Corporate Status in California - Part 2

2008-03-02T14:02:00.000-08:00

This is Part 2 of an ongoing series designed to provide California corporations general information on how to maintain their corporate standing. In this edition, we will review observance of corporate formalities.

It is easy to underestimate the importance of maintaining the formal integrity of your corporation. It is a separate and distinct entity. All important transactions in your business should be reflected in the corporate minutes. All contracts, including employment contracts, loans, and leases, should be made in the name and on behalf of the corporation. They should be memorialized by appropriate minutes in the corporate Minute Book. When signed, these documents should be kept in the Minute Book.

Without limiting the significance of the foregoing general caution, it is most important to realize that you are required formally to consider, review and act upon the following:

Salary and Bonus. It will be essential for you to establish and adjust, from time to time, the salaries and any bonuses for yourself and other employees of the corporation. A periodic review should be made.

Issuance of Additional Shares of Stock. Suffice it to say, taking in a new shareholder is a serious matter. Before a commitment is made to issue stock to anyone, we advise that you contact legal counsel and your accountant, and an appropriate agreement can be drafted. The should be thoroughly studied before any commitments are made.

Use of the Corporate Seal. Although there is no legal requirement that a Corporate Seal be used on any documents, many financial institutions require that it be used on corporate resolutions, loan documents, notes, and the like.

Loans to Employees. Loans to employees should be well documented. Promissory notes should be used to evidence the loans. Copies should be given to your attorney and your accountant.

The information provided in this article is general information only and is not intended as legal advice. DO NOT use this information as a substitute for obtaining qualified legal advice or other professional help. If your California corporation requires assistance with any of the topic outlined in this article, please feel free to contact us.

Collections for Small Businesses

2008-02-28T09:05:00.000-08:00

For those of you who are operating a business on a limited budget, managing your receivables is of the utmost importance. Just a few slow paying accounts can have a daunting effect on the success of your business. It takes perseverance to start a business; but it takes even more perseverance to keep it running efficiently.

Maximizing your receivables is essential to the life of your business. You must avoid holding back or becoming lax when it comes to asking for money that is owed to you.

When signing on a new account, be certain to emphasize your payment terms. Your payment terms outline the timeframes in which you expect to be paid. Verbally review your payment terms with your new customer and ask that they sign on the dotted line accepting your terms.

Optimize the payment process with a courtesy call shortly after services or products were provided. Inquire if the order was received and confirm that there were no disputes with your products or services. Document all correspondences that transpire during the duration of all business relationships. Reiterate when payment is due. To help expedite payments received, you may consider offering a nominal discount if the account pays within a specified period of time (generally 10 days).

Invoice immediately. Invoices should be drafted at the time the order is placed; thus, there is no reason to delay invoicing until the end of the month. This sets the stage for more timely payments received. Companies that invoice immediately and include the invoice with delivery experience expedited payments.

Managing your receivables must start with recognizing when an account becomes past due. Your payment terms should dictate when payment is expected and what consequences will occur if payments extend past the due date; a 1.5% late fee is the typical standard. It is important that you add the late fee to the first invoice that requires duplication. When you reissue an invoice in an effort to be paid after the due date has expired, you set a standard that gives you negotiating power. If you need to remind a customer their account is past due, and they have received a duplicate invoice that has incurred a late fee, you can offer to waive the late fee if the account is paid within a specified period of time (no more than 10 days).

Monitor past due accounts and initiate a consistent follow up process. Avoid waiting thirty days between follow up correspondences (verbal or written). If your payment terms are Net 30, follow up on the delinquent account on the 31st day. If your customer suggests cash flow problems are the reason for the delay, offer to arrange a payment schedule to expedite the payment process. Begin by offering to break the payment into two equal amounts, and negotiate the schedule based on your customer’s ability to pay.

About The Author: Donna Vestre is President and Founder of South Coast Revenue; a Professional Risk Management Firm based in Orange County CA. Donna has over 28 years experience in the debt collection and account receivables industry. Donna is the author of the popular digital resource guide, “Account Receivables – Your Guide to Getting Paid!” A B2B Resource Guide designed to empower businesses in achieving their most successful collection results! For more information about South Coast Revenue, please feel free to visit http://southcoastrevenue.com/ and browse the wide variety of resources and services available to you.

Maintaining Your Corporate Status in California - Part 1

2008-02-24T12:48:00.000-08:00

This is Part 1 of an ongoing series designed to provide California corporations general information on how to maintain their corporate standing. In this edition, we will review common issues of corporate governance such as holding director and shareholder meetings and keeping proper corporate minutes.

California law requires that an annual meeting of the Shareholders be held each year for the election of directors for the ensuing year and for other business that may come before the meeting. An annual meeting of the Board of Directors is usually held immediately after the annual meeting of the Shareholders to elect officers of the corporation for the next year, approve and ratify proper acts of officers during the current year, approve the compensation of the key employees for the current year, and to approve the corporation's contributions to its retirement plans, if any, for the current year.

The Board of Directors is charged with the management of the corporation and is held accountable for the ultimate direction of the corporation's business and affairs. Although day-to-day management of the corporation is generally delegated to the officers, the directors are responsible for approving major corporate action, setting goals and policy for the corporation, and monitoring the performance of management in achieving these goals. In performing these functions, the directors are fiduciaries for the benefit of the shareholders. The directors will be held liable to the corporation's shareholders if they fail to exercise "reasonable care", or if they fail to act in the best interests of the corporation ("duty of loyalty").

Directors exercising a duty of care are required to act as prudent persons would act in similar circumstances. In doing so, the directors may rely on the advice of independent experts, but they must make a reasonable inquiry into the facts on which such experts base their advice. The directors' duty of loyalty also includes a prohibition against a director profiting from a transaction at the expense of the corporation and its shareholders. A corporate transaction in which a director has a material financial interest will not be invalid if the transaction is fair to the corporation and the material terms and the director's interest are disclosed to and ratified by the shareholders or by uninterested directors acting in good faith.

To meet the fiduciary requirements of directing the corporation, the Board should convene regularly to discuss the corporation's business and to vote on required actions. Such meetings may be conducted by a conference call if all directors can hear each other simultaneously.

California corporation law also requires that shareholders meet at least annually to elect directors and to conduct other shareholder business. a shareholder's vote is required for a number of significant events, including election of directors, most amendments to the articles of incorporation, the sale of substantially all of the corporation's assets, and certain mergers and reorganizations of the corporation. Shareholder action by written consent process satisfies statutory requirements.

Minutes of both Directors' and Shareholders' meetings should be kept. The minutes must identify the issues before the groups together with copies of the notice of the meetings or waivers thereof, should be placed in the corporation's minute book. A copy of these minutes, certified by the secretary, is prima facie evidence that the meeting took place and that the matters stated in the minutes transpired.

California law requires that the accounting books and records, and the minutes of proceedings of Shareholders and Board of Directors, be open for inspection by any shareholder, director, or holder of a voting trust certificate. Further, corporations are required to send an annual report to shareholders not later than 120 days after the close of the fiscal year. This requirement can be waived in the Bylaws by corporations with fewer than 100 shareholders. The annual report must contain a balance sheet, an income statement, and a statement of changes in financial position for the fiscal year, and also must be accompanied by a report thereon by the company's independent accountants or, if there is no such report, by a declaration by an authorized officer of the corporation that the statements were prepared without audit.

Corporations with 100 or more shareholders that are not subject to federal securities reporting requirements also must comply with additional disclosure requirements. These include describing any significant transactions between the corporation and any director, officer, or 10-percent or greater shareholder.

The information provided in this article is general information only and is not intended as legal advice. DO NOT use this information as a substitute for obtaining qualified legal advice or other professional help. If your California corporation requires assistance with any of the topic outlined in this article, please feel free to contact us.

Getting Customers to Say “Yes” to Pay Your Invoices!

2008-02-13T11:42:00.000-08:00

Most businesses are owed money at some point. Every business owner offers their product and or service in good faith that once delivered payment will be made. As a business owner that sometimes has unpaid invoices do you often think, “What’s it going to take to get this client to pay? Do I turn their account over to a collection agency? Do I take them to small claims court, or do I write it off to bad debt?”

Your customers need to feel your attention is on their needs and upholding your side of the contractual agreement, not just getting paid. Sometimes that is hard to do when the issue has continued for a long period of time and there appears to be no resolution in sight. Businesses usually intend to pay their invoices. Some of the reasons for non-payment include:

• unsatisfactory performance
• perceived breach of contract terms
• cash flow issues

As the owner of a commercial collection agency, two of the most repeated concerns I hear are: how will using a commercial collection agency affect the relationship with the customer? Will my business still get paid for the overdue invoices? A good commercial collection agency should not interfere with your ongoing business relationship. Their objective is to resolve the lack of payments as quickly as possible. It is a small but important fact; don’t forget your manners and always be courteous and respectful toward others. Exhibiting professional and ethical behavior will you get you further in your collection efforts as a business owner and may create opportunities for future work.

Use words that demonstrate concern for the present issue and the desire to correct the mistake so it is not repeated. Try using a “power word or phrase” to connect with your clients. Power words say to your customers “What can I do to fulfill your need?” In asking this question you demonstrate care and concern about the problem and you want to do whatever is necessary to reach an acceptable payment solution. Here are some “power phrases” to use when working to get the client to say yes and pay the bill:

• What else can I do to help resolve the balance due?
• I’ll take care of that for you.
• I’m sorry for the mistake. I’ll correct that ASAP.
• Let’s work together to resolve this.
• What do you think?
• I don’t know the answer but I’ll find out for you.
• Consider it done.
• Thank you.
• We appreciate your business

Finally it is important to stay on top of your receivables while building your business. As your accounts reach 90 days and older, that is the time to reach out for outside collections help. Working with a collection agency instead of pursuing legal action is usually more cost efficient in time and money. Using a collection agency can help you to reduce the number of accounts written off to bad debt. An outside commercial collections agency will help collect the monies owed for past due products and services. Use them as another way to get your clients to say yes to pay your invoices.

About the Author: Dee Bowden is President of Bowden Revenue Collection Services. Ms. Bowden is a member of the Association of Credit and Collections Professionals (ACA International). Dee Bowden can be reached at (617)365-0814, email dbowden@bowdenrevenue.com or visit the website at www.bowdenrevenue.com.

Selecting a Bankruptcy Credit Counseling Agency

2008-02-11T20:45:00.000-08:00

Prior to filing for bankruptcy, individuals must receive a briefing from an approved nonprofit budget and credit counseling agency. After filing bankruptcy and before receiving a discharge, debtors must also complete a course on personal financial management designed to help them avoid debt problems in the future. I am often asked by clients which agency to choose.

Here in the Southern District of California, the U.S. Trustee's Office maintains a list of authorized credit counseling providers. However, there are only approved agencies that stand out with respect to the services that my clients have received: Springboard Nonprofit Consumer Credit Management, Inc. ("Springboard") and the Institute for Financial Literacy ("IFL").

A common complaint I hear is that agencies do not have sufficient staffing to handle emergency requests for counseling. Some agencies delay speaking with for several days for even a week. Both Springboard and IFL offer counseling over the Internet and via telephone. I recent months, clients have reported to me that both Springboard and IFL were able to handle their requests for immediate credit counseling. IFL offers the added advantage of emailing the completion certificates directly to my office.

While clients are free to to choose any approved agency, Springboard and IFL profile competitive service and reasonable prices.

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

What is an Automatic Stay in Bankruptcy?

2008-01-31T12:24:00.001-08:00

Question: I lost my job and a creditor is about to get a judgment against me. I've heard that the automatic stay in bankruptcy can help me. What is that?

Answer: The automatic stay is a federal court order that prohibits of any attempts by creditors to contact you or to collect a debt. It goes into effect the moment you bankruptcy petition is filed with the court.

Creditors cannot call you, sue you, garnish your wages, repo your car, foreclose on your house, take money out of your bank account or engage in any other efforts to collect the debt. The automatic stay gives you a little "breathing room" while the court processes your bankruptcy. Some creditors like a home lender might have the right to continue foreclosure on your home if you continue to miss payments, but the lender must file an appropriate motion with the court to get permission before proceeding with the foreclosure.

When your case is over, the automatic stay is lifted. If you receive a discharge, however, that acts as a permanent court order against future efforts to collect a discharged debt.

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

Attorney Carl Starrett Obtains $36,000 Judgment

2008-01-20T20:42:00.000-08:00

The Law Offices of Carl H. Starrett II has successfully obtained a stipulated judgment against Valentina L. Atckison of Escondido, owner of Zilla Realty and Rentals-4-U, in an amount in excess of $36,000. The Court entered the judgment on December 27, 2007.

The lawsuit was filed on March 25, 2007 on behalf of Robert L. Tate. The lawsuit alleged that Ms. Atckison failed to repay Mr. Tate for a short term loan of pay. Ms. Tate made partial payment, but a substantial balance remained due on the promissory note.

Rather than face a trial, Ms. Tate stipulated to entry of a judgment of $36,340.14, which included the balance owed plus interest, legal fees and court costs.

Civil judgments in California collect interest at the rate of 10% per year. In this case, interest will accrue at the rate of $3,634.01 per year or $9.96 per day until paid. Efforts to collect the judgment will begin immediately.

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

New California Laws for 2008

2007-12-31T16:33:00.000-08:00

During the 2007 legislative year, 964 bills were passed by the California legislature and 750 were signed into law. There are 167 changes just to the California Vehicle Code. Except as otherwise noted below, the following list is a sample of just a few of the laws that go into effect in California tomorrow:

Beginning July 1, 2008, California will prohibit drivers from using wireless telephones without a hands-free device while driving. A separate will law prohibits all drivers under the age of 18 from using a cell phone even with a hands free device. Both laws have exceptions for emergencies.
Bicycle riders must have some sort of illumination devices while riding on a highway, street or sidewalk at night. The law is not clear if riders will be required to have headlights or if reflectors will be enough. Failure to have to have illumination devices could result in a ticket that requires the rider to attend a bicycle safety class.
Smoking will not be allowed in any vehicle if minor children are inside. The prohibition applies regardless of whether the vehicle is in traffic or parked. Police will not be able to stop a car just to check for smoking, but then can cite the driver if they pull them over for another reason. Drivers could face fines of up to $100.
The California minimum wage will increase by 50 cents to $8 per hour. California workers will have one of the highest minimum wages in the country.
A new law will allow consumers to redeem gifts cards with balances of less than $10 for cash.
Cities and counties will now be required to designate areas where homeless shelters can be constructed without the requirement to obtain a conditional use permit. The law is designed to remove zoning ordinances that block construction of homeless shelters.
Courts will now be able to require parents or guardians of gang members to attend parenting classes. The classes are designed to prevent first-time offenders from committing additional crimes.
Cities and counties will not longer be allowed to require landlords to verify the citizenship of their tenants. This law was a direct result of an attempt by a city in Southern California to require landlord to screen the citizenship status of potential tenants.

The information provided in this article is general information only and is not intended as legal advice. DO NOT use this information as a substitute for obtaining qualified legal advice or other professional help.

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

Do I Really Have to Pay Calfornia's Minimum Corporate Tax?

2007-12-23T12:13:00.000-08:00

Question: Suppose I live in California, and I want an LLC in Nevada or Colorado. Is there a way to set it up so that I don't have to pay the idiotic $800 California fee?

Answer: I often hear radio commercials advertising the purported benefits of incorporating in states like Nevada. Before do that, you should consult with legal counsel and a qualified tax advisor before making any decisions. You mentioned forming and LLC, but many small business owners find that forming an S corporation is better for income tax purposes.

Whether you have to pay the minimum California franchise tax depends upon whether you are doing business in California. Even if you form an LLC or corporation in another state, you still have to register and pay the taxes on your California income if are regularly doing business in California. If you have an address, employee, inventory, bank account or significant business contacts in California, you are probably doing business here as defined in the law.

One advantage to forming a new California is that the corporation does not pay the $800 minimum for its first tax year. While it is called a "minimum franchise tax", it is really a minimum income tax payable in the first quarter of each taxable year (except for the first taxable year. By the time your corporation is in it's second taxable year, you will hopefully be making enough money so that you tax bill is higher than just the $800 minimum anyway. New California LLCs do not receive this benefit.

If you are going to incorporate in California and do business primarily in California anyway, there are few reasons not to form a California corporation.

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

Attorney Carl Starrett Obtains $96,000 Judgment

2007-12-03T12:29:00.000-08:00

The Law Offices of Carl H. Starrett II has successfully obtained a default judgment against CVT Nationwide, Inc. ("CVT") of Seal Beach in the amount of $96,011.85. The Court entered the judgment on November 29, 2007.

The lawsuit was filed on June 28, 2007 on behalf of Guava Express, Inc. ("Guava Express"). The lawsuit alleged that CVT failed to pay Guava Express for receiving the automobiles and preparing them for overseas shipment. Guava Express received the automobiles, built interior wooden structures for shipping containers and loaded them with the automobiles. CVT would then arrange for the delivery of the containers to the dock for shipping from Hawaii to California.

CVT failed to respond to the lawsuit and the Court entered a judgment for the balance owed of $87,000 plus interest, legal fees and court costs.

Civil judgments in California collect interest at the rate rate of 10% per year. In this case, interest will accrue at the rate of $9601.19 per year or $26.30 per day until paid. Efforts to collect the judgment will begin immediately.

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

The Lender Foreclosed, Now What?

2007-12-02T19:23:00.000-08:00

Question: My landlord's bank foreclosed on the house I am renting and he didn't tell me. What happens next?

Answer: According to RealtyTrac, a company that tracks foreclosures across the country, nearly 1.8 million foreclosures have been filed nationwide so far this year. Foreclosures in October 2007 were up 94% over the same period last year. Though no firm statistics are available, renters are increasingly left without a place to live through no fault of their own. In many cases, a financially troubled landlord will pocket the rent and stop making the payments while the bank takes back the property.

Once a foreclosure sale takes places, the tenant has no guarantee of a place to live. You should contact the lender or new owner right away to discuss a possible rental agreement. The new owner might want to begin collecting rent right away, but bank-owned properties often are easier to sell when vacant. If you cannot reach an agreement with the bank, begin looking for a new place to live immediately.

If you do not leave voluntarily, California law allows the bank or new owner can serve you with a 30-day Notice to Quit. If you do not leave voluntarily, the bank can file an eviction lawsuit against you. You have no legal right to remain in the property and even the mere filing of an eviction lawsuit against you can damage your credit rating, so moving out voluntarily is your best option.

Lawsuit Filed Against Pavel's Backerei

2007-11-18T18:11:00.000-08:00

The Law Offices of Carl H. Starrett II has filed a lawsuit against Paul D. Wainscoat d.b.a. Pavel's Backerei, located in Pacific Grove. The lawsuit alleges that Mr. Wainscoat ordered custom bread bags for his restaurant from J.T.R. Area Distributors, Inc. ("JTR") and subsequently refused to pay for the bags he had ordered.

The lawsuit alleges that Mr. Wainscoat entered a written contract to purchase the customer bread bags from JTR. The lawsuit further alleges that Home Furniture Gallery failed to pay for Stanton for over $11,000 in merchandise.

JTR's lawsuit is currently pending in the Monterey County Superior Court and seeks damages of $11,056.90, exclusive of interest, court costs and legal fees. JTR is also seeking interest at the rate of 10% per annum.

Lawsuit Filed Against Home Furniture Gallery, Inc.

2007-11-15T14:13:00.000-08:00

The Law Offices of Carl H. Starrett II has filed a lawsuit against Home Furniture Gallery, Inc. ("HFG") of San Jose, alleging that HFG failed to pay for merchandise that it purchased from Stanton International ("Stanton"). The lawsuit also names Phuong A. La a.k.a. John La as a personal guarantor of the debt owed to Stanton by HFG.

The lawsuit alleges that Home Furniture Gallery, Inc. entered a written contract to purchase merchandise for its two stores from Stanton. The lawsuit further alleges that Home Furniture Gallery failed to pay for Stanton for over $12,000 in merchandise.

Stanton's lawsuit is currently pending in the Santa Clara Superior Court and seeks damages of $12,136.00, exclusive of interest, court costs and legal fees. Stanton is also seeking interest at the rate of 10% per annum.

Lawsuit Filed Against Golden Blinds & Designs

2007-11-06T12:06:00.000-08:00

The Law Offices of Carl H. Starrett II has filed a lawsuit against Claudia P. Escobar dba Golden Blinds & Designs ("Escobar") of Spring Valley, alleging that Escobar failed to pay for merchandise that Escobar purchased from Skandia Window Fashions ("Skandia").

The lawsuit alleges that Escobar signed a written contract to purchase merchandise for her store from from Skandia. The lawsuit further alleges that Escobar wrote NSF checks to Skandia totalling more than $9,000 that have not been paid.

Skandia's lawsuit is currently pending in the San Diego Superior Court and seeks damages of $9,277.45, exclusive of interest, court costs and legal fees. Skandia is also seeking interest at the rate of 10% per annum.

Fires and Politics

2007-11-05T09:42:00.000-08:00

Whenever you have a tragedy like the current fire situation, you have multiple opportunities for politicians to get in front of a microphone or a TV camera to blather on about what is being done by the people who are actually working to save homes and protect lives. I really don’t mind, because they can actually get things done. This blog entry is really a report card on some of our local representatives:

BACKGROUND

After the 2003 Cedar Fire was finally put out, a great deal of criticism was raised about the response to the fires. Most of the criticism focused on lack of preparation, lack of coordination and lack of resources. A report by a blue ribbon commission contained many recommendations that were eventually adopted. Overall, the general consensus seems to be that response to the fires this year has been vastly superior to the response in 2003.

One of the biggest criticisms raised was the fact that a vast array of military fire fighting resources were available, but not put to use. Both the U.S. Navy and the U.S. Marines have large installations and aviation assets like the CH-46 Sea Knight and CH-53 Sea Stallion helicopters which can carry water-dropping buckets. At the time of the 2003 fires, military radios were not compatible with the frequencies used by state and local fire agencies. Military polices at the time also prohibited use of their resources until use of civilian resources had been maximized. That has since changed.

FAST FORWARD TO THE PRESENT

On Monday morning, I got a little irritated when I started hearing media reports about the early lack of use of military aircraft to fight the fires. So I decided to call some of my local representatives about this issue. My plea was for them to pull whatever strings they could to get the necessary approvals from President Bush of whoever needed to sign off on the use of military aircraft to fight theses fires. Here are the responses I got:

Duncan Hunter: Duncan Hunter represents my district in Congress. When I called his local district office, his staff told me the he was “already on it” and rattling of a list of things that he had already done. Now I will admit to being a little biased because he is a fellow Republican and my leading choice for President, but that was exactly the response I was looking for. Mr. Hunter gets an “A” for being proactive

Barbara Boxer: Barbara Boxer is the junior Senator from California. The staff member I spoke with there wasn’t even aware that local military aircraft available to fight fires. They noted my ZIP code and promised to “pass the message along”. Ms. Boxer finally made an appearance in San Diego 3 days after the fires started. Ms. Boxer gets a “D” for being uninformed and slow to respond.

Diane Feinstein: Diane Feinstein is the senior Senator from California. Ms. Feinstein’s staff was waiting for a formal request from Governor Schwarzenegger for activation of military units. Say what? You’re going to stand on protocol when lives and property are on the line? Governor Schwarzenegger had already made a formal request and had activated National Guard troops to help. Ms. Feinstein gets an “F” for not only being uninformed, but for waiting to be for a formal request for help before acting. That sounds like what FEMA did when talking to the state governments after Katrina.

I expect my elected officials to be informed and proactive…to anticipate problems and try to deal with them before they grow out of hand. In this case, two of our leaders failed and one came through. Fortunately, I do not believe we can blame any exacerbation of fire damages on the lackluster senators from California.

Leaving After a Foreclosure

2007-10-29T13:39:00.000-07:00

Question: I am losing my house in foreclsoure. After the foreclosure the sale, will I get some kind of notice to vacate or is the sale date the date to be out by?

Answer: After the foreclosure say, the new owner will serve you with a Notice to Quit if you are still in the property. It is a 3-day notice if you are the former owner(s) and a 30-day notice if you are a tenant of the former owner(s).

If you still have not left after the expiration of the notice period, the new owner can file an eviction lawsuit against you to get and order for the Sheriff to remove you. Eviction lawsuits can take a couple of weeks or longer depending on the particular aspect of the case.

Chapter 7 and Keeping Property After Bankruptcy

2007-10-20T07:53:00.000-07:00

Question: If I file a Chapter 7 bankruptcy, will i lose my home or car?

Answer: A person who files for bankruptcy may exempt certain items from the bankruptcy. In most cases, this lets you keep your home, your car, your furniture, your household items, your retirement and most, if not all, of what you have. Different states have different allowances for exemptions. You also can keep assets that have no equity, such as a car that's worth less than is owed on it, or a house where the mortgage is higher than the property value. Even if there is a small amount of equity, you can normally keep the asset.

While bankruptcy is a federal law, it is generally left for each state to decide what property that a debtor can keep after filing a Chapter 7 bankruptcy. California homeowners filing for Chapter 7 bankruptcy can protect (or exempt) anywhere from $50,000 to $150,000 of their equity depending on a number of factors that include age, marital status and the length of time they have owned the home. If the equity in the debtor's home is less than the allowed exemption amount, the debtor can keep the house simply by continuing to make the mortgage payments.

If the debtor's equity in the particular asset exceeds the allowed exemption, the property is called "nonexempt" and subject to possible liquidation (sale) by the appointed Chapter 7 trustee. Whether the trustee actually sells the asset depends on how much money the sale might generate. If the asset will not generate sufficient net proceeds to justify the sale, the trustee will often "abandon" the asset and ownership will revert back to the debtor. In other cases, the debtor can negotiate with the trustee to buy the asset back by paying the trustee the an amount equal to the nonexempt equity in the property.

Exemption planning and determining what assets you can keep after a bankruptcy are among the primary jobs of a bankruptcy attorney. You should consult a local bankruptcy attorney for further assistance.

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