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by Francine Traiger Poor

If you've faced a financial catastrophe, or just fallen behind on some bills, you're well aware that debt collectors are eager to collect those payments. But some collectors go over the line, threatening to have the person arrested, making improper bank withdrawals, intimidating people and making harassing phone calls. Many debt collectors buy old debts from companies or lenders for pennies on the dollar. For them, it’s a business transaction. They are doing whatever they can to get you to pay the debt.

Ethical debt collectors are necessary. According to one study, the collection industry saved the average American household $351 in 2005. That is how much money households would have spent if businesses were forced to raise prices to cover bad debt. The bottom line here is that if you owe money, you should make every effort to pay off the debt.

But you still need to know your rights. "Most people are not aware of their rights. And unfortunately debt collectors take advantage of that fact," says Joe Ridout of Consumer Action.

The Fair Debt Collection Practices Act requires that debt collectors treat you fairly. This doesn't mean you won't have to pay your legitimate debt. But here are some basic rights:

1.    A debt collector cannot call you before 8 a.m. or after 9 p.m., unless you agree.

2.    You cannot be contacted at work if the collector knows your employer disapproves.

3.    If you don't want to hear from a debt collector, write a letter telling them to stop. By law, they have to. Remember, the debt won't go away and you can still be sued.

4.    The debt collector can contact your attorney -- if you have one. If not, your friends and family can be asked about how to get in touch with you.

5.    A debt collector can't misrepresent the amount of your debt.

6.    A debt collector cannot use profane or threatening language

7.    Debt collectors can't say that they will put a lien on your property or file a lawsuit unless the agency really means to do that and it's legal.

8.    Collectors can't legally claim federal benefits, such as Social Security or your retirement accounts, like your IRA or 401(k). The exception to this rule is federal student loans. If you’re delinquent on those, debt collectors can garnish your Social Security wages and prevent you from renewing any state licenses.

Once you're contacted by phone, you have the right to get a notice that outlines your debt, who you owe money to, and what action to take if you don't owe the money. Keep in mind that a debt collector can collect a debt owed by an ex-spouse. If the debt was incurred while you married, you may be liable for the debt after a divorce even if the divorce papers state your spouse is responsible for paying off the debt.
If you don't owe the money, dispute the debt. A debt collector must send you written notice telling you the amount of money you owe and the name of the creditor. If within 30 days of receiving this notice you send a debt collector a letter stating you do not owe the money, a debt collector may not contact you. It's a good idea to send this letter certified mail, so you'll have proof that the debt collector received it. A collector could renew collection activities if proof of the debt, such as a copy of a bill, is sent to you.

Keep in mind that some debt has an expiration date. There is a limit to how long collectors can legally collect your debt. Generally this limit, which is called the statute of limitations, is 6 years, but it can be longer. Be careful not to accept new credit offers from an old creditor you never paid. Once that creditor renews your credit relationship, the clock starts ticking all over again on the statute of limitations. Also, according to federal law, you have no legal obligation to pay any debt that has had no activity in the last 7 years. There’s still a moral obligation to be a good citizen and make good for the debt that you have, but you’re not bound to pay it according to the law.

If you think you've been treated unfairly by a debt collector, take action and contact an attorney. Once you have an attorney, a debt collector must contact the attorney, rather than you. An attorney may be able to answer questions regarding your rights under the Fair Debt Collection Practices Act and specific debt collection laws in your state.

Financial Management in Troubled Times

Today, the best thing you could be doing for the economy is to spend as you normally do in good times. With today's economic climate, it is difficult to do what should be done. We don't know from day to day whether we still have a job or our spouse does and we do not know what the prices of necessary items will be over the next week or so. For these reasons, people are understandably cautious with their money today and for good reason. To help you get through this trying time, I offer the following suggestions.

CREDIT CARDS

Do not use credit cards to see your way through these times. They will only prolong your pain and may cause you more pain in the end. If you cannot pay the entire balance on the credit card when it comes in monthly, cut up those cards and do the best you can to pay off the balances as soon as possible. Credit cards can be a wonderful thing in the right hands, but an unbelievable disaster in the wrong hands. If you use a credit card for convenience and pay the bill each month, you get to use the credit card company's money for about 30 days or so without paying any interest. On the flip side of that is when you do not pay the card in full each month and get stuck with an 18% to 23% per year interest charge. Do not do it. That interest charge could be used for necessities. If you are in this predicament, call the card company and ask for a lower interest rate or look for a company with a lower rate and transfer your balances to the new company.

MORTGAGES

Some people find themselves falling behind on their mortgage because they took out the mortgage or refinanced it when times were good and their incomes were higher for various reason such as overtime pay or multiple jobs and so on. Today, they find themselves trying to keeping up with the mortgage to save their house. If you are having trouble keeping up, talk to your bank or financial institution. Ask if they can refinance the loan to stretch out the payments longer or give you a better interest rate. Do not ignore the problem; it will undoubtedly result in a foreclosure on your home.

TAXES

If you are still working, check with your payroll department to determine what exemptions you have selected for tax purposes. You may want to increase your exemptions to lower the amount taken for taxes, especially if you usually get a large refund at the end of each year. This will give you the money now, when you most need it rather than to wait until the taxes are done in April. While I am on this subject, also consider the use of a 401(k) plan if your company offers one or and IRA if they do not. This also reduces you taxes because the money invested is taken off of your income before taxes are calculated. It may not help your immediate need for cash but if you can afford to do it, it certainly will help your future need for money when you retire. This is also a good time to get your funds into the stock, mutual fund and bond market, since they are at lows that we have not seen for years. Investing the 401(k) money in the market over the long term should reap significant benefits for the patient investor. Once the money is invested, leave it alone until retirement. Withdrawing the money prematurely results in excessive taxes and penalties.

SHOPPING

Shopping for food, clothing, and other essentials is an important activity in conserving one's assets and cash. Buy only what you need, do not waste and forgo that which is a luxury, for now, to get by during these times. The important thing is knowing the difference between what you need and how much and a luxury.

HELP

If you are having problems and need some advice, please call us for an appointment to discuss your particular circumstances. We are eager to help. Our free half hour consultation should be sufficient to point you in the right direction or determine how we can assist you further.

New Child Support Guidelines for 2009

By Francine Traiger Poor

In Massachusetts, the child support guidelines are used by the Probate Court to calculate child support whenever the parents of a child are no longer living together. This applies whether the parents of the children are married or unmarried, and in all temporary, permanent or final orders for current child support. In all orders where an order for child support is requested, a guideline worksheet must be filled out, regardless of the income of the parties.
By Francine Traiger Poor

On January 1, 2009, the guidelines will change. Although the amount of child support payed to the custodial parent will be different under the new guidelines, existing child support orders cannot be modified for three years unless there is a change in health insurance or a material change in circumstances.

There are, however, circumstances where the new guidelines will not apply. If any of the following circumstances exist, the court will be allowed to deviate from the guidelines: If,

        parties agree and court approves it
        child has special needs or aptitudes
        child has extraordinary medical or other expenses
        application of guidelines leaves a party without the ability to self support
        payor is incarcerated, is likely to remain so for 3 years and has no assets
        application of guidelines would lead to gross disparity in income
        parent has extraordinary medical expenses
        parent has extraordinary travel or other expenses related to parenting
        application of guidelines may adversely impact re-unification of parent and child
        application is not in the best interest of the child.

There are many changes in the child support guidelines. The new guidelines specify how military pay, Social Security Disability Income and self-employment income should be accounted for. The new guidelines also recognize Massachusetts’ health insurance mandate and provide a larger benefit for health insurance premiums. The amount the non-custodial parent pays, in most cases, will be higher, but the custodial parent is no longer given a $20,000 credit. Below is a side-by-side comparison of the major changes in the new support guidelines.

For the full guideline text and worksheet go to: http://www.mass.gov/courts/childsupport/index.html

and for a video presentation of the Legal Ease show on the guidelines, click on Legal Ease above on this website and select the Guidelines show.

Estate Planning

Changes in Federal Estate and Gift Taxes

by Francine Traiger Poor, Esq.

If you give someone money or property during your life, you may be subject to federal gift tax. The money and property you own when you die, which is your estate, may be subject to a federal estate tax. However, there are times when these taxes apply and times when they do not . You should know how much money or property you can give away during your lifetime or leave to your heirs at your death before any tax will be owed.

Every American receives a "credit" against federal Estate and Gift Taxes. Most states also provide their own credit for state tax purposes. This credit is referred to as the "unified" credit because federal gift and estate taxation are integrated into one unified tax system. The unified credit plays a major role in estate planning because there is no estate tax for estates that are less than or equal to the unified credit. For tax years 2006 - 2008, the amount you can pass tax free to your heirs increased to $2.0 million for federal purposes and will increase again to $3.5 million in 2009. Massachusetts exemption is $1.0 million as of 2006 and thereafter. In 2010, the estate tax (but not the gift tax) expires; in 2011, the estate tax again becomes effective at the 2002 exemption level for deaths occurring in 2011 and thereafter, unless modified by Congress. The unified credit may be used for property left to any donee, either outright or in trust. In a typical estate plan, the unified credit amount is used by creating a trust for that amount for the surviving spouse during his or her lifetime. Upon the surviving spouse's death, the children would then become the beneficiaries of the trust. This trust is sometimes called an "exemption trust," a "by-pass" trust, credit shelter trust, or B trust. Regardless of the name of the trust, its purpose is to reduce or eliminate federal estate taxes for a married couple's estate. This type of estate plan sets up an irrevocable trust that will hold the assets of the first spouse to die. The amount transferred to the irrevocable trust usually will not be taxed for federal estate tax purposes when the second spouse dies.

You can effectively reduce or eliminate estate taxes with a little planning and the use of different types of trusts. Planning is a must. For example, a married couple’s estate of $4.0 million or less can be passed to their heirs complete free of federal estate taxes and the state tax can be greatly reduced by putting the assets of the first to die into a trust for the benefit of the children or some other beneficiary while still having the income from the trust used by the surviving spouse. Once the second to die passes on, that person’s assets will pass estate tax free if less than the exemption amount on the date of death. If this all happened in 2006 or 2007, a total of $4.0 million could be protected from federal estate taxes.

Consult your estate planning attorney for advice on how to minimize your estate taxes.