San Francisco Bankruptcy Lawyer Blog

In self-portraits, the artist looks at herself and sees her own beauty. She says she is worth painting. Filing for bankruptcy seems like the end of a book, but in accepting failure, do not reinforce old failures by doing things the same way. Take advantage of programs to save. Work more than one job to stay away from unproductive activities like depression.

Bankruptcy, though a serious situation, is a small thing compared to the rest of life. Do not let a small thing limit or intimidate. In bankruptcy, the petitioner has to declare all his assets and debts for the public to view. This may seem like giving part of the soul for people to judge. This may take away the fairy tale ending of growing up to own a house, have a family with two kids and a dog, and working a long term career. But, it is not that the story is not true. Like it is not that there is no Santa Claus, but a person can become Santa Clause by making the magic for himself.

Bankruptcy may seem like a fearful process, but fear is just false evidence appearing real. There are many people who go through bankruptcy and come out happy. Use optimism to choose happiness, rather than think it is something to accomplish. John Barefoot of Duke University reported in the May 1998 issue of Brain/Mind Bulletin: People with increased levels of suspiciousness, cynicism and hostility died sooner than all others.

Continue reading "Self Portraits" »

On January 30, 2010, Kimberly Wiefling, Global Business Leadership Consultant gave a seminar on "Creating a Vision for Your Future" in Redwood City, CA.

Wiefling discussed the brain and how the brain is not alert or aware of everything at once. There is the example of people who buy a new car and suddenly see everyone else driving the same car. The brain notices when something is important to someone. The brain filters things that are aligned with a dream. For example, when unemployed, be specific on the job sought in order for others to assist. People assist when they recognize patterns. If someone says he is looking for any job then that person will have a harder time finding a job rather than someone focused on a particular field.

It takes a longer time to find success when the brain spends too much time paying attention to the meaningless. This means when depressed about finances, spend less time reading other people's FaceBook pages and getting jealous of their families, friends, vacations, jobs. There is no need to compare with others because it is unknown the suffering others have gone through in order to achieve their goals, and it is unknown how the materials they exhibit on the outside actually affect their joy on the inside.

Wiefling's presentation pointed out that Shelly Taylor of UCLA and Jonathan Brown of SMU reported in Brain/Mind Bulletin in August 1988 that people who score high on mental health have the following illusions:

• Overly positive views of themselves
• Convenient "forgetting" of negative facts about themselves
• Illusory beliefs about having more control than they do have
• "Unrealistic" optimism about themselves
• "Unrealistic" optimism about the future in general
• "Abnormal" cheerfulness

Continue reading "Impossible is Only a Measure of Difficulty" »

In January 2010, the Federal Reserve announced new rules regulating credit cards that went into effect February 22, 2010. Credit card issuers will incur costs to modify existing billing and information systems to comply with the new card reform requirements likely resulting in reduced revenue. The new rules include the following provisions:

• Credit card companies must give 45 days' notice prior to any increase in or change to (a) a cardholder's interest rate, (b) certain fees associated with a credit card, or (c) a card's basic terms;
• Interest rates may not increase for the first year after a cardholder opens an account;
• Card issuers will not be allowed to establish minimum interest rates;
• Credit card fees may not exceed 25% of a cardholder's credit limit; but, this does not apply to penalty fees;
• Credit card companies may not automatically enroll cardholders in programs that charge regular fees for exceeding the credit limit;
• Monthly statements must indicate how long it will take a cardholder to pay off the balance while making only minimum payments;
• A card issuer must deliver a credit card bill to a cardholder at least 21 days prior to payment being due;
• Credit card issuers may only charge interest on balances in a cardholder's current billing cycle.

The rules seek to reform credit card issuers from opening card accounts or increasing credit limits for consumers without considering the ability of the consumer to make the required minimum payments under the account. A credit card issuer will need to have policies on reviewing information about a consumer's income, assets or current obligations, or to issue a credit card to a consumer who does not have any income or assets.

Cardholders will benefit from increased account disclosure requirements and the restriction or prohibition of historical credit card practices that cardholders. Credit card issuers may require higher interest rates or assess new or additional fees in connection with credit card accounts, and engage in greater up-front risk profiling of applicants to reduce credit availability to risky cardholders.

Continue reading "2010 Credit Card Rules" »

Review all estate planning documents to determine if any changes are needed as a result of the federal estate tax and the federal generation-skipping transfer (GST) tax repealed for estates of decedents dying in 2010, noting both taxes are scheduled to return in 2011. Married couples might want to divide assets to maximize federal basis increase.

In 2010, there is no increase in the cost basis of assets to market value at death in calculating capital gains tax on property inherited. The automatic "step-up" in basis for assets owned by a person who dies in 2010 has been eliminated and replaced with a "carryover basis" for capital gains tax purposes. With carryover basis, beneficiaries inherit property with the same property cost basis as the decedent. The executor of an estate can allocate up to $1,300,000 of basis increase (plus, unused built-in losses and loss carryovers) to any property in an estate and another $3,000,000 of basis increase to property passing to a surviving spouse outright or in qualifying trusts. In 2010 estates will escape federal estate tax, but potential capital gains liability for heirs could exceed what the estate tax would have been.

The federal gift tax remains with a reduced 35 percent tax rate, down from 45 percent. The repeal of the GST tax for 2010 creates an opportunity to make gifts in trust to children or grandchildren that may escape transfer taxes for future generations. Though, keep in mind the possibility of retroactive reinstatement of the GST tax.

Unless Congress provides otherwise, on January 1, 2011, the federal estate, GST and gift tax laws return to what they were in 2001 where there will be a federal estate and gift tax with an exemption of $1,000,000 and a top tax rate of 55 percent (plus a 5 percent surtax on estates from $10 million to $17 million), and a GST tax with an exemption of approximately $1,340,000 and a tax rate of 55 percent.

Continue reading "2010 Federal Estate and Gift Tax Laws" »

The Department of Labor issued, in January 2009, model notices for employers to use under the COBRA subsidy extension: http://www.dol.gov/ebsa/COBRAmodelnotice.html. Subscribe to DOL guidance on the COBRA premium subsidy program at www.dol.gov/COBRA. A summary of the types of notices:

1. General Notice: Covered employees who experience a qualifying event after December 19, 2009 and on or before February 28, 2010, the employer must provide to all qualified beneficiaries, within the normal timeframe for providing a COBRA election notice, an updated General Notice that describes the extended COBRA subsidy period.
2. Premium Assistance Extension Notice: Individuals who already received a General Notice, the employer must provide an additional notice describing the extended COBRA subsidy period. The following groups of individuals must receive the Premium Assistance Extension Notice:
A. Individuals receiving the premium subsidy as of October 31, 2009;
B. Individuals who became eligible to receive the subsidy or experienced a termination of employment qualifying event on or after October 31, 2009 and who were not provided a notice that explained the information about the subsidy and the subsidy extension; and
C. Individuals who received the full nine months of premium assistance required before the extension, including those who (i) did not make any payment for a subsequent period of coverage, (ii) made a payment of 35% of the full COBRA premium (or some other amount less than the full COBRA premium), or (iii) paid the full COBRA premium required to maintain the coverage without the subsidy.
3. Alternative Notice: Employers covered by state continuation coverage laws, rather than COBRA, must provide assistance eligible individuals with a copy of the Alternative Notice within the normal timeframe for providing notice under state law.

The Internal Revenue Service issued guidance for an employer claiming on its federal employment tax return (Form 941) the credit for 2009 retroactive coverage from the subsidy extension for individuals who otherwise exhausted the subsidy period. Any COBRA subsidy credit for premium payments received in 2010 relating to retroactive coverage for 2009 attributable to the subsidy extension may not be taken by the employer on its Form 941 for the quarter in 2009 in which the coverage was provided. The employer either may take the credit for the quarter in 2010 in which the 35% premium payment was received from the eligible individual or a later quarter in 2010. If an employer chooses to reduce its payroll tax deposits for a quarter in 2010 in which it receives the 35% premium payment, the employer must claim the credit for the same quarter.

Continue reading "COBRA Subsidy Extension" »

The Securities and Exchange Commission (SEC) issued interpretive guidance in February 2009 requiring publicly traded companies to consider climate change impacts, such as physical damage it could cause, economic impacts of domestic and international greenhouse gas emissions-reduction rules.

Companies will start to discuss climate in risk factors, description of the business, legal proceedings, management's discussion and analysis.

When considering disclosure obligations, companies will consider whether the impact of existing laws and regulations on climate is material such as international accords and treaties relating to climate change. For instance, a company may face decreased demand for products that produce significant greenhouse gas emissions, or increased demand for products that result in lower emissions.

Green concerns are gaining momentum. In February 2009, the Los Angeles Times reported Tesla Motors announced a planned $100-million Initial Public Offering. Tesla Motors also recently posted an ad on www.acc.com that it is searching for a General Counsel. Though in September 2009, it announced it hired Jon Sobel to lead the legal team, Sobel apparently left the company in December 2009 after 4 months with no public explanation as to the reasons for his departure.

Continue reading "Climate Risk" »

States with budget shortfalls are increasing revenues without increasing taxes by pursuing unclaimed property. In Delaware, for instance, unclaimed property collections are the state's third largest source of revenue. A case pending involves McKesson, incorporated in Delaware, pharmaceutical distributor in North America. McKesson was the subject of a Delaware unclaimed property audit. The auditor focused on inventory-related property and used extrapolation to determine McKesson owed Delaware over $4.5 million in unreported unclaimed property, not including any penalties or interest. McKesson filed a declaratory action (McKesson Corp. v. Cook, Delaware Chancery Court, No. 4920 (filed Sept. 25, 2009)), challenging the assessment Delaware's characterization of the inventory-related property as unclaimed property, the extrapolation methodologies used by Delaware, and the constitutionality of Delaware's actions on procedural and substantive due process and unlawful taking grounds.

Unclaimed property consists of property held by a business for a statutorily mandated holding period subject to escheat when there is no communications with the true owner.

Examples of unclaimed property:

• Uncashed travelers checks;
• Uncashed customer credits;
• Unused gift certificates;
• Uncashed employee payroll checks;
• Uncashed vendor checks;
• Uncashed dividend checks;
• Amounts distributable from employee benefit plans.

Businesses are responsible for reporting unclaimed property to the states annually. Some states require the business to communicate with the rightful owner prior to the filing of the report.

For a consumer to reduce the amount of unclaimed property, pay for services at the time of use instead of making pre-payments, such as purchasing gift cards.

With depressed real estate and capital markets, capital is used to purchase defaulted commercial real estate loans at discount.

Though there are returns in this type of investment, when buying distressed mortgage debt, do not focus entirely on price. Do a valuation on a net present value basis or capitalization rate basis, studying the cash flow and liquidation value of the real estate, the expenses, and time it will take to complete a foreclosure to convert the loan into real estate ownership.

Depending on the quality of loan documents and history, the borrower may have claims that can delay a foreclosure on the collateral and reduce the return to the loan buyer. While the real estate asset securing the loan is the source of repayment, the buyer of loans is not buying the real estate collateral. Though lender rights include the ability to foreclose on the mortgage and become the owner of the real estate, the loan buyer is acquiring the loan documents.

Sometimes the real estate collateral may need to be recovered out of a borrower bankruptcy, delaying the time to market and sell the real estate. The lender wants to avoid the borrower filing bankruptcy because of an automatic stay against the lender going for a mortgage foreclosure. Look at the loan documents to see if there is a "carve-out guaranty," where the person/entity controlling the borrower agrees to become liable on a recourse basis for the loan. The guarantor will become personally liable for the loan if the borrower files bankruptcy. These guaranties have been found enforceable by courts and are effective to deter bankruptcy filing and enhance the mortgage loan value.

Continue reading "Buying Loan Notes is not Buying Real Estate" »

On October 2, 2009, the New York Times reported on "Defying Knockoffs and Inviting Them". In the retail business, a company may fall into bankruptcy if it does not prevent knockoffs to protect its fashion designs.

Companies can apply for design patents on fashion designs, but it may be expensive if the designs are not long-term or high volume sales. Design patents may not be recommended for short term or seasonal designs. Cost for preparing and filing a design patent application is about $3K. The application is not as expensive as a utility patent application because it consists of drawings with 1 - 2 page descriptions, and does not require the drafting of claims. Time to issue is probably 6 - 12 months, assuming there are no conflicting designs.

Design patents only cover the ornamentation of the designs. For example, a t-shirt may have 6 hearts in a row - the design patent protects the way the item looks. If someone else did a t-shirt with a pattern different from the design patent (for example, 5 flowers in a row instead of 6 hearts in a row), then there would not be protection because it is not an exact knockoff. The company filing for intellectual property protection would need a design patent application for each different pattern.

Design patents provide similar protection as copyrights. Copyrights are traditionally for text but are now being used for designs. Copyright is intellectual property that gives the author of an original work exclusive right for a certain time period, including its publication, distribution and adaptation, after which time the work enters the public domain. The main difference between copyrights and design patents is that the damages for patent infringements might be more. A copyright registration for the assertion of rights requires the same specimens as for a design patent filing - a clean graphics of the design, both alone and on the shirt.

Design patents do not cover functions. For example, if a shoe lights up, for the protection of the shoe lighting up function, the company would need to file a utility patent. A utility patent protects the way an invention is used and works. Utility patents cost $6K - $8K. The filing requires drafting claims and figures. The utility patent would protect the function no matter the design. The utility patent would probably also protect the designs themselves if the company filing for intellectual property protection drew the designs into the patent application. The company filing for intellectual property protection would need different claims for each type of function such as a claim for a shoe lighting up when two people are close to each other, and another claim for lighting up when a person is running. The application needs to indicate how the function is done - the function process should be novel. Obtaining patent protection might not be worthwhile if the patent office asked to narrow the claims because the company filing for protection is not protected unless another party does the process exactly. For example, if a claim for a lighting up function occurs through electric circuitry, and another party does it through chemical process, there is no infringement protection.

Continue reading "Intellectual Property Protection for Fashion " »

Jumpstart.org believes that financial literacy begins when people are students in high school. For children to become wise on money, and not fall into bankruptcy, teach them to balance a checkbook and manage earning, spending, saving, and investing. Parents become an example by letting children take part when reviewing their retirement savings goals.

In October 2007 the Department of Labor (DOL) released final regulations governing the use of Qualified Default Investment Alternatives (QDIAs). The Pension Protection Act of 2006 (PPA) added ERISA §404(c)(5) to broaden the relief for plan fiduciaries under ERISA §404(c). The rule extends the fiduciary relief under ERISA §404(c) to situations in which a plan participant fails to choose how to invest funds, and the plan directs that the account be invested in a QDIA.

If a participant receives notice describing the default investment that will apply if he/she does not give investment instructions, and the default investment constitutes a QDIA, the participant will be treated as having exercised control over the assets that are invested in the QDIA.

A fiduciary of an individual account plan will not be liable under ERISA for any loss resulting from the investment in a QDIA, if the following requirements are met:

1) Participants receive advance notice at least 30 days before the first default investment, or at least 30 days before the date of plan eligibility. Participants must receive an annual notice at least 30 days in advance of each subsequent plan year.

2) Participants given the opportunity to direct their investments and failed to do so.

3) The assets must be invested in a QDIA. There are four alternative types of investment products that meet the definition of a QDIA. The alternatives: (a) product with a mix of investments that takes into account the individual participant's age, retirement age, or life expectancy, such as a life-cycle or targeted retirement date fund; (b) product with a mix of investments that takes into account the characteristics of a group of employees as a whole, such as a balanced fund; (c) investment service that allocates contributions among existing plan options to provide an asset mix that takes into account an individual participant's age or retirement date, such as a professionally managed account; (d) capital preservation product, but only for the first 120 days of participation. Absent participant direction, the plan fiduciary must redirect the participant's account balance into one of the above three QDIA categories after the first 120 days of participation.

4) Plan fiduciaries must provide participants investment information such as fund prospectuses, proxy voting materials, and fund performance and expense information for the QDIA into which a participant's assets will be defaulted.

5) Participants must have the ability to direct the investment not less frequently than once in any three-month period.

6) A broad range of investment alternatives must be offered.

Continue reading "Qualified Default Investment Alternatives " »

According to consumerjungle.org, 50 common financial mistakes include: not having a savings account, buying too soon--that is, buying something on credit instead of waiting until the money saved up, not having emergency savings, not saving early enough in life for retirement, lack of budgeting, following bad investment advice, not knowing the financial consequences of DUIs, drunk driving, speeding, etc., not taking advantage of an employer contribution to a retirement plan.

Choosetosave.org is a web site that offers financial literacy to debtors. It offers calculators, savings tips, and investment strategies.

As part of the Pension Protection Act of 2006 (PPA), employers have been helping employees choose to save by automatically enrolling new hires to 401(k) plans beginning January 1, 2008.

Employees who do not want to be part of a retirement plan should watch out for employer notifications on (1) their right to opt out of the plan, (2) to change their deferral amounts and investment allocations and what the default investment will be if they fail to do so. Employees automatically enrolled may revoke the enrollment within the first 90 days and receive a refund of deferred amounts as current taxable compensation without the 10% early distribution penalty excise tax.

Employers with automatic deferral must set a first withdrawal minimum of 3% to 10% of pay and must escalate at a rate of at least 1% per year so that the employee is deferring at least 6% after the third year.

Continue reading "Automatic Enrollment in 401(k) Plans" »

The following is a fictitious scenario:

Ted announces on LinkedIn that his job is being eliminated. Ted came in as a temp at Formaldehyde 4 years ago. Ted graduated from a nontraditional college. It was after his divorce that he went back to school. He has a 28-year-old daughter, Stacey, who lost her inside sales job in a prior round of layoffs. Ted remarried two years ago to a woman he met on match.com. It must be frustrating for Ted because his wife also lost her job in 7 months ago. She was in business development, and has not landed. One company made her go through 4 rounds of interviews before rejecting her. But, she makes every moment belong. She started making furniture out of wine barrels, developing an unbelievable web site with a shopping cart to market the chairs and tables. They bought a truck to haul the furniture to wineries on weekends to find buyers. His wife also passed a life insurance exam and started selling policies to friends. She's still interviewing for business development positions, but she doesn't give unemployment a value out of proportion to its merit.

Continue reading "Thinking Outside the Box" »

On January 12, 2010, CBS Broadcasting Inc., with Associated Press contributing, made the Yahoo! buzz with its "Tough First Year For Yahoo's Tough-Talking CEO". One year after Carol Bartz was appointed CEO, Yahoo!'s share of the Internet search market has lagged behind Microsoft and Google. What are the factors that affect company downfalls?

One factor is employee performance. This is why companies are doing more employment background checks. With background checks, people should know what is in their credit reports, and make sure reports are not sent to people without permission. In Banga v. National Credit Union Administration, et al., 2009 U.S. Dist. LEXIS 93449 (N.D. Cal. Oct. 6, 2009), the plaintiff brought suit alleging defendant Equifax furnished her credit report to multiple companies without a permissible purpose in violation of the Fair Credit Reporting Act ("FCRA"). Permissible purpose means that any consumer reporting agency may furnish a consumer report to a person which it has reason to believe intends to use the information in connection with a review or collection of an account of the consumer. It is not objectively unreasonable for a CRA to furnish a consumer report to the holder of a closed account.

Another factor affecting downfalls is the cost of workforce benefits. On December 19, 2009, President Obama signed the Department of Defense Appropriations Act, 2010 (the DOD Act), extending the COBRA subsidy program through the end of February 2010 to 15 months. The House of Representatives passed the Jobs for Main Street Act of 2010 expanding the COBRA subsidy program class through the end of June 2010 if enacted. The extension will be more costly for employers who let go of workers.

But pessimism does not seem to confront a company that stays concerned with investor relations. For example, Omnicell, Inc., a provider of systems and software solutions focusing on patient safety and operational efficiency in healthcare facilities announced in its October 22, 2009 earnings release that revenue for the third quarter of 2009 was $54.0 million, up $1.3 million or 2.5% from the second quarter of 2009. Part of its success may come from its corporate governance. Its whistleblower policy allows for not only employees, but also outside parties party, such as vendors, consumers, stockholders or competitors to report accounting or auditing matters. Omnicell products allow nurses, pharmacists, and other medical professionals to control their inventory, medication use processes, and workflow.

Continue reading "Factors Affecting Company Downfalls " »

On January 12, 2010, Associated Press reported in "STIMULUS WATCH: White House changes job-count rule" that the White House abandoned its method of tracking jobs under President Barack Obama's economic stimulus, making it difficult to count jobs saved or created with the $787 billion in recovery money.

But, the New Year appears to be bright for some job seekers in the San Francisco Bay Area. On January 12, 2010, Harris Stratex had 14 positions open in San Jose, CA on its web site. Harris Stratex Networks, Inc. provides mobility and fixed network applications. Its products fall under these categories: wireless transmission, voice compression, network management, WiMax broadband. On December 16, 2009, Harris Stratex announced that Melita Plc, a joint venture between GMT Communications Partners, MC Venture Partners, Gee Five Ltd., selected the NetBoss XT® resource management solution to manage its 3G mobile network, and installed Harris Stratex Eclipse™ radios for IP connectivity. From its Corporate Governance policies, the management at Harris Stratex seems to care about ethics, integrity, and honesty in its decisions; and seems forward-looking in its initiatives on protecting the environment, with compliance on Europe's Waste Electrical and Electronic Equipment directive.

Jobs creation remains a top concern for 2010. Edwin Duterte started pinkslipmixers.com to help people network and share jobs online and offline. The January 2010 live event was held in Palo Alto, CA with recruiters from Google and Tesla. The next live event is scheduled at PACIUGO Gelato, Hermosa Beach / Pier & Hermosa Ave., 1034 Hermosa Ave., Hermosa Beach, California 90254 on February 23, 2010. A resource for job tallies is Recovery.gov.

Continue reading "Job Counting" »

Lawsuits may cause depression when there seems no end to the dispute. Depression is the opposite of vitality not happiness. Sadness goes away whereas depression affects concentration, and is not about the moment but the past. Memories of criticisms stay longer.

People in litigation may get caught up in negative thinking created by anxiety, and then lie, cheat, or steal, feeling helpless with no self-esteem to generate the things they want. Continue on when there are no alternatives. Resolving a lawsuit requires accurate thinking. Believe in possibilities even when they are not seen.

In a lawsuit, mediation is a confidential process to settle differences unencumbered by courtroom procedures. Mediation empowers parties to retain control of decisions. The mediator is a neutral third party who does not impose any outcome. In Alameda Superior Court, there is a list of panel mediators for parties to choose from who do not charge for all their time in preparation or facilitation. These mediators qualify for the panel after a 40-hour training on conflict and communication, continued training updates in mediator issues, and mediation experience in at least five civil cases.

Mediation starts off with both parties sending the mediator a brief. The brief may be any length, even a one-page letter. Because not all mediations result in settlements, the parties should be careful not reveal any information they do not want discovered by the other side. On the day of the mediation, usually the parties begin in the same room, summarizing their view of the facts to the other side and the mediator. Then, they may split into different rooms with the mediator shuttling back and forth between the rooms presenting settlement proposals.

Continue reading "Mediation" »