Conference nyoss1::market_investing

	Re. .0

	Your nodename suggests that you are in Canada, so the laws may be
	different there than in the US. 

	My question is that why wouldn't the govt (or for that matter any
	creditor) put their claim on the money that she would get from the 
	sale of the house? Even if she were to pass the amount to her son
	as a gift, I think there might be sufficient grounds for a tax court
	to overturn the gift and let the govt. get access to the money. 

    I wouldn't have anything to do with this deal!  The poor woman needs:
    1) a bankruptcy social worker, and 2) a different lawyer.
    
    /Charlotte

    re: .1
    
    The government isn't after her yet...but we know it's just a matter
    of time.  Which is why we are trying to plan this ahead of time...
    
    If she sold her house, declared bankruptcy, THEN if the gov't came
    after her, they would have no recourse.
    I doubt it would be legal for them to go after the gift she already 
    gave away.
    
    and yes...I am in LA BELLE PROVINCE!
    
    
    

    re: .2
    
    Thank you for your opinion, however it would be much more helpful
    if you could explain your position!
    
    This is exactly what i need...the pros & cons

	Re. .3 

   	> If she sold her house, declared bankruptcy, THEN if the gov't came
    	> after her, they would have no recourse.
    	> I doubt it would be legal for them to go after the gift she already 
    	> gave away.

	As you said in .0, she has not paid the taxes in 5 years. When the
	govt. does go after her, they are going to look at her financial
	transactions starting with at least those 5 years, possibly even 
	before. If they can show that the gift was given with a mal-intent,
	and I would think that they would have very good reasons for showing
	that, it is possible to get the gift annulled. 

	But then, I'm far from being a tax lawyer. 

	I do recommend that you advise her to cancel all her credit cards
	pronto. She deserves no "credit" for being so irresponsible. 
  

	To go from .5 million to nothing in 10 years, not pay any taxes, 
	and run up credit card bills, is not just bad management, but looks
	irresponsible.

	I would not get any of your, or her, finances in any way tied up
	together, either house, or gaurantor, or gift......nothing.

	Get a lawyer who will tackle her problems, without involving putting
	your name to anything.

	If you make a connection, you bet your bottom dollar the tax men and 
	creditors will follow it - and even if you can hide some of her money
	this way (which I doubt) it may cost you many $ and grey hairs to 
	proove it in court.

	Heather

    "she deserves no credit for being that irresponsible"
    
    interesting opinion...but let's not make judgements when have no facts!
    You would not be so quick to judge if you knew her background.
    but regardless...
    
    Why make it a formal 'gift'.  Why say she gave the money away at
    all?  She could have lost it, ate it, spent it, etc...
    
    Then surely the government couldn't go after her...go after who?
    
    Laura	
    

    
>    Then surely the government couldn't go after her...go after who?
 
	In the UK they would.

	They would trace the money she spent, they can look through bank 
	accounts, or anything else they want to trace, if she declares
	bankruptcy.
	The recievers duty is to ensure the creditors get as much of the
	money as they can.

	Just look what they are doing with Maxwell, tracing his private funds
	through every proffessional loophole he tried, including Lichtenstein.

	The Lloyds names would dearly love to put their assets in other peoples
	names. ie wives, children etc., but to do that would be classed as fraud

	I would also consult a criminal lawyer on whether this would
	consitute fraud in Canada if/when you were discovered.

	Heather

    re: .07
    
    I would like to aplogize to being defensive.  I know she is very	
    irresponsible.  I don't know what makes me want to defend her.
    Her situation is very grave...and I really need help.
    
    Sorry, and thank you
    
    Laura

	Laura,

	Help her by giving her moral support, helping her get a decent lawyer,
	and helping her pick up the pieces.

	But don't put your name to a method that looks to me as if you're
	trying to defraud the creditors, you could end up in serious trouble
	which will be of no help to anyone.

	Heather

    Short answer: don't do it!
    
    Longer answer:
    
    1.  Are you willing to be a criminal?
    
    	Leaving aside the question of whether the revenue agents would
    	find the "gift", you'll have to ask yourself whether you are 
    	willing to lie (probably at some point under legal compulsion 
    	to tell the truth, e.g. on a tax return or in court). I can 
    	assure you that governments have no sense of humor about taxes
    	or purjury.
    
    2.	Transfers are not likely to be sucessful
    
    	It's pretty clear that you could probably transfer small amounts
    	under the table (e.g. she buys you dinner at a fancy restaurant,
    	buys you magazine subscriptions, hands over small amounts of 
    	cash).  Any sudden wealth on your part will look suspicious.  In 
    	the US, banks and other institutions are obligated to report 
    	transactions over a certain amount (was $10,000 and may have 
    	changed downward recently)--but that doesn't mean that the banks
    	are guaranteed not to report transactions under that amount:
    	it might be easier for them just to send a tape with everything
    	on it.  So any substantial transfers are possibly visible.
    
    	Just exactly how was the house to be put in your name, according
    	to the lawyer?  Lawyers rarely advise criminal actions, so this
    	one may have had something in particular in mind.
    
    3.	You can't cancel the tax owed, I bet
    
    	In the US, bankruptcy does NOT cancel taxes owed--I don't know
    	the Canadian law, but I'd be surprised if it were different.
    	So bankruptcy would only cancel the credit-card dept.
    
    4.	What about the post-event situation?
    
    	With $25,000 you can't buy much of a house, unless you also 
    	get a loan and pay interest.  What kind of income does this 
    	person have to pay support and mortgage with?  
    
    	Even if you already owned a small house and she were to live
    	in it, in the US you'd have to charge rent or count the foregone
    	rent as a gift, possibly liable to gift taxes (though here there
    	is an exclusion).  How would this work for you?
    
    5.	Bad luck may not exist, but somehow it acts as though it's
    	contagious when people in trouble are involved.  I'd keep a
    	big distance between my financial affairs and those of a person
    	in this kind of trouble.
    
    Conclusion:
    
    I agree with the noter who said to get bankruptcy experts (both legal
    and social) involved.  You might also want to determine ahead of time
    how involved you want to be (pick a dollar amount, and figure out
    when you would cut your losses).
    
    
    Question:
    
    What's a "common mother-in-law"?  Do you mean that this is your
    father's common-law wife, but not your mother?
    
    		-John Bishop

    what's a 'common mother-in-law'?
    
    well...it's my boyfriend's mother.  We aren't married, but have been
    living together for so many years that the law considers us so.
    
    Since my boyfriend and I are 'common-law married', I consider his
    mom my 'common mother-in-law'!
    Although, I usually just call her Betty!
    
    Laura

    
    In the US we have a freehold concept, basically means in bankruptcy
    they can't take the primary residence, and they have to leave you with 
    $30k or so.
    
    Perhaps the same applies in Canada?
    
    Simon

>    In the US we have a freehold concept, basically means in bankruptcy
>    they can't take the primary residence, and they have to leave you with 
>    $30k or so.
>    
>    Perhaps the same applies in Canada?
 
	In that case, there would be no reason to put the house in anyone elses
	name?

	Heather

    Thanks for the input everyone.
    
    I wanted to clarify, that the lawyer did not say to buy another home
    and put it in someone else's name.  Rather he said to spend the
    25,000.00 or so left and THEN file for bankruptcy.
    
    But then she would have nothing.  It's us that thought it would
    be better to put the 25,000.00 into land or something, rather 
    than spending it with nothing to show.
    
    Laura

    re .15
    
    Good!  Then I guess you do not need another lawyer after all.  But she
    definitely does need a professional to help unsnarl her finances, work
    out repayment plans for all the money she owes, etc.  As someone
    already said, the first step should be for her to destroy her credit
    cards - some people are just unable to handle the allure of credit and
    get in way over their heads.  In my opinion, it wouldn't be a good idea
    for you to co-sign loans for her, or otherwise tangle your finances
    with hers.  You could end up not only straining the relationship you
    have with her (obviously) but also being liable for some of her debts,
    which could be very expensive.  I think the best thing you could do to
    help, since you are obviously very concerned about the situation, is to
    hire a professional bankruptcy councilor for her.  Your bank would be a
    good place to start looking for a recommendation for someone.
    
    /Charlotte

    Well...I suppose our goal is to get out of this mess but at the
    same time paying the creditors as little as possible (like-none!)
    
    As honesty isn't my main concern, at the same time, I don't want 
    to engage in any seriously criminal bahaviour either!
    
    From all the wonderful information I've received...I've decided
    a professional is the way to go.  I didn't even know they are
    bankruptcy councillors!!!
    
    Please continue and give me your 2 cents worth.
    
    Laura

    If honesty wasn't a concern for me, the first lie I would tell
    would be one of omission--I wouldn't broadcast my lack of concern
    for honesty in a forum like this.  (But why do you feel that people
    who sold this woman goods and services don't deserve to be paid?
    How would you feel if Digital went bankrupt and stiffed you a
    week's pay?)
    
    In the US, it's my understanding that mere cohabitation does not
    create a common-law marriage: you have to present yourselves as
    married as well.  Here you can cohabit for decades and still not
    be married, if you are careful to never accept mail for Mrs. <husband's
    name>, etc.
    
    			-John Bishop

    It is different in Canada, unfortunately.  
    After living together for 1 year in the province of Quebec, you
    are considered common-law.  Digital recognizes this, and David
    has access to all my benefits.
    
    Honesty...you're right...probably NOT a smart thing to broadcast!
    I suppose the reason (justifiable or not) that I really don't
    care about whether nor not Visa and the like get their money is
    that i feel wrong-done-by.  I believe there is no justice in this
    world, and so, why would I try to ensure it for others?
    But this is highly controversial stuff.  (as are most of my views!)
    
    Laura

  Re .18

  Careful... It depends upon the state as to when you are considered married.
In some states it is overnight!!!

  Re .14  I believe that the law here in the US is the Homestead act.  It
does permit some value of the home to be protected from bankrupcy.

	I should think hard about whether you want to do things honestly or not,
	there are paybacks - like court.

	There are legal ways of doing things, and illegal ways of doing things.

	A bankcruptcy lawyer will be able to tell you which is which.

	You can then make your decision, based on the possible penalties.

	Heather

    Laura,
    	
    	Situations like this one are very sticky.  I had a similar
    situation with my own father.  He was in desparate need of money to
    pay creditors, and to avoid bankruptcy.  He had large tracts of land
    that he couldn't quickly sell.  I agreed to buy a couple of house lots
    from him as a way to get cash to him quickly, and provide something
    of tangible value to me in case he went totally bankrupt.
    
    	This sounds reasonable enough doesn't it.   Imagine my surprise
    when 3 months later a Sheriff shows up on my doorstep with a court
    summons for me and my wife.  I was shocked.  It seems the creditors
    sued my parents, for obvious reasons, and sued my wife and I for what
    they considered to be an "insider transaction at less than fair market
    value".  They viewed this transaction as a way to transfer assets and
    avoid creditors.
    
    	It took me two years and $15,000 of bills from lawyers and real
    estate consultants, and land surveyors to get out of this mess.  This
    for something that I thought was completely above board and legal.
    
    	My advice to you is not to involve your finances in any way with
    your mother-in-laws.  Offer moral support, offer to pay for a
    bankruptcy lawyer.  Save up some money to give her AFTER the bankruptcy
    is complete.  Any money given to her now goes right down the toilet,
    and after bankruptcy she will still have nothing and need your help.
    
    	It is tempting to jump in and help out, but the time to do it is
    after the slate is clean and she really needs your help.  The most
    difficult aspect of all of this may be relations with your "boyfriend".
    Your logical advice may fall on deaf ears to your boyfriend and
    mother-in-law.  This is a very emotional situation between family
    members.  Try to be helpful and supportive, but hold back the money
    as long as possible.  A year from now you will be glad you did, and
    so will your mother-in-law.
    

A sticky situation indeed...you asked for people's 2 cents worth, so
here's mine:

1.   The last thing you want to do is advance money, comingle assets,
     or otherwise be legally bound to this situation.  In my view, the
     last thing that most people in financial crisis need is more money - 
     especially if the first half million was "frittered away."  Not
     knowing all the details I'm not saying this is what happened, but
     in general, diving in with cash, or other financial things can
     be a very bad idea.

2.   You need to understand the bankruptcy laws in your state/province.
     In the US, bankruptcy laws vary widely from state-to-state.  In 
     general, however, there are some common elements:  you usually
     can't be forced out of your own home, and you cannot get relief from
     taxes due the Infernal Revenue Monster.

3.   In the states, doing something like "spending the last $25,000 and
     then going bankrupt" could be seen as fraudulent by the bankruptcy
     people.  When you say this, do you mean that the solicitor is 
     suggesting that she spend it on stuff, or that she use it to pay
     down taxes and the like?   Here in the US, if she were to spend that
     money and then try to leave creditors high and dry the courts may
     hold that the bankruptcy is an attempt to defraud - this would deny
     her protection from creditors, and could possibly clear the gundecks
     for various civil and criminal actions to be brought.

4.   Note that in the States it is difficult, if not impossible, to seize
     a dwelling in a bankruptcy action.  However, the tax people seem to
     have no qualms about seizing assets like this and auctioning them
     off to pay off the taxes.

I'd suggest the following scnario.  Of course, I'm just a software engineer,
so anything you read here should be thoroughly discussed with your lawyer:

1.   The taxes must be paid.  It would be far better to hire an accountant
     with a sharp pencil to gronk the numbers and find out what's owed.  She
     can then get a tax attorney to negotiate with the revenue services to
     lay out a battle plan for repayment.  In the States, the IRS hates it
     when you try to stiff 'em, but they can be reasonable when approached
     with an intelligent plan by a taxpayer who they decide is making a good
     faith effort to pay her obligations.

2.   In the US, there are various types of bankruptcy filings, ranging from
     various debt restructuring schemes to all out liquidation of assets.
     Perhaps in Canada there is a way of filing for protection from creditors.
     This affords time and protections to work out plans to pay the debts.
     Note that this is not just a reprieve - protection from creditors keeps
     creditors from proceeding against you for some finite period of time
     during which you can work out plans to repay debts.

3.   The credit cards, needless to say, should be cut up post haste.  

4.   Is the house owned free and clear?  If so, then it seems that the
     problem is pretty basic:  control spending, eliminate tax obligations
     as quickly as possible, and then work on debt service elimination.
     If she is working, this can be a reasonably simple (though quite
     painful...) thing:  a good credit counseling service can help her 
     work out payment plans with her creditors, and some can even do things
     like receive her paycheck directly and divy it up.  In the meantime,
     she can be taught how to manage her money more intelligently.   


Money management is something that is learned and takes time to do well.
On the other hand, most situations caused by less than astute judgement
can be worked out over time.  

Full-blown bankrupcty (liquidation of assets and release from debt) looks
very good when you're desperate - and money problems breed desperation.
But the downside consequences can be grave (and not just financial when
you consider issues like self-esteem and the like...).   Working out a
battle plan with the IRS, and with creditors, and then finding people to
help implement the plan has a desirable effect in that it eliminates
the desperation, allows the individual to repay their debts with a certain
amount of dignity, and offers the opportunity to learn how to avoid having
it happen again.

Good luck....

./chris

    
    There's a good article in this month's Money magazine about
    bankruptcy and how it's being abused.  I believe it mentions
    several of the aspects you mentioned, but I only skimmed the
    article.  Might want to check it out though.
    
    Tim

    Laura,
    	
    	my 2 cents worth, in the states if you file bankruptcy the credit
    card debt goes away, its considered an ensecured loan that does not
    have to be paid back. Taxes have to be paid, here is were your mother-
    in-law must get an attorney's help. Its your mother-in-law situation
    just be supportive.
    
    	one thought on the credit cards is to have your mother-in-law ask
    them to suspend the card and to set up a payment plan requesting that
    the balance be paid off with no interest charges, this can be done, 
    the companies that issue the cards do not want her to file bankruptcy.
    
    
    Dave

    Hi Laura,
    
    I used to work summers for my dad who is a tax cpa. Here in the
    states there is something called "an offer to compromise". This
    allows tax payers who are unlikely to ever be able to pay their
    taxes relief from their tax burden. In the past, this offer was
    usually reserved for out of work, older people.
    Currently, the IRS has streamlined this process and, seems to be
    broadening it's application here in the US (mostly for out of work
    people) Perhaps there is an analgous rule in Canada.
    
    good luck, jeff

    I'm unclear as to why the basenoter thinks that the creditors don't
    deserve to get re-paid. This concept should be abhorrent even to
    someone who believes there is "no justice in the world"
    
    Ken

    This note is related to this topic so put here instead of a new
    note.
    
    I  just found out that my best friend (known all my life)
    and her husband are saddled with large creditcard debt.
    It is his 2nd marriage.  It turns out that the majority of
    the debt is from his first wife, who ran up creditcard
    bills of over $30000)  He has been paying it off for over
    7 years and more than $20000 remains.  He has his own
    business (Sells insurance plans to corporations) and
    his cashflow is uneven.  MY friend teaches, partime.
    
    They usually only pay minimum payment (around $500/month)
    
    The debth is on 7 cards, 10000 on 3 cards at 19.8%
    $6000 on 3 cards at 11.8 percent, and 4500 on 1 card ant 9.9%.
    
    He tells me he has taken on new cards at lower rates when
    possible.  In addition, he is not maxed out on the debt on
    these cards and uses difference from what he owes and his credit
    for cash flow on his business.
    
    I found out about this when I innocently asked her about buying
    a house (which I know she has always wanted) and it all came out.
    SHe didn't even know the full extent of the debt until 
    we added up all 7 card statements.  She said that she
    has considered it his debt, since it was before they were married.
    but says that it hinders them in doing anything.
    
    They have never missed a payment but they are spending what
    they bring in each month  (and if it is a slow month, he
    borrows fromt he creditcard until next month) He tells me
    that he has always been able to pay back his loans when
    his clients pay.
    
    So now the questions.  What is the best way to help them out.
    At this rate, they will never get out of debt as the creditcard
    debt is a millstone around their neck.
    
    I was considering helping them out with a debt consolidation loan
    bringing their balance on cards to 0, with stipulation that
    they both go to credit counseling, and that they keep only
    the 1 card and show that it has a balance of 0 each month.
    Pay off would be over 4 years.     
    
    Does anyone have opinions on this? risks? way to structure contract
    etc.
    
    2) What would be necassary for them to get a debt consolidation loan
    from a bank? and what interest rates?  If this wasn't too high
    then I would think it would be the preferred choice in case
    anything went wrong.
    
    3)Any other suggestions on best advice I can give them to get
    out of this situation?
    
    I would really like to help her if I can.
    
    many thanks
    -lz
    

      It  would  be  interesting  to  know  if  this  $30K was or wasn't
      considered in this man's divorce settlement with his  first  wife,
      and if not, why not.  Interesting, but beside the point.
      
      So  far  as  I  know  there  are only two ways to pay of debt more
      quickly.  (1) Lower the interest rate or (2) make larger payments.
      
      Check  with  banks and finance companies.  Expect to get more "NO"
      answers than "YES", but some effort should make  it  possible  to
      beat 19.8%.  
      
      MAX  OUT the 9.9 and 11.8% cards to reduce the amount on the 19.8%
      cards.  Will these lower rate cards increase their  limits?   This
      could  represent significant savings -- ~$80/month!  Don't cut the
      payment, but use the savings to pay more on the principal.  
      
      Pay  more  than the minimum balance, even if it means giving up or
      cutting back on some discretionary expenses. (Make the old car run
      another  year;  vacation  locally;  eat  out  less  often; make do
      without new clothes; etc.) Set some dollar amount in excess of the
      current  minimum.  Pay at least that amount every month.  Keep the
      payment UP even as the minimum goes down.  

      Put  the  business  borrowing on a separate card or cards and keep
      that/those payments separate so  they  can  know  their  position.
      
      Based  on  the  financial  conditions I infer from your note, your
      friend and her husband should be able to manage a $20K debt.   But
      making  minimum  payments and not even knowing the total amount of
      debt is NOT management!  In fact, it sounds like not  knowing  the
      full extent of this problem is a big part of the problem.  Make it
      obvious and keep it clear.  Set up a paper or  PC  spreadsheet  to
      track  the debt and their progress in paying it off.  Re-check the
      balance every month. Seeing it come down each month will make them
      feel better.  

    I'd suggest you limit your help to finding out how to do a
    consolidation--don't co-sign or lend money.  People who mix
    friendship and business often lose both.
    
    Your best input is in helping them understand what their 
    situation is and how to get out.  I don't know whether there
    are organizations to help where you are, but lots of areas have
    no-fee help for people in credit trouble--a few phone calls to
    the local social services might be helpful.
    
    One other issue they'll have to work on is whether this is the
    husband's problem alone, or also the wife's: she may resent paying
    off the previous wife's debts.  They should discuss this (privately),
    but you should probably bring it up.
    
    		-John Bishop

    Depending on their age one option is to file for bankruptcy. I say
    depending on their age because if they are young enough they can
    rebuild their credit and get a house eventually. 

    Thanks for the replies.  They are in Albany New York. I agree
    with the previous who say that it is not management.  One thing
    that I will do regardless if I give a loan is to give them
    a copy of quicken, and show them how to use it.  The reason my friend
    didn't know the debt is interesting...I think it may have to do with
    the fact it is from the previous marriage and so there may be some
    resentment.
    
    I also like having the suggestion of a card just for the business to keep
    track of expenses.   Does anyone know someone who has done a debt 
    consolidation loan, and what the banks looked for.
    
    It is hard for me to imagine owing this on credit cards.  I've read
    stories about this in the paper...it is a dirty little secret for many.
    To make matters worse, they are constantly sent more and more
    applications for cards.  I also worry about losing the friendship
    but if I gave a loan would have to be prepared to look at it
    as I do investing in the stock market..be prepared to lose it.
    
    They have 2 little kids 1 year and 2.5 so the problem will only get
    worse as the kids get older and expenses increase.
                                                   

    I had a SO in a similar problem; even though she worked for a bank we
    weren't able to get her a debt consolidation loan at below 15% or so --
    and this is for somebody with a spotless credit history, despite 10K or
    so in debts.  
    
    Beyond requiring 15% interest they only required that they be permitted
    to pay off the credit cards themselves; i.e. rather than give her 10K
    she brought in 10K in credit card bills which the bank payed with the
    loan proceeds.
    
    It was a very good step to consolidate all of this into one loan,
    however.  Not only did it hammer home just how much was owed, but it
    provided a means to actually see progress as each payment lowered the
    outstanding debt.

I know this is an old note, but...

According to a recent articleout here, this is more common than I thought.  
It had some interesting points.

Most people in a shape like this break their current spending into 3 areas,
discretionary, variable and fixed and then focus on the variable (food,
gas, clothes...) and discretionary ( vacations, eating out, parties, ...). 
The article pointed out that there are actually no fixed costs and that
most of the money is spent on rent, taxes, utilities, food, and the like. 

Have they considered moving into a very small apartment?  Eating like 
students a few nights a week?  Not dining out more than once a month?  
Budgeting all expenses and then staying within it?  There should be 
penalties and rewards built in, but the totals in the budget need to be 
very small.

Since he seems to be in a business where more work can lead to more pay 
then looking at increasing his effectiveness can increase revenue.  Do 
either of them have a second job?  He is making the necessary 50-75 cold 
calls a week to build the business?

I would look at getting them in touch with a very experience credit 
councilor more than throwing more money at the problem.

matt

    If your friends need a SMALL loan (< $100) to buy necessities, you
    might spring for that. But be very hesitant to lend a significant
    amount to a friend with debts. I loaned about $1000 to a younger friend
    not long after he graduated, when he had already accumulated a couple
    thousand in credit card debts, to help him meet some bills which were
    behind. He assured me that his job (a decent sales job) would pay
    enough for him to pay me back over the course of a year. Five years
    later, I'm still waiting, and have since learned that he has similar
    loans from his brother and father in addition to his more public debt.
    Rescuing someone in that situation might just teach them that they will
    be rescued, instead of teaching them to be fiscally responsible.
    
    That's an exception: most of the time, friends I lend to (or borrow
    from) repay/are repaid promptly.