Tips for Navigating Medicare Open Enrollment

Medicare’s annual open enrollment period closes on December 7 this year.  During open enrollment, Medicare enrollees can shop for new prescription drug (Part D) or Medicare Advantage coverage. Medicare enrollees may be able to save hundreds of dollars on premiums and out-of-pocket costs by doing a checkup on their coverage and making necessary changes during the open enrollment period. Surprisingly, few enrollees bother to take advantage of this opportunity to review their existing coverage or make changes.

Morningstar contributor Mark Miller sat down for an interview recently at to discuss the potential benefits of annually reviewing your Medicare coverage, and he offers several useful tips to help navigate through the open enrollment period.

If you haven’t yet reviewed your Medicare enrollment options, or you weren’t even planning on doing so, it might help you to take a few minutes (about 8, in fact) and watch the interview to see if there might be something you can do to save money on your health care next year.  You can watch the full interview here.  I hope it helps!

Be Careful When Hiring an Estate Sales Agent.

An estate sales isn’t your run-of-the-mill garage sale. Estate sales offer the promise of nicer things for sale and that potential rare or priceless find. Many people faced with settling a loved one’s estate will turn to an estate sales agent to sell off the deceased’s belonging.  But hiring an estate sales agent can be a risky proposition. The industry is unregulated and not every one follows ethical business practices. Furthermore, they typically charge substantial fees as a percentage of the estate sale total.  You need to do things right when hiring one:  You need to get a copy of your prospective agent’s contract and review if carefully. You must also check into their business history and practices. It can even be helpful to go to one of their sales to see them in action.  A recent article in the New York Times highlights the problems with estate sales agents through the personal experience of two siblings who hired an unscrupulous estate sale agent after their mother died.

Read Paul Sullivan, It Pays to Be Wary When Hiring an Estate Sales Agent, NY Times, September 23, 2016.

Are Your Passwords a Joke? Time To Do Something About It!

Are you still using “password,” or “123456″ as your passwords of choice? You’re not alone. Those have been the most popular passwords for the past 5 years. If your passwords are weak, resolve to make your passwords strong this year. An excellent article over at the tech website, How-To Geek, tells you how.

Here are a few tips from the article, Your Passwords Are Terrible, and It’s Time to Do Something About It,” on how to make your passwords stronger:

Good passwords are long. The longer the password, the harder it is to crack. You should always make your password longer than the minimum password length required by the website.

Complexity. Good passwords contain a combination of letters, numbers, and alpha numeric symbols. Avoid proper nouns, place names, and simple words.

Uniqueness. Don’t use the same password for every site. You can have a bomb-proof password but if a single site’s system is compromised and hackers get it, they can access any account you use it on.

Two-factor authorization. More and more websites are going to two-factor authorization, which requires two different types of authentication to log into a site. An account with two-factor authorization requires a password, and a separate PIN sent to your phone. Even if your password is compromised, hackers won’t be able to get into your account because they won’t have your phone.  Use two-factor authorization if the website offers it.

Use a password manager. It seems like every website requires a user name and password. How do you keep track of all of them?  This is where password management software can be helpful.  A typical password management program installs as a plug-in to handle password capture and replay. When you log in to a secure site, the password manager offers to save your credentials. When you return to that site, it offers to automatically fill in those credentials.  A few managers even have some provision to transfer your logins to a trusted individual in the event of your death or incapacity.

Read the whole article here.

Post-Bankruptcy Mortgage Modification

A client contacted me regarding a potential home mortgage loan modification. The client had filed a Chapter 7 bankruptcy two years ago and received a discharge of all of her debts, including the mortgage loan debt. She wanted to pursue a loan modification under the federal government Home Affordable Modification Program, the “HAMP” program. Her concern was that by agreeing to a modification of the mortgage loan now, she would become personally liable for the mortgage debt that had been discharged in her bankruptcy.

If you file a consumer bankruptcy, you have the option to reaffirm (reinstate) a debt that would otherwise be discharged in the bankruptcy. By reaffirming a debt in bankruptcy, you remain personally liable for the debt after the bankruptcy, which means that if you later default on the debt, the creditor can sue you and recover the money owed through garnishment or other action. In general, bankruptcy lawyers do not recommend clients reaffirm debts since the point of bankruptcy is to shed the personal liability for the debts.

But what if, like my client, you didn’t reaffirm a mortgage debt in bankruptcy and later want to modify the loan. Does the mortgage modification reinstate the personal liability for the mortgage loan debt?

Even if you did not reaffirm your mortgage in your bankruptcy, you can work with your lender on a HAMP mortgage modification post bankruptcy, and the modification does not revive the personal liability for the discharged debt. The current HAMP Handbook, version 4.5 states that “Borrowers who have received a Chapter 7 bankruptcy discharge in a case involving the first lien mortgage who did not reaffirm the mortgage debt under applicable law are eligible for HAMP.” In addition, the following language must be included in the mortgage modification agreement: “I was discharged in a Chapter 7 bankruptcy proceeding subsequent to the execution of the Loan Documents. Based on this representation, Lender agrees that I will not have personal liability on the debt pursuant to this Agreement.”  Furthermore, Section 524 of the U.S. bankruptcy code prevents a debtor and a creditor from entering into any reinstatement agreement after bankruptcy for a debt that was discharged in bankruptcy.

A HAMP mortgage modification does not create a new loan  It changes the terms of the mortgage loan, and you are not agreeing to again be personal liable for the debt. (The only instance where personal liability on a modified loan survives bankruptcy is if you reaffirmed it during the bankruptcy.)

Understand that a loan modification is entirely different from a post-bankruptcy mortgage refinance, where an entirely new loan is being created after the bankruptcy. In that situation, you would have personal liability on the loan because it is a new debt that arose after the bankruptcy.

The HAMP morgage modification program is scheduled to expire December 31, 2016.

My Divorce Judgment Says My Ex Has to Pay a Joint Credit Card Debt, Why is the Bank Coming After Me?

I get calls from people who are being sued by banks or other creditors for joint debts that their ex spouse agreed to pay as part of their divorce. The question they ask: “If the divorce judgment says my ex is supposed to pay this debt, why is the bank coming after me?” They assume that since the divorce judgment says their ex has to pay the debt, they are no longer responsible.

A recent decision of the Michigan Court of Appeals illustrates a common misconception concerning the division and assumption of debts and liabilities in divorce judgments. The facts: Rod and his ex-wife, Kimberly, obtained a home equity loan from their credit union in 2003. In October 2011, the credit union sued them for nonpayment. The trial court entered default judgments against Kimberly and Rod in 2012. A few months after, Kimberly and Rod divorced. Their divorce judgment ordered Kimberly to pay the credit union debt and indemnify Rod against the debt. In June 2013, the trial court issued a writ of garnishment against Rod. Rod objected to the writ on the basis that Kimberly assumed the debt in the divorce judgment, which Rod argued absolved him of any liability on the debt. After a hearing, the trial court sustained Rod’s objections, holding that the divorce judgment precluded the credit union from seeking garnishment against Rod.

Now, most of you are probably thinking “that sounds right.” After all, Kimberly agreed to pay the debt, why should Rod be liable. On appeal, the Court of Appeals reversed the trial court, finding that Rod was still liable on the credit union debt though Kimberly had agreed to pay it. How can that be?

Well, like a lot of legal issues, it’s complicated. You see, the credit union was not a party to Rod and Kimberly’s divorce. And because of that, the credit union was not bound to the terms of their divorce judgment. Legally, BOTH Rod and Kimberly were still liable to the credit union, regardless of the terms of the divorce judgment.

Rod does have a remedy: the divorce judgment’s indemnity clause. An indemnity clause shifts the loss from the party forced to pay a debt (Rod) to the party who should have paid it (Kimberly). Rod has the right to sue Kimberly to reimburse him for any money he may have to pay the credit union.

So, what does this all mean for you?

  • First, even though your ex agreed to assume payment of a joint debt, that agreement doesn’t absolve you of your liability as to the creditor holding the debt. If your ex defaults on the payments, the creditor can still go after you for full payment.
  • Second, indemnity clauses in divorce judgments are important. If your ex stops making the payments and the creditor sues you, you can go after your ex to reimburse you for your loss. An indemnity clause may still be enforceable if your ex files bankruptcy.
  • Third, be vigilant. The time to find out your ex has stopped paying a debt is not when the process server is pounding on your door. Keep an eye on your credit report to see if your ex has been paying late, or or has stopped paying altogether. You can take your ex to court to enforce the agreement before the creditor comes calling.

The case is DFCU v Monts. You can access the Court of Appeals opinion here.

What The Heck? I Collected Unemployment Benefits Last Year And Now The State Wants Me To Pay Them Back!

A colleague of mine told me about a recent call from a person who had received unemployment benefits last year, and now the State of Michigan has sent him a notice he was overpaid and is demanding return of the overpayment amount, with fines and penalties to boot.  The caller explained that he was back to work, but was barely making ends meet.  He wanted to know what he could do.

The State may demand return of just a portion of the benefits paid because of a calculation error for instance (I know, even if it’s not your fault), or it may demand return of all of the benefits paid because the State has determined that the recipient was not eligible to receive unemployment benefits in the first place.  Unfortunately this is a fairly common situation – and people are oftentimes still unemployed, or are back to work making less money than before (and they have other debts accumulated while unemployed) – when the State sends them a repayment demand.  If you are in that situation, what can you do, and will bankruptcy help?  Can you include the overpayment amount as a dischargeable debt in bankruptcy?

A lot depends upon whether you are still receiving benefits.  If you are, the State can recoup the overpayment from you by reducing your future benefits until the overpayment is recovered. In this situation, a bankruptcy will not help. Generally, when you file bankruptcy all creditor enforcement actions are stayed, or stopped, by order of the bankruptcy court.  However, the bankruptcy stay does not extend to the recoupment of an overpayment.  So, if you are still collecting benefits and the State has reduced future payments to recoup the overpayment, bankruptcy will not help.

What if you are no longer receiving unemployment benefits, will bankruptcy help you?  Again, it depends.

If you are no longer receiving unemployment benefits, the overpayment amount is treated as an ordinary debt that’s owed to the State.  In this case, the overpayment amount is dischargeable in either a Chapter 7 or a Chapter 13 bankruptcy, with one big exception: if you obtained the benefits by fraud.  Under the bankruptcy code, if you committed fraud to obtain the benefits, then the overpayment debt will not be dischargeable in bankruptcy.

Okay, let’s say the overpayment amount is dischargeable (no fraud), you may still be facing fines and penalties.  What about those?  Fines and penalties are dischargeable in a Chapter 13 bankruptcy; they are not dischargeable in a Chapter 7 bankruptcy.

As with any serious legal matter, you should carefully assess your situation with an experienced attorney to determine whether bankruptcy may be an appropriate solution if faced with a demand from the State to recover an unemployment benefit overpayment.



I Bought a Car Yesterday, Can I Cancel the Sale Today?

A client called me the other day and asked about canceling the purchase of an automobile. They thought they had 3 days to cancel the purchase. Unless the salesman came to their home and wrote the sale there, I told them, they had no right to cancel.

In general, when you buy something at a store or merchant’s place of business and later change your mind, you don’t have the right to return the merchandise just because you change your mind and no longer want it.   However, if you buy an item in your home or at a location that is not the seller’s permanent place of business, you may have the option to cancel the sale and return the goods for a full refund. Here’s how the rule works:

Under a Federal Trade Commission (FTC) rule know as the “Cooling-Off Rule,” you have three days to cancel certain purchases.  You do not have to give a reason for canceling – you have the right to change your mind.

The Cooling-Off Rule applies to sales that take place at your home, workplace, or dormitory. It also applies to sales that take place at facilities rented by the merchant on a temporary basis, such as hotel or motel rooms, convention centers, and restaurants. The Cooling-Off Rule applies even when you invite a salesperson to come to your home to make a sales presentation. Under the Cooling-Off Rule, your right to cancel for a full refund extends until midnight of the third business day after the sale. You do not need a reason to cancel your purchase under the rule.

The salesperson must tell you about your cancellation rights at the time of sale. (The contract or receipt should explain your right to cancel, too.) They must also give you two copies of a cancellation form (one to keep and one to send) and a copy of your contract or receipt. (If the seller did not give you cancellation forms, you can write your own cancellation letter.)

As with any rule, there are exceptions. The Cooling-Off Rule does not cover sales that: (i) are under $25; (ii) are for goods or services not primarily intended for your personal, family, or household purposes; (iii) are made entirely by mail or telephone; (iv) are the result of prior negotiations at the seller’s permanent business location where the goods are regularly sold; (v) are needed to meet an emergency are made as part of your request for the seller to do repairs or maintenance on your personal property (purchases made beyond the maintenance or repair request are covered).

In addition, sales exempt from the Cooling-Off Rule are those involving: (i) real estate, insurance, or securities; (ii) automobiles, vans, trucks, or other motor vehicles sold at temporary locations, provided the seller has at least one permanent place of business; (iii) arts or crafts sold at fairs, shopping malls, civic centers, schools, and the like.

A cancellation notice must be sent before midnight of the third business day after the contract date. (Saturday is considered a business day under the rule; Sundays and federal holidays are not.) Proof of the mailing date and proof of receipt are important, so one should consider sending the cancellation notice by certified mail with a return receipt request. If the merchant is local, the cancellation notice may be hand delivered. One must make sure to retain a copy of the cancellation form or letter.

If you cancel your purchase, the merchant has 10 days to: (a) cancel and return any promissory note or debt instrument you signed; (b) refund all your money and tell you whether any product you still have will be picked up; and (c) return any trade-in. Within 20 days, the merchant must either pick up the items, or reimburse you for mailing expenses, if you agree to send the items back.

You must make the purchased items available to the seller in as good condition as when you received them. If you do not make the items available to the seller, or if you agree to return the items but don’t, you remain obligated under the contract.

Beware the Trust Mills and Their Peddlers

A very good Times Herald article sheds light on the problematic practice of non-attorneys pushing estate planning documents on unsuspecting consumers.  Not surprising, this advice is given for the non-attorney’s own financial gain.  There’s big money in peddling “estate plans” on an unsuspecting public.

In Michigan, our State Bar has received numerous complains regarding estate plan salespersons practicing law without an attorney license by giving legal advice. The Michigan Attorney General and the Michigan Office of Financial and Insurance Services have received numerous complaints about deceptive sales practices by annuity and life insurance sales persons.  To counter these predators, the State Bar of Michigan Elder Law and Disability Rights Section and the Probate and Estate Planning Section have been promoting “A Living Trust Education Initiative,” the goal of which is to educate Michiganders about deceptive estate planning schemes and what to look out for.

These predators, commonly known as “trust mill peddlers,” use two primary schemes to separate you from your money. The first scheme is a free lunch or dinner presentation under the guise of providing “estate planning” or similar information.  (Who can pass up a free meal?)  The second is the home visit generated by a lead card mailed to you offering free estate planning information that you fill out and mail back to them. Some will even use a combination of the two.

Once they get in front of you, trust mill peddlers will attempt to sell you a trust plan without learning about your situation or your assets and income. They tell you they don’t need to know the specifics of your situation, your family, or how you want your assets distributed after your death, because they know what you need and their trust plan will protect you.  They will often times employ scare tactics to get you to buy their trust plan. Their ultimate goal, however, isn’t to provide you with an estate plan. It’s to get you to purchase expensive annuities, life insurance, and other investment products through the companies they represent, on the basis that the trust plan will work best with these products (which generate high commission income and fees for them).

So, how do you protect yourself from the trust mill peddlers? Most importantly, always rely upon trusted, knowledgeable, and licensed legal, insurance, investment, and tax professionals to help you with your financial and legal affairs. If you do not know any yourself, ask a friend or relative for a referral.  Second, avoid the common tactics used by trust mill peddlers, such as informational meetings including a meal, lead cards sent to you in the mail offering free estate planning information, and non-attorneys coming to your home to sell you an estate or trust plan.

Read the entire article here.