Can't I just file bankruptcy if I can't pay my student loans?

We know the cost of higher education is going up, and lately going up two to three times faster than inflation. I'm not sure whether that extra money is for better facilities, better food, higher professor salaries or fumigation for rooms like some of my dorm-mates in college, but the high cost means a lot of students are graduating with huge debts they didn't plan on having.

Here's the story of one recent medical school graduate with $555,000 of debt! Her story is extreme, but we can learn a few things from it:

1) Save early, if possible, for school--529 college savings plans make it even easier and more advantageous.

2) Read the fine print on the loan documents you sign, especially if you're co-signing for someone.

3) If you need a deferral of payment, try negotiating this with the lender and using their procedures, or you may double your debt like the unfortunate doctor above.

4) Find ways to spend (and borrow) less, like a less expensive school.

5) See an attorney about negotiating the debt--there are options, but they're limited, and the possibility of discharging through bankruptcy is very limited.

How not to get divorced - tips from another attorney

Here's a post from a Dallas, Texas, family law attorney with some good advice, especially before Valentine's Day (click here). Having been through the painful divorce process myself, I'd certainly recommend doing what you can to avoid it. Michelle May O'Neil's advice may not be revolutionary, but it's worth reminding ourselves before little hurts become big ones and the people we love feel taken for granted.

What up with the estate tax in 2010?

I've been to a few lectures this year where attorneys and tax professionals, like me, are looking for the answer to what will happen with the estate tax this year and beyond. We're unsettled because none of our expectations has come to pass--we're left with no estate tax, for this year only, and instead have a step-up in basis for capital gains limited to $1.3 million per estate, and $3 million for assets passing to a spouse. And next year, we're back to a (now small) $1 million estate tax exemption.

There were many ideas about what legislation Congress would pass to avoid this result, but none have yet passed, and the longer this drags on, the less likely a solution will come until after the November election this year. Here's an article in Forbes that discusses it further.

In the meantime, the language in most trusts needs some patchwork to make it work well. I know that very few of us plan on dying this year, but just in case, have your attorney review your trust and prepare a short amendment to "2010-proof" your trust. Trusts are structured differently, so a one-size-fits-all amendment won't work, but the amendment that fits your trust shouldn't be too complicated.

You may not be able to just walk away...

There are a lot of homeowners, and income property owners, who are having to seriously consider "walking away" from their properties by letting them go to foreclosure or by doing a short sale. What they may not understand is that depending on their state's laws, and whether there are second and third mortgages on the property, they may still be on the hook later for a "deficiency judgment." This article on Yahoo's site explains the problem.

Many times the lenders don't bother getting such a judgment, but if they do in California, it's good for up to 20 years, and can attach as a lien against your other real estate. You may not have equity in your other properties now, but if you manage to hang on until you do, and there's a judgment, you'll be paying that off years from now at 10% interest, so it's worth investigating now to see what you can do about it. Bankruptcy and debt negotiation are among your options. I can remember a client from several years back who went through this situation in the early '90's, then discovered a deficiency judgment in 2003 when he was in escrow to sell his formerly "worthless" property and had to negotiate quickly with the bank.

So, if you're in the unfortunate position of considering foreclosure or a short sale, talk it over with an attorney first.

And, if you're in the unfortunately position of holding a note secured by property that's now underwater, talk to an attorney about preserving your rights to a deficiency judgment--it could pay off years from now.