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Are your children’s education saving funds exempt when you file bankruptcy? (Lancaster attorney David Lozano is here to put your mind at ease!)

Couples and single parents frequently take advantage of my offer for a free consultation to discuss their options for dealing with debt. For many their concerns involve not only them, but their children as well! Parents worry whether the savings they’ve set aside for their children’s future education will be affected when they file bankruptcy.

I am pleased to say that you can protect your children’s education funds by using special savings plans, such as a 529 or Coverdell Education Savings Account (ESA). Wikipedia compares and contrasts the two plans well:

Important differences with 529 plans

  • Coverdell ESAs have lower maximum contribution limits; currently $2,000 can be contributed per year per child, while 529 plans generally have no restrictions on contributions, up to the maximum lifetime contribution.
  • Coverdell ESAs can allow almost any investment inside including stocks, bonds, and mutual funds, while 529 plans only allow a choice among a number of state run allocation programs. The rules for investments allowed in ESAs are the same as those for IRAs.
  • Balances in a Coverdell ESA must be disbursed on qualified education expenses by the time the beneficiary is 30 years old or given to another family member below the age of 30 in order to avoid taxes and penalties; there is no age limit for 529 plans.
  • Coverdell ESAs allow withdrawing the money tax free for qualified elementary and secondary school expenses; 529 plans do not.
  • The income level of a donor may affect contributions into a Coverdell ESA, but would not affect contributions to a Section 529 plan.

Important similarities to 529 plans

  • Money in both a Coverdell ESA and a 529 plan is not considered the child’s (beneficiary’s) money when applying for federal financial aid as long as the owner of the account is someone other than the beneficiary, such as a parent. This works to increase the child’s potential financial aid because parents are expected to contribute only around 6% of their assets to finance college education, as opposed to the child’s 35%.
  • The custodian of both an ESA and a 529 plan can designate a new beneficiary without incurring taxes or penalties provided that the new beneficiary is an eligible family member of the previous beneficiary.

When filing bankruptcy, money that has been in a 529 or ESA savings account for over two years is exempt from the bankruptcy process! And up to $5,000 worth of money in the account that has accumulated for at least a year but under two years is also exempt. In addition, only money that has been added to the savings account within a year prior to bankruptcy is available to creditors–everything else is protected!

The future depends on the well-being of the next generation, and a large part of that well-being involves the extent of their intellectual growth!  Visit our Lancaster location for a free consultation. Protecting the education funds of our children helps to ensure their continued intellectual growth!

David Lozano, Attorney at Law
Contact me today for a free consultation
800-974-5680/Se habla español

Is there a difference between forgiving debt and discharging debt?

To the IRS and many collection agencies, to forgive debt means that while you don’t have to repay the debt, there is a possibility that you will still owe income tax on it! In bankruptcy, having debt discharged means that you are exempt from having to pay all or part of the debt you owe–depending on the type of bankruptcy claim you file. The whole point of bankruptcy is to give people a second chance and a fresh start!

Coming to terms with your debt is difficult thing to do. Many clients come into my office thinking they could have done something differently to avoid bankruptcy. But in most cases the circumstances that lead to debt are beyond your control, such as the loss of a job or unexpected medical bills!

Although collection agencies may have a somewhat distorted view of what forgiveness is, they are on the right track in their terminology! Friends, family members, and employers need to show forgiveness to people who are in debt or filing bankruptcy. More importantly though, you need to be able to forgive yourself! You cannot blame yourself or let others place the blame on you. Contact me for a free consultation. By filing bankruptcy you are doing the responsible thing by taking charge of the situation!

David Lozano, Attorney at Law
Contact me today for a free consultation
800-974-5680/Se habla español

Dealing with debt and rising prices? Lancaster attorney David Lozano advises you to keep a budget!

Everyone has a different grocery shopping approach–some make a list, others go in and shop for whatever looks good, some plan their shopping trip by clipping coupons and waiting for the biggest sales, others shop for what they need for the week. Whatever their shopping style, however, all shoppers will be affected by the increase in food prices this year!

There is a predicted 2% to 3% rise in food prices for 2011! According to Rick Plumlee, the break down of prices goes like this:

“Beef increased nearly 6 percent through Sept. 30 over the end of the third quarter in 2009. Pork shot up 10 percent, and fresh vegetables increased more than 4 percent. And then there are eggs. They jumped 11.3 percent, in part because of a salmonella outbreak in August at two Iowa farms.”

With the economy the way it is, any increase in prices is cause for concern! Gas prices are already causing people to pull their hair out. Although the government has turned to using ethanol fuel to try to keep the price of gas down. But wait, ethanol is made from corn! Do you know how many foods have corn or corn syrup in them? Not to mention how corn is used as feed for chickens.

As a bankruptcy attorney, I look at things from the perspective of my clients. Dealing with debt makes even the slightest jump in prices a nightmare! I advise my clients to practice good budget management. By sticking to a budget, my clients can take advantage of the times when prices are good and make do when they aren’t! Visit our Lancaster location today for a free consultation!

David Lozano, Attorney at Law
Contact me today for a free consultation
800-974-5680/Se habla español

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Overdraft protection plan dangers – West Covina attorney David Lozano

I’ve told you in past blog posts about the drawbacks that go with payday loans, but a bad payday scheme isn’t the only risky deal out there! Banks offer what is called an overdraft protection plan to prevent a check from bouncing due to insufficient funds. Of course this sounds like good thing but, as with the payday loans, there is a major downside!

If you should happen to make a withdrawal that exceeds the amount of money you have in your account, you are charged a penalty fee. Well that sounds reasonable, right? The bank simply wants to discourage people from overdrawing their accounts. The only problem is that the fee can be up to $20 or $35 per overdraft! On top of that, there is a $2 to $5 daily fee until the balance is paid!

West Covina attorney spreads the word about the risks of overdraft protection!An overdraft is most common at the ATM or when using a debit card, but it can also occur when writing a check. Overdrawing an account usually happens when someone doesn’t monitor his or her account activity as closely as he or she should. But even the most scrupulous account holder is capable of making a mistake!

Of course by itself, an overdrawn account doesn’t typically result in bankruptcy, but the little things can add up! Someone who is dealing with the loss of a job or medical bills doesn’t need anything else on his or her plate! At the Law Offices of David Lozano, we do everything we can to make your financial life easier! Stop in at our West Covina location or contact me for a free consultation.

David Lozano, Attorney at Law
Contact me today for a free consultation
800-974-5680/Se habla español

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Don’t go down with the ship! (Los Angeles bankruptcy attorney David Lozano helps business owners navigate business bankruptcy!)

Owning a business is not a task to be taken lightly, as any business owner will tell you. Business owners must have integrity, dedication, discipline, and a good head on his or her shoulders! Part of having a good head on your shoulders is recognizing when the business is drifting into troubled waters and knowing what to do about it.

There are steps that business owners can take to get the company through a rough patch. When times are slow and the cash reserve is starting to run dry, the key to preserving the business is to prioritize and negotiate! Business owners must reevaluate the company’s finances and make adjustments while making sure to stay current on taxes and utility bills. Business owners must also talk to their suppliers and creditors to negotiate payment strategies. The important thing is to not fall behind because that is a slippery slope that can often lead to staggering debt!

Of equal importance is maintaining your integrity despite your struggles! Don’t try to gloss over details when trying to take out a loan or surreptitiously give away assets to squeak by. The consequences of such actions will come back to haunt you! You don’t want to have to deal with accusations of fraud on top of everything else!

Bankruptcy attorney David Lozano helps business owners navigate business bankruptcy!The hard truth is that sometimes, despite all their efforts, business owners simply cannot put the business back on track on their own. When that happens, contact the Law Offices of David Lozano for a free consultation! I will lend all my professional expertise to evaluating your business’ financial situation. And, if it comes down to filing business bankruptcy, you will be in the best of hands! My topmost concern is helping you steer your finances back on the right course!

David Lozano, Attorney at Law
Contact me today for a free consultation
800-974-5680/Se habla español

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Your pets can be affected by foreclosure, too! (Bankruptcy attorney David Lozano wants to help both you and your pets through debt!)

In a time when prices are on the rise and employment options are scarce and selective, there is one aspect of people’s lives that they are still spending their money on–their pets! Pets often become a part of the family. A dog or a cat is the equivalent to a child to many people and, like good parents, they tend to all their little one’s needs.

According to APPMA’s 2009-2010 National Pet Owners Survey, the number of dogs and cats owned in the United States was approximately 77.5 million dogs and 93.6 million cats with an estimated $47.7 billion spent on these pets. Pet food and regular veterinary care make up a large portion of this figure, but Americans are spending a decent chunk of change on pampering their pets as well. Pet beds, toys, treats, cosmetics, even clothing make for high selling products in the pet industry.

While this may indicate that pet care is the industry to be in, there’s a downside to all this spending. Sometimes when pet owners are down to their last penny and their home is foreclosed, the family pet gets left behind. This has happened often enough that these pets are being called foreclosure pets.

It’s unclear what the family is thinking, whether they fear the animal will be put down if they take it to a facility or simply cannot bear to see their beloved pet at a shelter. Although taking the animal to a humane society location or the animal shelter is better for the pet. At least the animal has a chance of finding a new home and loving family.

Of course the best solution would be to prevent foreclosure and keep the pet, especially given the current stress the owner is going through. It has been proven that pets help reduced stress, which in turn lowers the risk of stress-related health problems. It’s true! If you take care of your pets, they will take care of you! Contact me for a free consultation, together we can figure out a solution that has you and your pet’s best interest in mind!

David Lozano, Attorney at Law
Contact me today for a free consultation
800-974-5680/Se habla español

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Do you have something in common with Will Smith? (Bankruptcy attorney David Lozano says, “more than you might think!”)

Do you have a flair for the dramatic, a thirst for action and adventure, a good sense of rhythm with a dash of witty humor and charm to tie everything together? See, we’ve already established some strong similarities between you and the Fresh Prince! One likeness that might come as a surprise to you, however, is Will Smith’s close encounter with bankruptcy.

Will Smith was once an up-and-coming rapper with dreams of one day becoming a movie star! He earned the nickname “Fresh Prince” for being able to smooth talk his way out of trouble. In 1988, as part of a hip-hop trio, Will Smith won a Grammy for the song “Parents Just Don’t Understand” and became a millionaire. Smith then went on a spending spree and underpaid his taxes, which nearly forced him into bankruptcy. To be fair, Smith was only 18 and a million dollars is enough to go to anyone’s head!

Regrettably, the Fresh Prince couldn’t smooth talk his way out of the debt he accumulated after squandering his fortune. He owed 2.8 million dollars in tax debt to the IRS, a number of his possessions were repossessed, and his income was heavily garnished. Will Smith narrowly escaped bankruptcy thanks to NBC signing him on the sitcom, The Fresh Prince of Bel-Air. It was a close call, but fortunately the sitcom was a hit and put Smith on the road to stardom.

Now, you certainly aren’t in debt as the result of reckless spending, I’m sure! The average Californian’s debt problems are due to unforeseen  circumstances, such as the loss of a job or unexpected medical bills. Whatever the case may be, David Lozano is here to help! Contact me for a free consultation. Bankruptcy is not an end-all, it is merely a stepping stone to getting your life back on track!

David Lozano, Attorney at Law
Contact me today for a free consultation
800-974-5680/Se habla español

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Bankruptcy for the small business owner

Business owners often devote a full 40-hour work week to managing their business. This simply goes with the territory of owning a company, but I’ve found small business owners go a step further.  They spend more than the allotted 40 hours a week making sure every project and final piece of paperwork is in order, down to the last minute detail!

Many small business owners will cancel or reschedule personal plans when a situation at work arises that needs their immediate attention. In fact, a small business owner’s personal life and business affairs are usually so entwined it is hard to tell where one ends and the other begins.

It is in cases like these–when the business is not a corporation, partnership, or a limited liability company (LLC)— that it falls on the owner to file bankruptcy if the business is in danger of going under. It is also important to understand that filing Chapter 7 or Chapter 13 for a business is different than filing personal bankruptcy.

In Chapter 7 business bankruptcy, ownership of the business is transferred to the bankruptcy lawyer, who is responsible for ceasing operations and liquidating the business’ assets with the proceeds going to the creditors. Chapter 13 business bankruptcy gives the owner more time to sell assets. The benefit of this is that the owner may be able to sell the assets for a better deal than what the assets would be sold for with Chapter 7 business bankruptcy.

When small business owners must file business bankruptcy it can seem like asking the owner to give up an arm or a leg. I know how attached small business owners can be to their company, and I do everything in my power to ease the process. Contact me for a free consultation to determine what needs to be done for your small business!

David Lozano, Attorney at Law
Contact me today for a free consultation
800-974-5680/Se habla español

Does filing bankruptcy affect student loans?

A common question I get from my clients is if filing bankruptcy will have any effect on their student loans. Unfortunately, filing bankruptcy does not eliminate or reduce your student loans. The U.S. Bankruptcy Code states that only “undue hardship” is grounds for discharging student loans. Now before you start planning your appeal saying that you are facing “undue hardship”, I should tell you that the Code’s definition will settle for nothing less than permanent and total disability.

While filing bankruptcy does not discharge your student loans or prevent interest from accruing on the loans, there is a ray of hope. Filing bankruptcy will give you a little extra time–up to five years–to get your finances straightened out and possibly catch up to the point where you are able to pay off your student loans! You can do a lot of things in five years if you set your mind to it!

Pursuing the career you took those student loans for may be the key to paying off your loans as well! Don’t let student loans interfere with your goals in life! Contact me for a free consultation. It’s never too soon or too late to seek professional advice on settling your debt!

David Lozano, Attorney at Law
Contact me today for a free consultation
800-974-5680/Se habla español

Are Mom and Dad making sacrifices for your sake?

To cope with the current state of our economy people will often take on extra shifts at work or cut back on frivolous spending. But what about individuals who are retired and their frivolous spending consists solely of buying the grandkids holiday and birthday gifts? That’s right, I’m talking about generous Grandmas and Grandpas here!

The elderly are struggling with debt just as much as the rest of society. A common assumption has been that social security and a good 401(k) plan will be enough to support the elderly after retirement. What I’ve seen happening more and more frequently, however, is elderly folks dipping into their savings for the sake of their children and grandchildren.

Supporting ones children is a hard habit to break. So when Mom and Dad see their son or daughter low on cash, struggling with unemployment, beset with unexpected hospital bills, or in need, the automatic response is to help out.

Lending cash when one is on a fixed income is difficult though. Many elderly men and women turn to borrowing against the equity on their house or relying on credit cards to get by. Unfortunately, both of these methods lead to trouble! Taking out a second mortgage can easily result in foreclosure and missing a few payments on the credit card quickly develops into hefty credit card debt. The elderly may even go without prescribed medication or scrimp on food in an effort to keep up with their bills.

No one likes the thought of dear old Grandma and Grandpa risking their health and comfortable living during retirement! That’s why it is important that elderly individuals get professional financial advice before it comes to that!

Bankruptcy was designed to give people relief from their debt! Mom and Dad have been taking care of you all your life! It’s probably about time to return the favor. Contact me for a free consultation. Together we will make sure that your elderly loved ones can enjoy their retirement to the fullest!

David Lozano, Attorney at Law
Contact me today for a free consultation
800-974-5680/Se habla español

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