Attorney Frank Soave Quoted in Crain's Detroit Business
April 19, 2009
Know which red flags signal bankruptcy
By Nancy Kaffer
Bankruptcy can be a frightening word. But for many local business
owners in a worsening economy, it's a word that promises relief from a
morass of financial entanglement.
Local attorneys say small-business bankruptcies have doubled in the
past year.
“It started three or four years ago,” said attorney Francis Soave of St.
Clair -based Soave & Associates P.L.C. “We started seeing
people that had been involved in investment real estate, ... people with
five to 15 homes that they had purchased, all with mortgages.”
The field of bankruptcy clients continued to widen, encompassing all
types of small-business owners, Soave said.
“We started seeing business people coming in with small businesses,
looking for some relief,” he said.
When is it time for a business owner to consult a bankruptcy attorney?
“If you think you're in trouble, you probably are,” said attorney Charles
Schneider of Livonia-based Charles J. Schneider P.C. “The reason I say that is, they'll go to the utmost lengths of trying
to keep a business afloat, far beyond the time that I, knowing what the bankruptcy laws say, would have pulled the trigger
and fired the bankruptcy bullet.”
A business owner in difficult circumstances, Schneider said, might empty or take a loan against a 401k retirement savings
plan, or mortgage a family home.
“There's a certain bundle of property they're allowed to keep to make a new, fresh start in life — an IRA account, or a
401k, that would have been exempt under bankruptcy code or not available to creditors,” he said. “People dive into
exempt or excluded assets trying to pay back their debt, when they should have seen the writing on the wall and not done
those things.”
Common, Schneider said, is for a business owner to borrow against the equity in a family home.
“There are assets we call "exempted assets,' ” he said. “When they come to me and they've usually liquidated those in
some sort of fashion, it's almost always the case that they've gone too far to try to avoid bankruptcy. If you're looking to
invade assets of those types, you ought to be looking to see whether you ought to be filing a bankruptcy case at that
time.”
A big red flag is getting behind on tax payments, Soave said.
“That situation should not be allowed to linger,” he said. “You should immediately talk to your accountant and speak to a
bankruptcy attorney because of the risk and peril of ignoring that, especially with the withholding taxes.”
Withholding, Soave explained, refers to payroll taxes and includes payments to a state's unemployment insurance fund or
Social Security.
“Those are trust fund taxes,” he said. “They don't belong to the person that's collecting them. You're dealing with them in
trust for the government, and they're just passing through your hands. When you don't surrender them to the
government, those are priority debts in a bankruptcy and in many cases cannot be discharged, in or out of the bankruptcy.
And the individual can be responsible for those.”
Other potential indicators can include a business that's closed or on the verge of closing, or foreclosed property, he said.
“But people know when they're in trouble,” Soave said.
About half his clients are simply closing a business and liquidating assets, he said.
More than half of his small-business bankruptcy clients file Chapter 7, which involves liquidation of the business. Chapter
11 bankruptcy protection allows a company to reorganize. A corporation or partnership can't file for Chapter 13
bankruptcy, but an individual with a regular income may use Chapter 13 to adjust debt.
“Most small-business people, when they get into borrowing situations, are forced to sign personally for debt,” Soave said.
“Though they may have a limited liability corporation, the requirements of their loans typically have personal guarantees.
So the most common suit we're looking at is personal bankruptcy.”
Schneider concurs.
“The lenders like to see the individuals on the hook for the amount of the debt because then it gets personal and they
can't just walk away,” he said.
“Unless they file for personal bankruptcy. But if it comes to that point, they've lost all hope that, if business has gone
away, they aren't going to keep their personal assets, either.”
Nancy Kaffer: (313) 446-0412, nkaffer@crain.com
Michigan Governor OKs Property Tax Break for Start-Up Businesses
(7/27/04)
Michigan Gov. Jennifer Granholm (D) on July 22 signed HB 6025 (now Public Act 252 of 2004) and HB 6026 (now P.A. 251 of 2004), which will provide start-up businesses with exemptions from taxation under the General Property Tax Act and the Obsolete Property Rehabilitation Act, respectively.
Michigan Governor Approves Breaks for 'Innovation Centers'
(7/27/04)
Michigan Gov. Jennifer Granholm (D) has signed HB 5823 and HB 5824; the bills provide property tax relief to "innovation centers," located in "certified technology parks" or "smart zones" statewide, which use tax increment financing to develop infrastructure and services.
ATTORNEYS GENERAL IN SEVERAL STATES SAY AVOID FORECLOSURE SCAMS
July 27, 2004
Attorneys General in several states urges consumers facing foreclosure to beware of solicitations that require homeowners to transfer title by quit claim deeds and to rent back their homes. Homeowners should avoid real estate transactions in which the value of their home and equity are not discussed, and they should avoid entering any real estate transaction without a real closing conducted by a title company.
Homeowners have options when falling behind on their mortgages. They should understand that lenders prefer not to foreclose on residential loans. Lenders will work with homeowners who act responsibly. When facing foreclosure, homeowners should consider the following:
Do not ignore foreclosure notices. Contact your lender and explore options, including catch-up plans.
Make your home payment first—it is likely your largest investment and foreclosure may cost you all the equity you have put into your home over the years.
Seek advice from unbiased professionals who are not seeking your business, such as an attorney, a loan officer at your bank, or a non-interested realtor.
Finally, if all options to bring a mortgage loan current have been exhausted, selling your home to preserve your equity, or filing Chapter 13 to allow you time to catch up the arrearages and reinstate the mortgage are two more options. State real estate laws give homeowners the right to sell their property anytime in the foreclosure process, including the redemption period after a foreclosure sale. If the redemption period does not provide enough time to close a pending sale, a Chapter 13 Bankruptcy can provide the needed time to close. Given the increase in home values, the sale of a home, even in foreclosure, and with the help of a short-term Chapter 13 Bankruptcy filing, can yield thousands of dollars to a homeowner to assist them to get back on their feet financially. If keeping your home is your primary objective, and you have the income to continue current payments, but need time to catch up the missed ones, Chapter 13 is the best option.
State Bar of Michigan Members' Newsletter for Tuesday, June 29, 2004
An article in Tuesday's Detroit Free Press reports that, "A U.S. Supreme Court ruling on the rights of hundreds of terror suspects at Guantanamo Bay, Cuba, will unleash a flurry of legal challenges by finally allowing captives to take their cases before U.S. civilian courts, human rights lawyers said." According to the article, "For the past two and half years, the United States has maintained its remote naval base in Cuba was beyond the reach of U.S. courts, but the Supreme Court disagreed in a ruling Monday, bringing legal options to nearly 600 prisoners from 42 countries."
(Detroit Free Press)
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An article in Tuesday's Macomb Daily reports that the U.S. Supreme Court on Monday, "warned police away from using a strategy intended to extract confessions from criminal suspects before telling them of their right to remain silent." According to the article, "The court, on a 5-4 vote, said that intentionally questioning a suspect twice -- the first time without reading the Miranda warning -- is usually improper."
(Macomb Daily)
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An article in Tuesday's Traverse City Record-Eagle reports that the U.S. Supreme Court, "ruled Tuesday that a law meant to punish pornographers who peddle dirty pictures to Web-surfing kids is probably an unconstitutional muzzle on free speech." According to the article, "The court did not end the long fight over the law, however. The majority sent
the case back to a lower court for a trial that could give the government a chance to prove the law does not go too far."
(Traverse City Record Eagle)
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An article in Monday's Flint Journal reports that, "The Genesee County Prosecutor's Office kicked off its new community-prosecution program today by opening Project Trust centers at two police mini-stations." According to the article, "The prosecutor's office received a grant last year to have prosecutors work closely with community groups to address crime issues. "
(Flint Journal)
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An article in Tuesday's Detroit Free Press reports on a proposal under consideration by the Michigan Supreme Court that, "would allow witnesses to testify via two-way video under certain conditions." According to the article, "Supporters say the change would bring modern technology to the courtroom -- cutting costs, speeding up cases and helping crime labs ease case backlogs. Opponents argue video testimony would hamper a jury's ability to determine the truth and a judge's capacity to assess whether a defendant is voluntarily entering a plea."
(Detroit Free Press)
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An article in Tuesday's Detroit News reports on a case headed for the Michigan Supreme Court that, "has sparked a debate about whether a citizen has the right to resist an unlawful arrest by a police officer." According to the article, "In July of 2002, the legislature amended a statute in the Michigan Penal Code in order to increase from a misdemeanor to a felony the charge for an individual who resists, obstructs or assaults a police officer performing his or her duties. "
(Detroit News)
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State Bar of Michigan Members' Newsletter for Monday, June 28, 2004
An article in Monday's Traverse City Record-Eagle reports that, "The U.S. Supreme Court delivered a mixed verdict Monday on the Bush administration's anti-terrorism policies, ruling that the U.S. government has the power to hold American citizens and foreign nationals without charges or trial, but that detainees can challenge their treatment in U.S. courts."
Traverse City Record Eagle
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An article in Sunday's Lansing State Journal reports that, " Just as Michigan is a crucial battleground state in the fall presidential election, the 6th Circuit Court - which handles appeals from the state's federal district courts - is on the front line of a partisan struggle for influence over the nation's federal courts." According to the article, " With the 12 sitting judges equally divided between Democratic and Republican nominees, the four Michigan vacancies on the 16-member court could tip the balance in a circuit that also includes Ohio, Kentucky and Tennessee."
Lansing State Journal
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An article in Monday's Macomb Daily reports that, Macomb County Sheriff Hackel, " is lobbying state legislators to change a law to allow jail operators to put three inmates in a cell and increase the use of common areas for bunking inmates." According to the article, " Existing law restricts cells to two inmates and provides a minimum amount of square footage of common area per inmate."
Macomb Daily
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An article in Monday's Lansing State Journal highlights legislation signed earlier this month by Gov. Jennifer Granholm that makes it a felony to use, "hidden devices to observe, photograph or record others without their knowledge." According to the article, "The new legislation, which takes effect Sept. 1, updates Michigan's laws so people who use gadgets to invade others' privacy can be punished with jail terms and fines as high as $5,000."
Lansing State Journal
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An article in Monday's Macomb Daily reports that, "As the next step in the state Legislature's fight against late-term abortions, a Macomb County lawmaker is proposing a bill that would impose criminal penalties for physicians who perform so-called partial-birth abortions." According to the article, "Rep. Brian Palmer's legislation would revise the state's criminal code to include a felony provision carrying a penalty of up to two years in prison and a $50,000 fine for performing partial-birth abortions."
Macomb Daily
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An article in Monday's Detroit Free Press reports that, "Beginning Monday, New York becomes the first state to require new "fire-safe" cigarettes to be sold." According to the article, "The law is meant to cut down on the number of smoking-related fires."
Detroit Free Press
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An article in Sunday's Ann Arbor News highlights the five-year "Building Restorative Communities" initiative, which involves Washtenaw County's juvenile court. According to the article, " Within the initiative is a philosophy called, "Balanced and Restorative Justice," in which youths make restoration to the individuals and communities they have harmed while developing the skills needed to live productive lives."
Ann Arbor News
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An article in Monday's Washington Post reports that the U.S. Supreme Court, "said Monday it will consider whether sick people who smoke pot on a doctor's orders are subject to a federal ban on marijuana."
Washington Post
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Michigan Incentives News, June 28, 2004
Michigan Senate OKs Part of Controversial JOBS II Package
The Michigan Senate has passed three sections of the JOBS II job creation package that Senate Majority Leader Kenneth Sikkema (R) requested
that the governor support in exchange for votes for her cigarette tax, which has become law.
Michigan House Passes Incentives for Producing Films, TV Shows
The Michigan House has approved HB 5958, HB 5959, HB 5960, and HB 6027, which would provide tax relief to motion picture production companies.
Michigan House Panel Passes Package of Film Tax Breaks
The Michigan House Tax Policy Committee has unanimously approved a four-bill package that would provide tax relief for filmmakers who spend at least $250,000 in Michigan; the committee also approved property tax relief for start-up businesses.
State Bar of Michigan Members' Newsletter for Monday, June 14, 2004
An article in Monday's Detroit News reports that, "The Supreme Court at least temporarily preserved the phrase "one nation, under God," in the Pledge of Allegiance, ruling Monday hat a California atheist could not challenge the patriotic oath while sidestepping the broader question of separation of church and state."
An article on Monday's Mlive.com reports that, "A Michigan Court of Appeals ruling has reinstated a petition drive to put an anti-affirmative action measure on the fall ballot." According to the report, " In a seven-page opinion dated Friday, the unanimous three-judge appeals panel overturned a March ruling in Ingham County Circuit Court that the Michigan Civil Rights Initiative was improperly worded and likely to confuse voters."
Also see: The New York Times
An article in Monday's Lansing State Journal reports that, "A doctor's proposal asking the American Medical Association to endorse refusing care to attorneys involved in medical malpractice cases drew an angry response from colleagues Sunday at the annual meeting of the nation's largest physicians group."
Also see The Detroit News
An article in Monday's Detroit News reports that, "All court services will soon be housed under one roof as the 52nd District Court third division prepares to move to its $18.1 million facility Friday."
An article in Sunday's Ann Arbor News highlights Michigan's new election law which takes effect in 2005 and which will change the way local, state, federal and school elections are held.
An article on Sunday's Mlive.com reports that, "An Oklahoma jury's inability to decide whether to send bombing conspirator Terry Nichols to death row may reflect wider misgivings about the death penalty, his defense attorneys say."
Also see: The New York Times
An article in Monday's New York Times reports that, "Texas juries in capital cases must make a prediction. They may impose a death sentence only if they find that the defendant will probably commit more violent acts." According to the report, "Other states look backward, asking juries to consider the moral blameworthiness of the crime. Texas, which leads the nation in executions, wants to know the future: Will the killer kill again?"
An article in Monday's Washington Times quoting a Japanese newspaper reports that, "The Japanese government plans to translate major law codes into English to boost foreign investment."
We're Here To Help
Soave & Associates, Plc is here for you. If you have questions or comments about our services, or want to know how we can help you, please call us at 810-326-7000 or e-mail us at fnsoave@michlegal.com .
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