What a Struggling Business Must Do to Survive Under Financial Stress

January 5th, 2012

This article was featured in a recent issue of the Mercer County Woman. It was written by Paul Maselli, a partner with the firm.

The continued success of a struggling business depends on the business owner’s ability to make prudent decisions under financial stress.  In 25 years of representing struggling businesses (and unpaid lenders), I have witnessed many bad business decisions.

A “struggling business” is one that has had past success in timely paying payroll, taxes, rent and other operating expenses, but finds itself in a situation where it is no longer selling enough products or services on a monthly basis to meet its monthly expenses.

The worst decision a business owner can make is to not pay taxes.  Delaying the payment of payroll withholding and employment taxes, sales taxes, etc. can be fatal to both the business and the business owner.  The government has little flexibility in negotiating payment plans or reducing the tax debt,  and strong collection powers.  Taxes are the first priority.

It is foolhardy to not pay rent if there is no place else to run the business.  A landlord has quick access to the courts to obtain an eviction which will effectively terminate the business.

The next priority is the payment of long-term debt to a creditor, such as a bank, with a lien on the business assets –  accounts receivable, machinery and equipment, inventory, etc.  Creditors with collateral can not act as quickly as the government or the landlord, but they do have expedited court remedies which can destroy the business.

Before missing a payment to a creditor with collateral, the business owner should  meet with that lender, disclose the problems, and attempt to negotiate a new payment plan.  Ignoring these types of creditors doesn’t make them go away, it just makes them angry and impedes the resolution process.

Trade creditors with no collateral have the most difficult time collecting which provides leverage in negotiating pay-outs. Trade creditors usually want to keep the struggling business as a customer if it has been a good customer over the years and will usually make an effort to resolve the situation.

Avoid the temptation to borrow on a line of credit to meet cash needs.  This can be fatal.  The credit line should be used only to cover the delay in collecting strong accounts receivable and should be repaid immediately when the customers’ payments come in.

On the other hand, borrowing money when the business is not generating enough sales to meet operating expenses is a temporary fix that will cause more damage in the long run.   If the company’s problems are not addressed because the company can borrow money, that money will soon run out and the problems will still be there.  Except now the problems include the repayment of the borrowed funds.

The best decision for a struggling business is to decide to seek professional help from a business consultant, accountant or lawyer with experience in providing advice to businesses.  While this may create an additional expense in a time when cash is short, it is the smartest decision for resolving the crisis.

Insurance For Your Marriage: Why You Need A Premarital Agreement

January 3rd, 2012

This article was featured in a recent issue of the Mercer County Woman. It was written by Kimberly Pelkey Sdeo, an attorney with the firm.

You have insurance on your car in case of an accident and medical insurance in case you get sick.

Getting married is exciting. It’s also a good time to evaluate your personal financial circumstances and determine whether you need to insure your marriage. Premarital agreements help you to protect your assets and should be considered before you say “I do.”

In New Jersey, property acquired before marriage is called premarital property and will remain separate property unless commingled after the marriage. In New Jersey, premarital agreements are governed by a
law called the Uniform Premarital and Pre-Civil Union Agreement Act. N.J.S.A.§37:2-31 et seq.
The statute requires the Agreement to be in writing, signed by both parties with full disclosure of assets and liabilities to be enforceable. N.J.S.A. §37:2-33. Consider the following two hypothetical relationships:

Nick and Jessica

Jessica owns a house, which she bought five years ago for $250,000. After the wedding, Jessica and Nick move into her house and share the mortgage payment. Over time, they renovate the house and finish the basement where Nick creates his “man cave.” Five years later, Nick and Jessica divorce. The property is now worth $300,000 and the mortgage is $125,000. Since Nick has a marital interest in the equitable distribution of the house, Jessica must pay him $87,500 for his one-half net equity in the house. Jessica must refinance or sell the house to obtain the funds. If Jessica had a premarital agreement, she could have carved out the home and its equity as separate premarital property.

Reese and Ryan

Reese and Ryan meet at work, fall in love, get married and have two kids. Ryan stays home with their kids and turns to shopping online to comfort himself while Reese is off on her many business trips. Ten years later, Reese and Ryan call it quits. It is only after they split that Reese learns of Ryan’s credit card debt. Now the parties are separating and faced with $100,000 of debt.

Just like the equitable distribution of assets, upon a divorce, there is an equitable distribution of debts acquired during the marriage. Ryan hasn’t worked full-time in years and doesn’t have the means to pay the credit cards on his own, so Reese will absorb the credit card debt through making monthly support payments to Ryan.

If Reese had a premarital agreement, discussed finances and learned of Ryan’s habits before tying the knot, she could have stipulated that the debts in each party’s name remain his or her sole and separate liability in the event of a separation.

With a little foresight and planning, Jessica and Reese could have avoided these problems by insuring their marriages with a premarital agreement. Unsure if your marriage needs to be insured? Call me for a consultation.

As always, please feel free to leave comments or questions, and also check out our Facebook and Twitter feeds.

A Primer on Aid and Attendance for Veterans

December 29th, 2011

This is a guest post by Penny Rodenbaugh, a Certified Estate Planner, Certified Senior Advisor, Member of the National Ethics Bureau, and member of the National Notary Association. Penny provides services for senior citizens, the “sandwich” generation, “baby boomers,” veterans, business owners, and those in the midst of estate administration or divorce matters.

What is the Veterans Aid and Attendance Pension benefit?

The Veterans Aid and Attendance Pension is a federal assistance program offering a monthly benefit payment from the Department of Veterans Affairs designed to provide care for veterans or surviving spouses who are disabled or frail and might have trouble living on their own. The benefit is paid in an income to the veteran or surviving spouse, not the care provider, and the funds can be used for anything, although most need the money to pay for needed care and medical expenses.

Who is eligible for the Veterans Aid and Attendance Pension benefit? According to the Department of Veterans Affairs website, Aid and Attendance Pension is a benefit paid in addition to monthly pension. This benefit may not be paid without eligibility to pension. A veteran may be eligible when the veteran requires the aid of another person in order to perform personal functions required in everyday living, such as bathing, feeding, dressing, attending to the wants of nature, adjusting prosthetic devices, or protecting himself/herself from the hazards of his/her daily environment. The veteran can also be eligible if bedridden, in that his/her disability or disabilities requires that he/she remain in bed apart from any prescribed course of convalescence or treatment, or a patient in a nursing home due to mental or physical incapacity, blind, or so nearly blind as to have corrected visual acuity of 5/200 or less, in both eyes, or concentric contraction of the visual field to 5 degrees or less.

While you may apply for Aid and Attendance Pension benefits by writing to your VA regional office, both I and Maselli Warren, P.C. offer extensive knowledge of the benefit and a host of services to assist you in the application process. To ensure the highest level of service and long term care assistance, we have dedicated our resources to create relationships with assisted living facilities, at home care providers and other senior advocates, and we host complimentary informational workshops in retirement communities across the nation.

Contact Maselli Warren, P.C. or Penny Rodenbaugh today to determine if you or a parent are eligible for Aid and Attendance benefits. Penny can be reached at (215) 353 1707, or at pennyandassociates@yahoo.com.

Can My Parent Qualify for Medicaid in New Jersey?

December 27th, 2011

This is part of a series of posts, published on Tuesdays, regarding Medicaid and elder law topics of general interest in New Jersey.

The answer to this question is complex, but given a little help from these posts, and hopefully some consultation with a good elder law attorney, we will be able to sketch out what is needed so your parent can qualify for Medicaid (also known as “Medicaid Only”) services for medical care in New Jersey. Eligibility for Medicaid for seniors has two facets financial and medical. The medical factors are usually handled by the facility itself, and require paperwork to be filled out by medical personnel (who again are typically employed by the facility). The financial factors are of course within the control of the applicant and his/her family, and we will be discussing them in great detail in future posts.

The baseline rule is that a Medicaid recipient can only have $2,000 in what are called “countable assets.” That number is preposterously low for the vast majority of New Jersey residents, and the key to making that number more palatable is to determine what is “countable.” Medicaid planning is, at its most basic level, the art of converting “countable” assets to “non countable assets,” exempting as much as possible from the grasp of the Medicaid program. Future posts will discuss what “countable assets” are, what exceptions there are to those rules, and how a skilled attorney can start to use those exemptions to a client’s advantage.

Consumer’s Corner: A Few Words About…Cell Phone Contracts

December 22nd, 2011

I talk to people all the time about legal issues, and a few weeks back I asked our readers on our Facebook page if there were any issues they were interested in seeing discussed on this blog. As expected, several of the readers stepped up to the plate. One reader asked me to do a quick discussion of cell phone contracts. Before I get started on this subject, just a quick note: this, just as much as the other posts, is not legal advice. In fact, a lot of consumer legal subjects don’t reach the realm of “legal advice.” A little practical thought, and understanding plain language and the ways of big corporations, will go a lot farther than any statute I can throw at you.

Cell phone contracts (not the month to month variety) all have a few things in common. They are usually 2 years long, and they usually have various fees and charges for data, minutes, and other features. They also have a big cancellation fee, usually upwards of $300, if you try to get out of the contract before the end. This isn’t usually a problem, until carriers try to raise some of the miscellaneous fees in the contract. In that case, how do carriers get away with it, and how can you fight back?

Typically with these contracts you have the right to cancel without a termination fee when there has been a “material change” to a contract. It’s not entirely clear what that means, but a substantial increase in a fee for a service such as text messaging might well qualify. In any case, it’s certainly something you can bring up when calling customer service in an attempt to get out of a contract. If you threaten to cancel, carriers will often grant some pretty substantial concessions on your monthly bill. You may not get the original increases rolled back, but maybe you can get some more minutes or text messages. Just be aware that if the carrier refuses to budge on your argument, and you do cancel, they will charge you the big termination fee. How can you combat that fee? That is a subject for another column.

What do we mean by “Medicaid” in New Jersey?

December 20th, 2011

This is part of a series of posts, published on Tuesdays, regarding Medicaid and elder law topics of general interest in New Jersey.

“Medicaid” is an entitlement program (meaning the government gives it away to people). It is, however, not a “social insurance” program in the way that Social Security and Medicare are. Social Security are automatically available to you once you reach a certain age, and there are no additional requirements. You also have to pay in to those programs through automatic deductions from your paycheck.

Medicaid on the other hand is a program funded through both the federal and state governments that allows for health insurance, medical care, and cash payments in some cases. However, in order to qualify for Medicaid, a person must meet specific financial and/or medical standards. The programs cost the state government a lot of money, and so the state’s guidelines are strict. Each county’s Board of Social Services (or County Welfare Agency) administers these guidelines very carefully, although sometimes there is variation in some of the marginal issues depending on which county you go to.

When this blog discusses “Medicaid” in an elder law context, though, what is mainly being referred to is something called the “Medicaid Only” or “Medically Needy” programs. They mean that an applicant is only looking for the government to pay for the cost of care, and not to provide cash or other benefits (food stamps or the like).  Each of those programs have different asset limits but they are certainly lower than the assets most seniors currently have saved for retirement.

In short: If you see the word “Medicaid” used without reference to assisted living or skilled nursing facilities, some of the information presented there might not be accurate for your particular case.

Business Owners And Employees Now Subject To Personal Liability For Violation Of New Jersey’s Consumer Fraud Act

December 13th, 2011

This article was featured in a recent issue of the Mercer County Woman. It was written by Brian A. Mills, a partner with the firm.

A recent Court decision has extended the reach of New Jersey’s Consumer Fraud Act,
(the “CFA”) through the corporate shield and into the pockets of the individual owners and
employees of the company with whom a consumer has a contract. In the wake of this important decision, the corporate or LLC structure alone is insufficient to protect business owners and employees from personal exposure for business liabilities arising under the CFA.

The case Allen v. V and A Brothers, Inc., 414 N.J.Super. 152 (App.Div 2010), was brought
by homeowners against a landscape contracting corporation, its sole individual shareholder
and two of its employees alleging breach of contract and consumer fraud in connection with
the construction of a retaining wall on their home. In holding the three individuals liable
for damages in excess of $600,000, the Court interpreted the Consumer Fraud Act to permit
the imposition of damages against the individual owner and employees of a company even
though the contract was with a corporation and even though no individual was deemed to have
committed any wrong “affirmative act.” The individuals were deemed personally liable for the
damages by virtue of the company’s failure to adhere to certain “technical requirements” under
the CFA. The Court stated that it is not necessary to pierce the corporate veil in order to impose personal liability.

The CFA was adopted in 1960 as remedial legislation to be liberally construed in favor of
consumers to punish “unconscionable commercial practices.” In short, the consumer is entitled
to the benefit of every doubt whenever a potential CFA claim or issue arises. The act is intended to “increase the attractiveness of consumer actions to attorneys” by allowing a consumer to recover damages equal to 300% of their actual losses plus attorney fees in prosecuting the case. In essence, the legislation removes the cost-prohibitive barrier to bringing a lawsuit against a business where the damages are trivial. Lawyers for consumers are likely to bring small cases knowing the Court will force the defendant to foot the bill for the plaintiff’s lawsuit. Moreover, damages awarded under the CFA are not covered by insurance.

Further, the New Jersey Division of Consumer Affairs has enacted a number of regulations
elaborating on the CFA obligations of providers of certain types of goods and services. Taken
together, the CFA statutes and regulations bring almost any business that does business
with consumers within the sights of the CFA and its remedial objectives designed to punish
businesses for actions deemed unconscionable.

Most significantly, what is deemed an unconscionable business practice under the CFA and
its regulations may not be obvious to business owners. For instance, the regulations enacted
pursuant to the CFA make special provision and impose specific obligations on the following
types of businesses- mail order businesses, retailers of meats, furniture and household furnishing retailers, internet dating services, prepaid calling cards, home appliance repair services, sellers of animals, home improvement contractors, food and dining establishments, automobile and watercraft dealers and repair facilities, tire retailers, toy stores, health clubs, towing companies, realtors, ticket sales, and sellers of motorized wheelchairs. Seemingly benign things such as failing to provide a starting and ending date for a construction project, certain disclosures or insurance information on a construction contract are “technical violations” of the CFA and deemed unconscionable business practices.

In addition, duties are imposed on all retailers with respect to refund policy, marketing by
facsimile, disclosure of unit pricing and advertising generally.

Benjamin Franklin may have been speaking directly to consumer businesses in New Jersey
when he said “an ounce of prevention is worth a pound of cure.” Preventative measures are the key to avoiding exposure to significant liability under the CFA which, under the Court’s recent decision, now extends to the owners and employees of the business as well.

Accordingly, it is now more important than ever for businesses that transact with consumers to
take steps to ensure it does not run afoul of the CFA. Business owners and managers should
consult with an attorney familiar with the requirements of the CFA to conduct a CFA audit and
review contracts, advertising and business practices for potential areas of exposure.

And CFA considerations aside, regular review of a business’ terms and conditions is an
essential exercise. What could be more important that defining the scope and parameters of the relationship between a business and its customers? Ensuring the customer’s expectations are consistent with the business’ offer is one of the most important keys of business and is also a way to avoid CFA claims.

Maselli Warren, P.C. has taken the Allen v. V and A Brothers, Inc, case to the New Jersey
Supreme Court on behalf of the individuals deemed liable for the company’s CFA violations. A
successful appeal would be a tremendous and important victory for business in New Jersey.

As always, please feel free to leave comments or questions, and also check out our Facebook and Twitter feeds.

No Shame In Seeking a Second Chance Through Bankruptcy

December 8th, 2011

This article was featured in a recent issue of the Mercer County Woman. It was written by Carl G. Archer, an attorney with the firm.

Most of us manage our debts well enough to scrape by. Nowadays, though, it is easy for life to become unbalanced in a hurry. Bad things often happen to good people. Between pay cuts, unemployment, divorce, and the costs of unexpected problems, there is plenty out there to bring anyone financial problems in a hurry. Credit card companies, and others, charging 20 percent interest or more only make the problem worse. These and other financial crises leave normal, honest people worried, ashamed, and in need of a fresh start.

Given these burdens, it can be a relief to know that federal bankruptcy law grants relief to people in financial stress. It can relieve a person of the obligation to pay many debts, including credit cards and medical bills. And yet, given the opportunity under federal law to make a clean start of it, many people still choose to bear this cross alone. Many people often hesitate because they wonder how they can justify walking away from their debts, which they agreed to pay, even if the law allows it.

No one should be racked with guilt over this decision. Every major religion and most industrialized countries support bankruptcy as a mechanism to relieve an overburdened debtor. Any person who has ever faced such hardship in their lives knows that bankruptcy relief may prevent a family from being torn apart over financial stress. Businesses know that bankruptcy exists, and that they may not get repaid by someone who files for bankruptcy. They take that risk into consideration when setting interest rates and prices for their products.

This country has been helping people to improve their lives through a “second chance” for a long time. Bankruptcy law had its American origins in the Constitution itself. Millions of Europeans immigrated here at the turn of the 20th century and saw the Statue of Liberty as a symbol of new opportunity for their families. They were the embodiment of poet Emma Lazarus’s words “Give me your tired, your poor/Your huddled masses yearning to breathe free” which appear on a plaque inside the Statue of Liberty. The concept of a “second chance” has a universal appeal for a reason – everyone needs one at some point during their lives.

Bankruptcy is provided for in the law because it is better to let people start over than it would be for them to struggle for the rest of their lives to pay back debts they cannot handle. Those struggles affect not just a person’s financial health, but their mental health and their relationships with family, friends, and other people. Filing bankruptcy is an important decision. If you feel overwhelmed by debt, consider filing a bankruptcy for relief from your financial and mental pressures.

As always, please feel free to leave comments or questions, and also check out our Facebook and Twitter feeds.

Child Support Basics – What Every Parent Should Know

December 6th, 2011

This article was featured in the most recent issue of the Mercer County Woman. It was written by two attorneys with our firm- Patricia Agoes and Kimberly Pelkey Sdeo.

Maggie meets Mike on a dating website, they instantly connect and ten months after their first date, they welcome baby Maxwell. Maggie cannot bear to leave Maxwell, but returns to work part-time and sends Maxwell to day care. Shortly after, Mike breaks up with Maggie. Mike and Maggie reluctantly accept the relationship is over. Mike moves out and visits the baby every other weekend.Not wanting to deal with lawyers and the Courts, Mike agrees to pay one-half the day care costs, but doesn’t think he should pay child support. Mike works a mechanic making $1,200 a week gross.

Soon, Mike stops paying for one-half of Maxwell’s day care. Maggie returns to work full-time as a nurse earning $900.00 gross per week, but it’s hardly enough to keep up with the monthly day care bill of $1,000.

Mike and Maggie argue about money every time they see each other and it upsets Maxwell. Maggie runs into a friend and tells her how hard it is to be a single mom with no support. Maggie’s friend gives her the name of a local family law attorney to call. Her friend tells her that a consultation doesn’t cost too much and she deserves to know her rights and options.

Maggie schedules an appointment with the attorney, who sat with her for over an hour. Maggie learned that child support is based upon the New Jersey Child Support Guidelines. The Guidelines approximate the costs to raise children based upon the income of each parent. The Guidelines include housing, clothing, food and activity costs. Even medical insurance premiums and child care can be included as additional child support.

A request must be made to the Court asking for support. Once support is established, the County Probation Department can collect directly from the parent’s paycheck. If payments stop, Probation can enforce child support in Court, take tax refunds and even suspend a driver’s license. Child support cannot be eliminated through bankruptcy. Regular income, side income and overtime are used to determine child support. Income can be imputed if a parent does not work. Job loss does not automatically decrease child support and an increase in income can be a basis for a recalculation of child support.

Maggie learns that the Guidelines calculate child support to be $260 per week, including day care. Maggie’s attorney files the request with the Court to establish the child support obligation. A week before the court date, everything gets resolved by exchanging financial information and using the Guidelines without ever stepping foot in the courthouse. Attorneys for Mike and Maggie prepare a written agreement and submit the Court Order to establish the child support obligation and create the Probation account to collect the child support.

By seeking legal advice, both Mike and Maggie know the Court has established a fair amount for Maxwell’s support.

Are you having trouble with child support matters? Do you need to establish child support? Contact us to schedule an appointment today to discuss your rights and options.

As always, please feel free to leave comments or questions, and also check out our Facebook and Twitter feeds.

Medicaid Eligibility Can Be Different In Every State and Even Every County!

December 1st, 2011

The federal government provides only the bare minimum guidance on its programs, and leaves the implementation of the programs, along with most of the eligibility requirements, to the individual states. The states in turn put together laws and regulations to interpret the federal laws and lay out the groundwork for the application process. The actual interpretation of state and federal laws and codes is done mostly by bureaucrats at the county level. If there is a dispute, and an individual appeals an adverse ruling, only then does an administrative law judge get involved.

Medicaid planning and application for seniors isn’t like traditional legal and litigation work. It doesn’t help a lawyer very much to “know the judge.” It is much more important to know the officials on the county level who interpret the rules, and know what they will allow and what they will reject. That kind of ground-level knowledge will make planning much less risky and much more efficient, while ensuring that your loved one receives uninterrupted care with minimal financial risk. If you have any questions about county rules and interpretations, or you just want to know how to get started, please feel free to call Carl today at 609-452-8411 for a free phone consultation.

As always, please feel free to leave comments or questions, and also check out our Facebook and Twitter feeds.