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Inside the Bitcoin Debt Crisis

posted on 2018-03-12 by Mikaela Parrick

 

When the bitcoin bubble bursts, there will be quite a few investors in debt. According to Cointelegraph, about 22% of bitcoin investors used borrowed money to purchase bitcoin. People are even taking out mortgages to buy bitcoin, in addition to using credit cards and equity lines. This means there’s a lot of people accumulating a lot of “bad debt.” Bitcoin is still so new and unregulated that these individuals are taking huge risks to invest, hoping to strike it rich. Many people, including the founder of another popular cryptocurrency dogecoin, are predicting the bitcoin bubble to burst… and soon. So when the value of bitcoin tanks, there will be massive amounts of debt left behind. Some are even drawing parallels to the 2008 housing crisis because people took on huge amounts of debt with the expectation that the housing marketing would boom, only for the bubble to burst. People were left with too much debt and not enough assets to cover it.

What is bad debt?

Bad debt is debt that doesn’t increase your net worth, has no future value and that you don’t have money to back for. Some examples of bad debt are auto loans and credit cards. Good debt is considered an investment that generates long-term income or value.

How much debt is too much?

While any amount of debt is too much, there is an easy way to find out if your amount of debt is too high. A good metric to use is your debt-to-income ratio. To find this, add up all your monthly debt payments and divide that by your monthly gross income. Anything over a 43% debt-to-income ratio is a red flag to potential lenders. Learn more about bad debt here.

Can I invest in bitcoin without going into debt?

Yes! Here are a few words of advice to those interested in investing in bitcoin:

1. Buy only what you can afford

To prevent going into bitcoin debt, first we suggest only buying what you can afford. A good rule of thumb is that if you have to borrow, or you can’t buy the same thing twice, you can’t afford it.

2. Start with a small share

Bitcoin can be purchased in fractions for a cheaper price. Start small before spending all your hard-earned money.

3. Do your research

Bitcoin might not even be the smartest cryptocurrency to invest in. There’s a host of other options available, most of which are currently doing well. Research some other (possibly cheaper) options, like ethereum or litecoin.

4. Buy insured bitcoin

Insured bitcoin can be bought through Coinbase, which is better than uninsured. However, keep in mind that only 2% of Coinbase bitcoin is insured. Always read the fine print!

5. Buy low, sell high

Similar to the stock market mindset, to survive in bitcoin you’ll need to buy low and sell high. We realize this advice is a little too late, considering bitcoin was $500 a few years ago and is now in the tens of thousands, but it’s still good advice to follow nonetheless. This is where the gamble comes in. You never know when the price will fall or shoot back up, so prepare for anything.

6. Stay up-to-date on the market

If you’ve invested in bitcoin or any other cryptocurrency, you need to watch the value like a hawk and sell if you see the market start to tank.




Resolving A/R Disputes

posted on 2018-03-12 by Don Leviton

 

What can be done to help resolve disputes and invoicing problems before they become collection issues? Sorting out legitimate disputes from those purely designed to avoid payment can be a challenge. By implementing several preemptive practices, you may be able to reduce both. Consistent follow-up with the buyer before the account comes due has long been recognized as a key to heading off problems before they develop into disputes that delay payment. Call the buyer when the goods should have arrived; ask if the shipment was received timely, if the quality is satisfactory, if your invoice is clear and correct. In addition to alerting you to any potential problems, these customer service contacts also serve to remind the buyer of his obligation. He also becomes aware that you are following his account and will take quick action to assure payment. [ Related: From the Desk of Attorney Don Leviton: Proven Strategies for Improving Collection Rates ] Requiring written purchase orders should also become part of your sales policy if your goal is to reduce problems and disputes. Having the details of the purchase in written form goes a long way toward helping to determine whether or not a customer has a legitimate complaint. These documents provide protection for both buyer and seller, and eliminate the error, misunderstanding and loss of confidence that often results when orders and their details are left to verbal agreement. Items such as price, quantity, terms of sale and warranties should all be clearly agreed upon and stated in the purchase order. Once received it is important that the purchase order be reviewed for errors or ambiguities. If these are resolved early on, problems can be avoided later on ensuring the cash flow process is uninterrupted. The following are specific account management steps that can be taken to reduce disputes: Set a policy that requires all disputes to be resolved within two business days. Work with billing to ensure that the invoices that are mailed are correct, effectively eliminating much of the dispute issue. Email the customer to find out if there are any discrepancies – before the due date of the invoice. Fax a copy of the statement to the payables person at those accounts where disputes occur frequently. Do this prior to the due date of the invoice. Call customers 10 days after large invoices have been mailed to identify potential disputes and get them resolved before the due date. Exchange invoice information with comments on all major accounts. Mail quarterly statements to help resolve small disputes and keep them from growing into a large amount. This information is provided as a matter of information and education only. It is not intended to provide legal advice or counsel. Do not take action in specific cases without full knowledge of the facts, and competent legal advice from your attorney.




Proven Strategies for Improving Collection Rates

posted on 2018-03-12 by Don Leviton

 

Taking a few safeguards can improve your success when collecting on your receivables. I have found that basic strategies are usually the most effective. In order to increase the effectiveness of your collection process, you should: 1. Have a written credit policyand follow it on a consistent basis. 2. Know your customer. Is your customer an individual, a sole proprietor, a partnership, or a corporation? Businesses often use fictitious names and acronyms for their businesses. It is important to clearly establish who is responsible for the obligation. 3. Plan for collection problems before they happen. Your credit agreement or application should provide for provisions for attorney’s fees, interest at the highest rate allowable and late charges for a delinquent account. In order to recover attorney’s fees, most courts require a written agreement signed by an authorized representative of the customer. 4. Use personal guarantees, especially when you are dealing with new companies that do not have a credit history and will try to escape personal liability by creating a corporate account. 5. Have a detailed credit application. All of the above, and more, should be contained in a comprehensive credit application 6. Obtain a security agreementthat can be used to create a lien on the equipment or merchandise sold to protect you in the event of a default or bankruptcy filing. 7. Keep all correspondence between you and your customer. Letters or emails received from your customers may admit the liability in question. Phone conversations should be followed up with a letter or email confirming the conversation. A letter or email received from your customer that you do not agree with should be responded to delineating the reasons for the dispute. Most importantly, once an account is in dispute and the customer has defaulted you must act quickly. The age of the account will be one of the main factors that will impact your ability to be able to collect. Statistics show that 90 days after the account is past due, you have less than a 75% chance of collecting it. The percentage quickly shrinks every passing month and after 12 months, there is only a 25% possibility of collection. [ Related: 8 Things to Expect From Your Collection Agency ] It is essential that accounts are closely monitored during the first three months of aging and an evaluation should be made without delay whether an account should be sent out for collection. Almost always, debtors will ask and creditors will afford a debtor a final opportunity to remit, hopeful that payment will be received the next day, or next week, or next month. This tactic is used by all debtors. Your most effective tool is acting promptly. The strategies discussed above will assist you in managing your accounts receivable and provide for increased collection success if and when the account is sent out for collection. Information in this article is provided as a matter of information and education only. It is not intended to provide legal advice or counsel. Do not take action in specific cases without full knowledge of the facts, and competent legal advice from your attorney.




Settling a Lawsuit

posted on 2018-03-12 by Don Leviton

 

So you find yourself in a lawsuit. You sued someone, or you got sued; it really doesn’t matter. You’re spending money or, if you’re involved as an injured party in a suit for damages, you are waiting for the compensation for your injuries. Regardless, you’re stuck in a time-consuming and less-than-pleasant process that may be costing you lots of money, and there is no certainty about the outcome. Maybe you’ll win, maybe you won’t; and, even if you win, you could really lose, given the money you’ve spent, the time you’ve wasted and the opportunities you’ve lost. All in all, not a good situation! Lawsuits cannot always be avoided, but opportunities to resolve them without a trial are always present. Federal and state courts provide vehicles for forcing litigants into mediation, where a reputable third party—a judge or someone skilled in mediating disputes—simply uses his or her skills to help the parties reach common ground. The mediator or settlement judge cannot force a settlement, but he or she can force the parties to engage in the process. Not every case will settle, but the opportunity to settle is always present, so long as the litigants are willing to consider risk, cost and time. Similar opportunities to settle before a suit is filed are also present. [ Related: Proven Strategies for Improving Collection Rates ] After almost 30 years of litigating and settling cases, I find the attorney-client relationship most severely tested when we discuss a possible settlement. “Whose side are you on?” “She’s not getting anything from me until some judge forces me to pay.” “Are you scared about trying my case?” I’ve heard all of these comments, and more, and often in the same conversation that includes questions like: “Why is this costing so much?” “When will this be over?” and “Can’t we get a continuance; I really want to join my family for our vacation?” Your attorney is on your side, but he or she would be a lousy advocate if the issue of settlement was not explored thoroughly. The settlement process provides several advantages. First, a settled case is a case that ends the monthly billing cycle for you. (The corollary, often lost, is the fact that a case that an unsettled case usually generates more fees for your attorney). Second, every case—and I mean every one—has its flaws! Rare is the case that isn’t better settled and resolved now. Finally, even when the settlement process does not result in a settlement, you and your attorney will surely gain insights into the other side’s case and you’ll often get a “free look” at what an experienced decision-maker thinks about yours. Before he went to work for the federal government in 1861, Abraham Lincoln was a very accomplished attorney. He also wrote a little about a variety of subjects, including the art of lawyering. About resolving disputes, he offered the following thoughts: “Discourage litigation. Persuade your neighbors to compromise whenever you can. Point out to them how the nominal winner is often a real loser—in fees, expenses, and waste of time. As a peacemaker, the lawyer has a superior opportunity of being a good man. There will still be business enough.” Interesting, in these words, is the fact that some 150 years ago, people involved with the litigation process were concerned about the same issues: cost, time and energy! There was no professional class of mediators in the 19th century, and court rules did not mandate participation in settlement conferences, but the rationale for resolving disputes without having a judge or jury impose a resolution on the parties was present then, just as it is now. Ah, but what about emotions? Lawsuits are not simply about money; they also involve righting wrongs and vindication. Sure, and attorneys appreciate the emotional aspects of your litigation experience! Not getting “your day in court” can be a very unsatisfactory outcome. In some cases, a trial may be the only satisfactory approach. But, and this is important, that “day in court,” when it occurs, can also result in a very unsatisfactory and costly outcome, and that outcome may occur long after you have processed and resolved the emotional issues. What’s the bottom-line takeaway? There are two: First, always give the notion of settling due consideration. Second, recognize the fact that by raising the prospects for engaging in the settlement process, your attorney has focused on your best interests, and not on his or hers. Information in this article is provided as a matter of information and education only. It is not intended to provide legal advice or counsel. Do not take action in specific cases without full knowledge of the facts, and competent legal advice from your attorney.




When Should You File Suit?

posted on 2018-03-12 by Don Leviton

 

A lawsuit is generally the last option that should be chosen in trying to resolve a dispute. This question of whether to file the lawsuit enters the mind of many people who are upset with a bad product or service, or breach of an agreement. In order to answer this question and make a decision, one must consider the following factors:

Potential Recovery

Calculation of expected recovery, if the lawsuit is won, is based on the best case and worst case scenarios. Expectations may not be realized. Not all damages may be recoverable. In case of breach of contract, the aggrieved party’s emotional distress is not compensated; loss of income, plus time spent, while involved with a claim or suit is not compensated; interest may or may not be recoverable. In most instances interest is only recoverable if provided for in a credit agreement or contract. Your attorney’s fees are probably not recoverable unless provided for in the credit application or contract. The amount of actual recovery in a lawsuit is unpredictable.

Attorney Fees and Expenses

Legal fees may be based on an hourly rate or contingency fee basis. An hourly rate depends on a lawyer’s experience, relationship with a client, desire to have repeat business, or volume of client’s business being given to that lawyer. Lawyers charge for each minute of their time spent on the case. Billable time can include, every telephone call to and from a client or any other party related to the client’s matter; meetings, legal research, writing of letters and briefs, time in court (which may be charged at a higher rate than for the office work), preparing legal documents, travel time or depositions (interrogations of parties and witnesses) are recorded and then billed to clients. Expenses connected with the case may reach such a level that further litigation may become counterproductive. Typical file expenses may include fees paid to the court for filing a suit; the sheriff for serving a party with a complaint and summons; a private process server or private investigator for finding a defendant or ascertaining a party’s criminal or financial background; interpreters for translation of documents or interpreting the testimony of a witness or a party speaking a foreign language; experts for giving professional opinions; copying of documents and photos, cameramen and photographers for videotaping and picture taking; court reporters for their attendance time and preparation of transcripts of the proceedings; and attorneys for transportation and lodging (for out of town meetings). On the other hand, a client does not incur such monthly charges if an attorney agrees to take the case on a contingency fee basis. Contingency fee means that an attorney is participating in the claim recovery, if any, on an agreed percentage. As a rule, such percentage fluctuates between 20% and 50% of the amount of recovery. An attorney may advance costs and expenses of litigation to be repaid upon settlement or adjudication or a claim. However, a client remains ultimately responsible for expenses under any of the above-discussed methods of payment.

Alternative Dispute Resolution (ADR)

There are many organizations and individuals who are willing to serve as a mediator, counselor, or a judge in a private or out-of-court proceeding. Sometimes it is less costly and faster to resolve any dispute through such intermediaries than to litigate in courts. Mediation involves a semi-formal or informal process of introducing evidence by parties. Parties may bring witnesses or documents to support their views and may hire attorneys to represent their interests at the hearings. Arbitration may be accomplished through government or private organizations, such as American Arbitration Association (AAA), JAMS, Endispute, and many others. Former judges or experienced attorneys hear the evidence and make binding decisions. The rules of the AAA or other adjudicating bodies are different and less restrictive than the rules of evidence adhered to by the courts. [ Related: From the Desk of Attorney Don Leviton: Resolving A/R Disputes ]

Collection on Judgment

After a long and victorious litigation, a winning party secures a judgment from an adjudicating tribunal. This piece of paper may or may not materialize into actual funds being transferred to the winner. Collection on a judgment is a separate legal process. Sometimes one may never recover the award if a judgment-debtor declares bankruptcy which would isolate that party from claims of creditors, including the judgment-winner or judgment-creditor; a judgment debtor dissolves its corporation and, adding insult to injury, opens a new company under another name; all assets of a judgment-debtor are under other parties’ names (relatives, friends, corporations, or business associates) and, therefore, that party becomes judgment-proof.

Piercing the Corporate Veil

If a business takes the protection of a corporation, LLC, in some instances the individual owners may be ultimately liable for their corporate debts, if it can be proved that the corporation or LLC is just a shell for the individual owners.This can happen where the owner uses the same checking account for personal and corporate debts, or there is no adherence to corporate formality.Most states require that corporations, LLC etc, follow certain rules such as holding annual meetings, keeping corporate minutes, resolutions, etc.This process of piercing the corporate veil is possible, and must it must be done in the courts. It can be a time consuming and expensive process.

Length of Litigation

Litigation is a slow moving process which may take months and, in most cases, years before reaching the trial stage. After filing a complaint there can be many delays caused by the judicial system and frustrating the parties. There are many reasons for delaying the proceedings, including an attorney that continually asks for continuance of a deposition or trial because of the attorney’s family emergencies or conflict of schedule; a party which has to be deposed or answer interrogatories is out of town; an expert witness is unavailable on the scheduled deposition or trial date; the file was recently transferred to another attorney who had no chance to prepare for trial; the suit was filed in a wrong venue and, must be transferred to another court; service on the defendant was improper and, thus, must be properly repeated again; a judge assigned to handle the case has left for vacation, or is sick, or temporarily transferred to another court, or is still busy with the preceding trials; a new defendant has been added and, consequently, time is needed to conduct written and oral discovery associated with that defendant.

Opposition

An opposing party’s financial, intellectual and legal wherewithal may affect a decision to initiate litigation. The opposing party’s ability to sustain a prolonged judicial process, the quality of their attorneys, and legal defenses may either encourage or stop the filing of suit.

Principle

Often people desire to punish an opposing party or change the law and, therefore, want no recovery. There are political, moral or social causes which prompt such a decision.

Time Consumption

Litigation is time consuming for the participants. A party must appear at depositions and at a trial. The trial may continue for at least a few days or even weeks. Preparation for a deposition and the deposition itself can take one or more business days. Mandatory arbitration, which in some states is part of a court-based judicial system, also will take about a day. Consultations and meetings with attorneys, as well as answering interrogatories (opposing party’s questions) and requests for production of documents, take many hours of business time. Loss of business time is translated into a loss of income.

Stress

Besides court appearances and testifying under oath at depositions, arbitration and trial, each participant is thinking and worrying about the case outcome at all times. Such incessant consumption of energy and emotional involvement may increase the daily stress of a person. Such psychological and mental drain takes a toll over the course of time.

Lawyers

Trust in the attorney’s abilities and rapport with that attorney are essential for cooperation, decision making and communication efforts. Experience in litigation of the matters at issue is important. One may present his own case in any court but the judges usually resent this “pro se” representation because “pro se” litigants are not familiar with the court and evidence admission rules. In small claims courts where the amount of recovery does not exceed a statutory limit set up by the legislature, for example $2,500 or $5,000, a plaintiff may not need an attorney.

Counterclaims

A complaint filed in court may trigger a counterclaim by a defendant against the plaintiff for another act related to the complaint. For example: a complaint by a company for payment for goods sold and delivered may trigger a client’s counterclaim or defense of warranty or defective goods. That is why a review of one’s own vulnerable points and background is needed in order to ascertain the level of risk in that regard. Any past wrongdoing may come to light in the court proceedings.

Loss of Suit

In case a lawsuit is lost, the losing party will still have to pay legal fees to his own legal counsel, unless there was a contingency fee agreement, plus file expenses, and the court costs of the opposing party. If a contract provides for payment of attorney’s fees of the prevailing party, then these fees also must be paid by the losing party. Name, reputation and prestige may also be affected by that legal loss. Disclosure of trade secrets may be forced upon a party by the court.

Administrative Remedies

Besides the court system, there are many other tribunals which may help an aggrieved party. In general, any problem may be addressed to the governmental agency responsible for or regulating that area of conflict. For example: the State’s Office of the Attorney General may help victims of violent crimes, antitrust violations, consumer fraud by businesses and individuals, etc.; a state’s Department of Insurance may be asked to secure payment from insurance companies vexatiously and frivolously delaying payment; and the Department of Labor may impose sanctions on employers in their disputes with employees.

Appeals

A party may appeal the trial court’s judgment to a Court of Appeals which may affirm, or remand the case back to the trial court for further proceedings, or to reverse a judgment. An appeal process may take a years. In case of reversal with remand, a trial can repeated. Costs will be increased proportionally. In case the trial court decision or judgment is affirmed, a losing party may try to appeal to the State or the U.S. Supreme Court but the chances of a commercial case being heard by the Supreme Court are very low. A prevailing party is accumulating interest on the trial court award. That interest is set by a state statute. In Illinois, for example, judgments earn annual interest at nine percent. Knowing all the deficiencies and advantages of the judicial system and practical aspects of the litigation process should help any person or legal entity to make a decision to settle, arbitrate, or adjudicate any claim. Sometimes a letter from an attorney or third party mediator may bring the parties to an amicable resolution of a dispute. It is not justice, but the fair and economic compromise of the parties’ positions that is the goal of such resolution. Information in this article is provided as a matter of information and education only. It is not intended to provide legal advice or counsel. Do not take action in specific cases without full knowledge of the facts, and competent legal advice from your attorney.





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