Social Security Benefit Limits Vary

QUESTION: My husband and I are in our late 50s. We started planning for retirement 20 years ago. We are both professionals and have earned good salaries over the years, which makes our projected Social Security benefits $990 each if we retire at age 62.

However, we have been told that there is a $1,200 family limit on Social Security benefits. If that is true, it would have an impact on our retirement planning and we would probably work until age 65. Do the current laws really dictate this limit or have we been given some erroneous information?

--R.B.

ANSWER: Both. Social Security does impose maximum family benefit limitations of 150% of the primary wage earner’s benefits in instances where both spouses are claiming benefits on one person’s earnings record. However, you are each claiming benefits against your own work records. In such cases, the maximum family benefit rule would not apply, said Leslie Walker, spokeswoman for the Social Security Administration in San Francisco.

Divorced Niece, Spouse Both Are Legally Liable

Q: Three years ago, we made a $15,000-loan to my husband’s niece and her husband, who live in California. They needed the money in order to save their home. We live in South Bend, Ind. In the meantime, they sold the home and are divorced. They made payments until March of 1995, leaving an unpaid balance of nearly $8,000. Each party feels that paying the balance is up to the other.

We had our attorney draw up a promissory note, which both parties signed. But I know that laws can vary by state. How do we collect the balance?

--M.A.

A: Because they both signed the promissory note, both your niece and her ex-husband are legally liable for the debt to you, said Ralph Warner, author of several legal self-help manuals and publisher at Nolo Press. You can sue them both--separately or together--and you can collect from whoever has the money.

The real question is where do you sue, if you must go to court to force them to pay? If the deal was made in South Bend--they flew to Indiana to sign the note and pick up your check--you can file suit in Indiana. Otherwise, you probably have to file suit in California. And practically speaking, when it comes time to collect, it may be quicker to file suit in California anyway--if they still live and work in the state.

California’s municipal courts handle cases worth between $5,000 and $25,000, Warner said. Filing a complaint can be done by mail. You would only need to appear for the hearing. And you can ask that your costs, including attorneys fees and transportation costs, be awarded as part of the judgment too.

You also may be entitled to a tax write-off if this debt is uncollectable and you can show that you took reasonable steps to collect.

Banks Can Seize Assets in Some Foreclosures

Q: I am the lucky owner of a six-unit apartment complex which is worth substantially less than the loan amount. Due to the severely declining local economy, it is becoming increasingly difficult to keep the apartments rented--at any price--and the situation is likely to get much worse over the next five years. Although I have substantial assets that I could use to pay the mortgage and expenses, I’m considering walking away from the property.

I understand that the foreclosure will appear on my credit history for many years, but my question is this: Can the lender obtain any financial judgment against me beyond recovering the property in question? Can they attach my wages or put liens on my personal residence or other real property? Can they seize my other assets? I am not asking if they are likely to. I am asking if they can.

We live and work in California and the property in question also is in California.

--S.T.C.

A: Yes. Yes. And yes. California real estate law says that mortgage loans on apartment complexes of four-units or more are so-called recourse debts, said Leonard L. Schapira, a Hermosa Beach real estate attorney. That means your lender could go through what’s called a judicial foreclosure. In such cases, the bank gets the property and sues you for any additional losses they incure. Judicial foreclosures are complex and costly--often taking years--so banks don’t often bother, Schapira said. Nonetheless, they can.

She’s Likely to Inherit Responsibility for Debt

Q: My 8-year marriage has had many ups and downs because of my husband’s inability to handle money. Our most recent problem has been his abuse of credit cards. He lies to me about getting them and then hits the maximum on his credit line.

These credit cards are in his name only. I have called the credit card companies and asked them to stop giving him increases in his credit card line. They tell me because these cards are not in my name, I have no authority to make the request. My question is: If we were to get divorced, would I be responsible for his credit card debt?

--J.O.

A: The general answer is “probably” because you live in California, which is a community property state where both debts and income of either spouse are considered jointly held by both, said Robin Leonard, author of “Money Troubles: Legal Strategies to Cope with Your Debts.”

But, there are some excepions. If your husband applied for the credit card in his own name and against his own income--not yours--you may not be liable, she said.

To find out, call the credit card companies and ask for a copies of your husband’s original credit applications. You may need to ask for a supervisor to get this, and even then, it’s not certain that they’ll provide it, Leonard added. In some cases, you need to file the divorce case first and then subpoena the credit documents, she said. But that’s a more costly and time-consuming process. It’s better if you can get the companies to voluntarily comply.

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Normally written by Carla Lazzareschi, the Money Talk column is by Kathy Kristof this week.