Senior with reverse mortgage seeks Chapter 7 discharge of $37k credit cards; client reopens Chapter 7 to cover unlisted debt
“ Client says he likes his life now as simple as it is with no mortgage to pay, and living by himself. He’s not sick and in good health, so he takes each day one day at a time, simply being alive, enjoying what’s left of his earthly life.”
Client No. 1
CLIENT is 58. His income for the past few years is good. He grosses about $150K a year. However, because he has been helping his daughter finish college, he hasn’t been paying his income taxes for the last 3 years. He owes the IRS about $40K. He has also maxed out his credit cards to pay for her tuition and owes $110K of credit cards. She graduated last year with a degree in Biology, with the intention of going to medical school to become a physician. But she has a boyfriend, and the boyfriend wants to get married. So I guess she junked her future as a doctor in favor of being a wife and mother. She could have actually done both, be a wife and mother, and still pursue her dream of becoming a doctor. But when reality sets in, the responsibilities of being a wife and children cannot be taken lightly, and really, her options will change. But who’s to say, what God’s plan is for her. I think she should discuss her options first with our Lord. Maybe He wants her to become a physician and not a wife and mother? I don’t know what it is, but young women often think that marriage is the end all and be all. That without the guy, her life is incomplete, until of course, Prince Charming becomes the beast after marriage, then she just blew a medical career for what, for a guy whose not worth the sandals she wears. In any event, client has just become partially disabled so he can’t make $150K anymore. Client’s income has decreased by $2K a month right now because of his disability. Considering that his plan payment is $1,345, the reduction in monthly income wipes out the disposable income required to pay the plan payment.
Hence, there is no sense in continuing with the Chapter 13 because the reduction in income now creates a financial hardship for client to set aside $1,345 a month for his Chapter 13. I advise him to convert to Chapter 7, which will discharge all of the $110K of credit card debt. However, the $40K owed to the IRS has to be treated separately since the amount owed is still not eligible for a discharge.
Client No. 2
Client is 64. He just retired last year. He was able to get a reverse mortgage on his house. So, he does not have any mortgage payments, which is good. However, his social security is $1,400 and his wife’s social security is $500, for a combined total retirement income of $1900, which is a little tight but good enough to cover all other monthly expenses, except for one major expense. This major expense is minimum credit card payments of $1,200 a month for $35,000 of credit cards which he has paid for in the last 10 years. His monthly expenses for food, gas, medicine & insurances are $1,800. So, there’s really nothing left for credit card payments. Their social security income is only $1900. Mathematically, that’s the end of the road. Client really must get a Chapter 7 discharge of his credit cards. In fact, American Express has already filed a lawsuit for $4,800, and Capital One has also just filed a lawsuit for $7,300. Besides, he has already paid over $144,000 to keep the $35,000 debt current in the last 10 years. So these cards have been paid four times over. It seems unjust that after paying $144,000 he would still owe the same $35,000. But that’s the reality of it. If he discharged the cards ten years ago, then he would have $144,000 now in savings, and would owe zero.
Client decides to file Chapter 7 to discharge all of his credit cards. Unfortunately, his wife has also decided to discharge him because she decided to go back to their country of origin so she can spend the rest of her life with her own family. I’ve actually encountered several cases like this where one spouse just decides to pack up and leave because she or he is tired of the life here or the passion for the spouse has been “discharged.” It’s just gone. They say they’re just like roommates. Sometimes when the kids become adults, parents go their own separate ways because it was only the responsibility of raising the children that kept them together. Maybe wife has a high school sweetheart back home whose now single again or widowed. Anyway, client says he likes his life now as simple as it is with no mortgage to pay, and living by himself. He’s not sick and in good health, so he takes each day one day at a time, simply being alive, enjoying what’s left of his earthly life. Everything in this world is temporary. When you get older you will understand this.
Client No. 3
Client got his discharge last year. Went out of the country after the discharge and came back with a small claims judgment against him for $9K in his mailbox. Apparently, he thought that insurance would pay for the entire cost of water damage to his house, but insurance was short $9K. So, the contractor sued him in small claims. Fortunately, the contact for repair was executed one month before his bankruptcy was filed. This means the $9K is still discharged. The small claims judge allowed him 120 days to reopen his bankruptcy case and amend his list of debts to include the contractor. So, we filed a motion to reopen to file the amendment to discharge it.
“In the morning, Lord, You hear my voice; in the morning I lay my requests before You & wait expectantly.” – Psalm 5:3.
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Lawrence Bautista Yang specializes in bankruptcy, business, real estate and civil litigation and has successfully represented more than five thousand clients in California. Please call Angie, Barbara or Jess at (626) 284-1142 for an appointme nt at 1000 S Fremont Ave Mailstop 58 Bldg A-1 Suite 1125 Alhambra, CA 91803.