THE client is young in his 50s. Believe me, that’s young. This is not only mentally young, but physically, 50s is still quite young. It is said that the 60s now are the new 40s.
During the olden days, people were not expected to live beyond their 40s. Even here in the USA, the average life expectancy in the year 1900 for women was 48, while for men it was 43. So at that time, if you lived to 50, that was already considered very good for you.
But truth be told, at 43, we’re just getting a little wiser from life experiences. We’re not yet ready to die. We would still want to go on living to a ripe old age. Life expectancy statistics have improved since 1900 fortunately. In 2019, the average life expectancy for a white male in the USA was 78.6 years. But for black males, the average life expectancy in the USA is only 73. Hispanics are doing much better at 81. Why the disparity here? Here’s an interesting fact. Males in Hong Kong have an average life expectancy of 83. So, why the disparity again? I guess eating dim sum contributes to longevity, right? Let’s not get into any kind of emotional argument. We all live by the grace of God Almighty. I mean Kobe was only 40 last year. Steve Jobs was only 56.
Pre-COVID gross receipts were $800K
The client owns and operates a business that used to generate $800,000 of revenues yearly with good profit for the last 10 years.
But even before the virus hit, his business was really slowing down. Last year, his gross receipts were down by 30%. With the lockdown and general business slowdown, he just doesn’t see any light beyond the tunnel anymore. He obtained a $50,000 PPP loan but that has been used up. There’s just no money left to pay all monthly expenses that keep piling up. He still has $70,000 of inventory that nobody wants even if he were to give away for free. You need storage space to house $70,000 of inventory because they take up a lot of space.
$80K credit cards and $50K PPP
The client used his credit cards to finance the business. He owes $80,000 in credit cards. And he just got the $50,000 PPP loan or grant. You know how the PPP works. If the $50,000 was used to maintain and pay salaries of employees at pre-COVID levels, the used for business expenses, then it may become a grant that does not have to be paid back. But the client has decided to throw in the towel. He notes that even Walt Disney threw in the towel twice with two Chapter 7 cases before success came in a big way. Mr. Hershey of Hershey chocolates also started fresh with no accumulated debt with Chapter 7 once before his chocolate business became the world’s largest chocolate business. Of course, Disney has suffered a major slowdown because of COVID, but once the vaccine is found and distributed, Disney’s business will bounce right back like a coiled spring no doubt. Didn’t the president just announce that the vaccine just cured him and that he was going to make sure that every American gets it for free? Well, that is certainly great news! We already got the vaccine and the president will make sure we get it for free! Hooray, Hooray, Hooray! But that’s what he said yesterday. It’s already today. What’s the story today?
Fresh start in life without accumulated debt & fast credit build-up
So the client has decided to get his fresh start in life without accumulated debt just like Walt Disney and Milton Hershey. His credit score will increase very fast. Next year, his credit score may already be over 600 depending on how well he handles new debt. I suggest getting one or two of the preapproved cards that debtors get soon after they get their discharge. There are banks that specialize in sending debtor who just got out of Chapter 7 with new credit cards. Just get those but pay the whole balance every month so credit score goes up much faster.
The client will be able to get new car loans immediately upon discharge but interest will be higher. Life is great with the fresh start! Just imagine the client used to pay a minimum of $2,500 a month to keep $80,000 of credit cards current. That’s $30,000 in 12 months, and $60,000 in 24 months, but the principal remains at $80,000 despite $60,000 of minimum payments in 24 months!
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DISCLAIMER: NONE OF THE FOREGOING IS CONSIDERED LEGAL ADVICE. EACH CASE IS DIFFERENT.
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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 appointment at 20274 Carrey Road, Walnut, CA 91789 or 1000 S. Fremont Ave., Mailstop 58, Building A-10 South, Suite 10042, Alhambra, CA 91803.