SENIOR SEEKS CHP 7 RELIEF FOR $40K CREDIT CARDS; SENIOR QUALFIES FOR CHP 13 FOR $60K CREDIT CARDS

Client is a senior at 67. He is married but separated from his wife for some time. He lives with a woman but is not married to her obviously because he is only separated from his wife. You can’t remarry until you have divorced. Separation, whether de facto or legal, does not entitle you to remarry. If you remarry while you are only separated, that would make you a bigamist, and bigamy is a crime. Apparently, client is aware of all of these different marital or cohabitation arrangements. He says that although he is collecting social security, he still works when his employer gives work to him. He works as a seaman. Seamen do not work for 12 months a year. Sometimes they work half a year or a couple of months in a year. This kind of work is different from working in a cruise ship where the employer gives you ten months of work and allows you two months of vacation.

When seamen are working, they can make $7K to $8K a month on the higher side. The problem is that it’s not that easy to get fully employed for 12 months. “Feast or famine” would be appropriate for seamen. When they work, they make good money but they can go for months without working and make nothing. Client made $40K last year for 5 months of work, which means that he was not employed for 7 months last year. If we average out his income of $40K over 12 months, his monthly income is a little over $3,300/mo. 

The above analysis of his income situation is relevant to qualify him for the type of bankruptcy relief that he is looking for. He says that he owes $40K of credit card debt. He is tired of paying $1,300 a month. He says he has paid $1,300 every month on these cards for the last ten years, and still today, he owes the same $40K after paying over $156K. Doesn’t seem fair and he’s just plain tired of paying. In other words, borrow $40K and pay back $156K, and still owe the same $40K in ten years, seems a little one sided. Should have just paid for a house instead. 

Since he wants to get rid of his $40K of credit cards now, can he qualify for a total wipe out of $40K with a Chapter 7, or a partial wipe out of the $40K with a reorganization of his financial affairs in a Chapter 13? Well this would all depend on the applicable means test to determine what his actual current gross income is. What if his employer called him in to work for 10 months at $8K a month? That kind of current income would knock him out of Chapter 7 and force him into Chapter 13 with probably a $300 to $500 monthly payment for five years. In Chapter 13, he might have to pay about $18K of the $40K, then, $22K would be wiped out after completion of plan payments.

This looks more of a Chapter 7 than a Chapter 13 actually considering his employment income for last year was $40K. An examination of his employment income from January 1, 2018 to March 31, 2018 shows a gross of $10K, or $3,333 a month. Even if he has social security of $1,400, he would still be eligible for Chapter 7 complete wipe out of the $40K relief. His wife from whom he is separated is a registered nurse who makes $100K a year. But since they have been separated for some time, his wife’s monthly gross income of $8K a month does not come into play under the means test. Separation from his wife actually makes him eligible for Chapter 7 while being not separated from wife would not make him eligible for Chapter 7, but would make him eligible for Chapter 13 instead.

Next client is 56 years old and a widow. Her husband was in perfect health when he died from an accident inside their house 3 years ago. He slipped and fell on his head became comatose and never recovered. So, client now owns the house by herself since she was a joint tenant on the house. The condo is a senior housing facility. She owes $60K of credit cards. She doesn’t make much as a caregiver. Her gross income of $2,500 is enough to paying the mortgage which is only $500 a month but the HOA is $400! Still a total of $900 for the house is not bad at all. It’s cheap housing in LA where rent for a one bedroom apartment will set you back $1500. I remember 40 years ago when I only paid $550 for a two-bedroom apartment. 

Client wants a Chapter 7 wipe out but unfortunately, even with her low income, she can only qualify for Chapter 13 because she has $20K of non exempt equity in her home. If she were to file a Chapter 7, she would end up losing her house to the trustee who will sell her house. From the sale proceeds, trustee will give her $100K as her exempt equity while $20K would be used to pay the $60K of credit cards. So she will have to pay one third or 33% of the $60K. After paying one third, the court will discharge $40k or two thirds of the $60K credit cards. In Chapter 13, there is no risk of losing her house. So, considering everything, client should go for Chapter 13, not Chapter 7.

If you need debt relief, set an appointment to see me. I will analyze your case personally.

“FOR GOD SO LOVED THEWORLD THAT HE GAVE HIS ONE AND ONLY SON, THAT WHOEVER BELIEVES IN HIM SHALL NOT PERISH BUT HAVE ETERNAL LIFE.” JOHN 3:16

Lawrence B. Yang is a graduate of Georgetown University with a Master’s Degree in Law and specializes in Bankruptcy, Business, Real Estate and Civil Litigation.  He speaks English, Mandarin and Fujian and has successfully represented thousands of clients in California, including companies overseas. Please call Angie, Barbara or Jess at (626) 284-1142 for an appointment at 20274 Carrey Road, Walnut, CA 91789 or1000 S. Fremont Ave., Mailstop 58, Building A-10 South Suite 10042, Alhambra, CA 91803.