MOM WITH TWO TEENAGERS WANTS CHAPTER 7 DISCHARGE OF $20K CREDIT CARDS;SENIOR REVISITS CHAPTER 7 AFTER 20 YEARS;DISABLED CLIENT SEEKS TO DISCHARGE FEDERAL STUDENT LOANS OF $70K WITHOUT BK

CLIENT NO. 1

Young mother of two teenagers, both daughters, presents her problem as follows. She is a registered nurse with gross income of $70K. She doesn’t own a house but pays rent of $2K for herself and daughters. Husband is still abroad in their country of origin, waiting to be petitioned to migrate when client’s finances have stabilized. She is paying for a new Acura SUV at $600 a month. Her net income is $5K. The problem it seems is that she has $20K of credit card debt, which she has been paying for two years after they migrated to California ten years ago. She pays about $750 a month for minimum card payments. She has paid this amount for the last 8 years. She is unaware how much total she has paid to keep $20K of credit currents for the last 8 years. I said just multiply your minimum monthly payment of $750 by 12 months, then multiply the sum by 8 years, and that results in $72K. I said you have paid $72K to keep $20K of credit cards current in the last 8 years. Doesn’t seem fair but it’s true. That really is the simple truth about credit card debt. If she did not have credit card debt in the last 8 years, she would have $72K of cash in the bank right now, assuming she saved all of that money. 

Now the problem is that she wants to petition her husband to migrate. So, I asked what’s the problem you can do that right now?  She said she has to pay lawyer and immigration fees to bring him in, and she doesn’t have money to do that if she keeps on paying for her credit cards. Her credit score is about 600. I told her that when she files her Chapter 7 case, her credit score will be 500, but in 2 years, if she handles new credit on a timely basis, her credit score will be at least 600, or over it. All she needs to do is pay the Acura on time, and her credit score will be over 650 on the third year. On the 7th year, her credit score may well be over 730, and on the 10th year, there is no record of bankruptcy filing on the credit report. Between getting her husband to California and paying credit card debt, I guess you know what she opted for. It’s not easy taking care of two teenagers on your own, any parent can tell you that.

CLIENT NO. 2 

Client is 67. She and her husband were my Chapter 7 clients 20 years ago. That means that she was as young as Client no. 1, the one with two teenagers above described. Unfortunately, this also means that when I first met client no. 2, I was also 20 years younger. I won’t tell you my exact age then. But it doesn’t really matter because as this client has just expressed to me, she feels physically and spiritually invigorated. That is well and good, I tell her. She needs debt relief again because she still has two houses, her residence and a rental, which is upside down. Further, the rental has a second trust deed of $70K. She also owes a significant amount of attorney fees to another lawyer for a transaction that I will not discuss here. I explain to her that she can either do a Chapter 13 or a Chapter 7. There are different considerations. In a Chapter 13, she may be able to strip the 2nd t. deed on the rental but she has to pay something to the Bk court for at least 3 years. On a Chapter 7, the 2nd t. deed of the rental will get discharged but not stripped, but considering that the property is upside down, it doesn’t seem likely that the 2nd t. deed holder will foreclose on the property for a long time. There is no incentive for the 2nd t. deed holder to foreclose on the rental because if it does that, as the new owner of the rental it has to take care of the first mortgage, which means it has to continue paying the first mortgage, or it can sell the rental, but in this event, the sale proceeds will not be enough to pay even a portion of the 2nd mortgage, therefore, there is no incentive for the 2nd to foreclose. However, because of a Chapter 7 discharge, creditor can no longer collect on the mortgage. Client opts for Chapter 7.

CLIENT NO. 3

Client is 66. He co-signed on the student loans of his son for $180K. Son cannot pay his student loans because he has not been able to get employment since he graduated from college 3 years ago, so Uncle Sam is now collecting the $180K from him. I inform him that he may be able to discharge his FEDERAL student loans without a bankruptcy. However, he must prove permanent and total disability. There are 3 ways to prove this. If the application is successful, in other words, Uncle Sam believes client’s contention that he is now suffering from a permanent and total disability; all FEDERAL student loans will be discharged without bankruptcy! If you are in this kind of situation, it doesn’t matter how old you are, come and see me. Note that this only applies to FEDERAL student loans and does not apply to PRIVATE student loans. By FEDERAL, we mean William D. Ford Federal Direct Loan, Federal Family Education Loan, older loans that predate the FFEL program, Federal Perkins loan and TEACH Grant service obligation. Permanent and total disability means that you cannot engage in any ‘substantial gainful activity” due to a medically determinable physical or mental impairment that can be expected to result death, or has lasted continuously for at lest 60 months, or can be expected to last continuously for at least 60 months.  

 “THE EYES OF THE LORD ARE ON THOSE WHO FEAR HIM, ON THOSE WHOSE HOPE IS IN HIS UNFAILING LOVE. – PSALM 33:18.
Lawrence Bautista Yang is a graduate of Georgetown University Law Center and has been in law practice for thirty years.  He specializes in bankruptcy, business and civil litigation and has handled more than five thousand successful bankruptcy cases in California.  He speaks Mandarin and Fujien and looks forward to discussing your case with you personally.  Please call (626) 284-1142 for an appointment at 1000 S Fremont Ave, MAILSTOP 58, Building A-1 SUITE 1125, Alhambra, CA 91803 OR at 20274 Carrey Road, Walnut, CA 91789.