楊清泉律師專欄：SIGNS THAT YOU WILL YOU NEED BANKRUPTCY RELIEF IN 2017

Mr. Trump has made filing for bankruptcy relief as a sign that he’s smart. He’s smart he says because his companies filed for bankruptcy 4 times using applicable law. Bankruptcy allowed his businesses to get rid of debt, a lot of it, and bankruptcy allowed him to keep his ownership over these businesses, which emerged from bankruptcy leaner and more productive. So, since we are now in Trump Land, filing for bankruptcy to get debt relief is smart. American bankruptcy laws exist to help debtors become productive again, allowing debtors to keep exempt assets while getting rid of accumulated debt. Hence, if you think filing for bankruptcy when you need it, is dumb, you are wrong. Just ask Mr. Trump. He got away with not disclosing his tax returns and not paying income tax for the last 20 years. And still becoming president elect for our great country. The man is a genius.

What are the signs that you will need to be smart next year by filing for bankruptcy? Let’s go over the common red flags that you have to watch out for:

1. Mortgage default or car default: If you are behind in your house or car payments, you have serious cash flow problems. This means that your income is not enough to pay for your most important asset that puts a roof over yourself and your family. Your first instinct might be to blame every one else and everything else. But seriously, you have to analyze your financial situation to determine what the cause is. You might be paying $1K just to service $30K of credit card debt at the expense of paying for your house or car. Chapter 7 or 13 will get rid of the $30K credit card debt, or allow you to reorganize your financial affairs to get rid of your credit card debt with nominal payment while giving you time to cure the default on your house or car. 

2. Borrowing from A to pay B: If you borrow from Peter to pay Paul, you are living the illusion that your finances are ok but in truth, you are not paying down your debt. If you borrow $50K from Peter to pay Paul $50K, you owe the same $50K, except you now owe it to Peter instead of Paul. Maybe the $50K loan from Paul matured today so you got a new loan of $50K from Peter, which matures in 12 months. Yes, you bought yourself 12 months but admit to yourself that you have serious debt problems you are not able to pay down the $50K from your own money.

3. Raiding your retirement account to pay debt: Never ever use retirement money to pay debt. Retirement money is for retirement. Is that clear enough? That’s why its called a retirement account. Let’s say your IRA or 401K is $70K. You want to pay off your credit card debt of $30K. Don’t make the mistake of using the retirement account to pay off the credit card of $30K. First of all, there is a penalty for withdrawing early. Second, you can wipe out the $30K credit card debt while keeping all of your $70K retirement account intact with a Chapter 7 or Chapter 13, so why sacrifice your financial security when you retire?

4. You sacrifice necessities to pay debt: Let’s say you owe $40K of credit cards that require $1,200 of monthly minimum payments. Your net income is $3,000. You only have $1,800 for necessities. Necessities are food, shelter, transportation, insurance etc. If you feel the constant tug between necessities and credit card payments, you may need bankruptcy relief to get rid of the $40K credit cards. It’s pretty hard to have your family eat less or not pay the rent.

5. Refinancing your house to pay down credit card debt: If you are really tempted to refinancing your house to cash out $50K to pay off $50K of credit card debt, think again. Adding $50K to your mortgage now means adding $200 to your mortgage. When you retire, $200 more for the mortgage is an amount that you cannot afford. When you retire, every dollar from social security and other sources is critical to survival. It can mean the ability to keep your house when you retire. You can actually keep your house and get rid of your $50K with Chapter 7 or 13 so why pursue refinance? Be smart, that’s the name of the game now in Trump Land.

6. Your savings account doesn’t exist: All of my clients, without exception, answer this when I ask them do you have $5K in your savings account? They always answer: I wish I had $5K in it. I have practically nothing in my savings account. If you have extra money at the end of the month, your instinct will be to stash it away into a savings account. If you have no savings, this means all your income is being used up to pay all your monthly expenses. If you owe $20K of credit cards, you need $600 a month. Instead of saving $600 a month, or $7,200 a year, you use the $7,200 to keep your $20K of credit cards current. That’s why you have no savings and that’s why you need bankruptcy relief.

7. You have maxed out your credit cards: If you have maxed out your credit cards, you are in bad shape financially. Need I say more? You need bankruptcy Chapter 7 or 13 to get rid of your credit cards and start fresh without accumulated debt. Be productive again. Be smart!

Best wishes to all readers for the New Year!! If you filed for bankruptcy in 2016, you would have no more debt in 2017, but its not too late. Get bankruptcy relief in 2017 if you need it. It’s the smart thing to do says Mr. Trump.

 “YOU CROWN THE YEAR WITH YOUR GOODNESS, AND YOUR PATHS DRIP WITH ABUNDANCE.” PSALM 65:11

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 1000 S. Fremont Ave., MAILSTOP 58 BUILDING A-1 SUITE 1125, Alhambra, CA OR at 20274 Carrey Road, Walnut, CA 91789.