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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.

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