CLIENT CONVERTS CHAPTER 13 TO CHAPTER 7; SENIOR WITH REVERSE MORTGAGE SEEKS CHP 7 DISCHARGE OF $37K CREDIT CARDS CLIENT REOPENS CHAPTER 7 TO COVER UNLISTED DEBT

CLIENT NO. 1

Client is 58. His income for the past few years is good. He grosses about $150K a year. However, because he has been helping his daughter finish college, he hasn’t been paying his income taxes for the last 3 years. He owes the IRS about $40K. He has also maxed out his credit cards to pay for her tuition and owes $110K of credit cards. She graduated last year with a degree in Biology, with the intention of going to medical school to become a physician. But she has a boyfriend, and the boyfriend wants to get married. So I guess she junked her future as a doctor in favor of being a wife and mother. She could have actually done both, be a wife and mother, and still pursue her dream of becoming a doctor. But when reality sets in, the responsibilities of being a wife and children cannot be taken lightly, and really, her options will change. But who’s to say, what God’s plan is for her. I think she should discuss her options first with our Lord. Maybe He wants her to become a physician and not a wife and mother? I don’t know what it is, but young women often think that marriage is the end all and be all. That without the guy, her life is incomplete, until of course, Prince Charming becomes the beast after marriage, then she just blew a medical career for what, for a guy whose not worth the sandals she wears. In any event, client has just become partially disabled so he can’t make $150K anymore. Client’s income has decreased by $2K a month right now because of his disability. Considering that his plan payment is $1,345, the reduction in monthly income wipes out the disposable income required to pay the plan payment.

Hence, there is no sense in continuing with the Chapter 13 because the reduction in income now creates a financial hardship for client to set aside $1,345 a month for his Chapter 13. I advise him to convert to Chapter 7, which will discharge all of the $110K of credit card debt. However, the $40K owed to the IRS has to be treated separately since the amount owed is still not eligible for a discharge.

CLIENT NO. 2

Client is 64. He just retired last year. He was able to get a reverse mortgage on his house. So, he does not have any mortgage payments, which is good. However, his social security is $1,400 and his wife’s social security is $500, for a combined total retirement income of $1900, which is a little tight but good enough to cover all other monthly expenses, except for one major expense. This major expense is minimum credit card payments of $1,200 a month for $35,000 of credit cards which he has paid for in the last 10 years. His monthly expenses for food, gas, medicine & insurances are $1,800. So, there’s really nothing left for credit card payments. Their social security income is only $1900. Mathematically, that’s the end of the road. Client really must get a Chapter 7 discharge of his credit cards. In fact, American Express has already filed a lawsuit for $4,800, and Capital One has also just filed a lawsuit for $7,300. Besides, he has already paid over $144,000 to keep the $35,000 debt current in the last 10 years. So these cards have been paid four times over. It seems unjust that after paying $144,000 he would still owe the same $35,000. But that’s the reality of it. If he discharged the cards ten years ago, then he would have $144,000 now in savings, and would owe zero.

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