Client is 65. She still works middle management and earns $37K yearly. Although she is married, I would say that she has some kind of money agreement with her beloved husband that arrangement works well for one side only, and that’s not her side. She herself owes $24K of credit cards.  She needs to pay at least $800 a month of minimum interest payments to keep the $24K current every month. With her monthly gross of $3K, her net take home pay is $2500, more or less. From her net pay of $2500, she has to pay 100% of the mortgage of $1600, leaving her $900 for utilities, food and monthly necessities for both herself and her husband. 

Client feels overwhelmed by the burden of paying $900 a month for credit cards at her age of 65. Next year, she can retire and get full social security benefits. SS benefits of course will be about $1600 in her case, which is less than her current take home pay of $2500. If she still has to worry about $24K of credit cards next year, half her social security would have to go to card payments. This is not something she looks forward to, to say the least. Despair and depression would be a more accurate description of how she feels right now. I tell her not to feel so bad because truthfully, she owes her creditors money only, not her enjoyment of life! 

“WE HAVE STRENGTH FOR ALL THINGS IN CHRIST WHO EMPOWERS US – HE INFUSES US WITH INNER STRENGTH AND WE ARE SELF SUFFICIENT IN CHRIST’S SUFFICIENCY!” Philippians 4:13

I wanted to say this because client was so depressed and I could see her depression clearly on her face. Please, it’s not the end of life and of the world, as we know it. We all can rely on Jesus who will help us. So, cheer up! Together, we can solve this problem and get rid of this burden. 

For the husband’s part, he gives her $1K a month as his share of all the household expenses plus the mortgage. And he doesn’t want to file bankruptcy even if he himself owes $40K of credit cards. Supposedly the $1K a month he gives her is half his take home pay. The other 50% he uses to pay his $40K of credit cards, which require at least $1200 a month of minimum payments. He’s still short $200. Perhaps he drives for UBER for the extra $200?

Well, let’s just say the wall is about to break even if Mexico did pay for it. Even if POTUS used American-made cement and American citizen workers, the wall will still break under the load of too much credit card debt for this family. Can client file for bankruptcy herself to handle her $22K of credit cards? Yes. Non-filing husband will be left to his own resources to handle his $40K of credit cards. They have $230K of equity in their house. Her homestead exemption is $175K, so that still leaves $55K of non-exempt equity. This means that she cannot do a Chapter 7 to discharge the $24K. If she did Chapter 7, trustee would sell her house, give her $175K in cash then use the rest of the sale proceeds to pay off the $24K. Who wants to lose their house because of credit cards? Certainly not this client and none of my clients want to lose their house in a Chapter 7. She can, however, file for Chapter 13. In Chapter 13, she will pay $400 a month for 60 months. At the end of the plan, she will be fully paid, because there is no interest in Chapter 13, and the court will give her a discharge order, meaning no more credit card debt! This is $500 less than $900, which is a minimum interest payment only. After paying $900 a month for 60 months, or $54K, she would still owe the very same $24K at the age of 70. Whereas, if she made all the Chapter 13 plan payments of $400 for 60 months, she would have paid $24K only which is all principal, and at the age of 70, she would owe ZERO credit cards. So, I hope client will feel a lot better now that there is light at the end of the tunnel. She can look forward to a good retirement with no credit cards to bother her. 

The next clients are spouses who are both 64. They have a million dollar house, which unfortunately also has a million dollar mortgage. This mortgage was taken 10 years ago with nothing down and interest only for 10 years. The problem is two months from now, 10 years would have been reached and the interest only portion expires. When interest only portion expires, guess what, you have to start paying principal too. With principal payments, mortgage payment will double, from $3k to $6K. Time to let the house go. There is minimal equity. Clients have listed the house for sale for over a million with no offers. Just some dogs sniffing around, and stray cats looking for food. No serious buyers. As POTUS would tweet out “NOT NICE!”  There is a second mortgage of $150K. And credit cards of $60K. If the house is not timely sold for the right price, the right price being, at least $1.15M, then eventually the first mortgage holder will foreclose. When that happens, they will not owe anything on the $1.0M first mortgage, but they will still owe the $150K, which becomes an unsecured debt, like a credit card debt. So, if the house is not sold, clients will owe about $200K of unsecured debt. 

I suggest a Chapter 7 to wipe out all debt. Let the house go if it is not sold, and go look for another residence now that is more reasonable in mortgage payments. They have two successful children who will help them purchase the new house anyway. God blesses them with two children who care for them. What more can they ask for? Good health and children who care for them. Our God has blessed them with abundance. 

Yes, I did not forget that clients were formerly rich. They had $750K of retirement funds. But alas, they lost all of it in the stock market. I feel bad for them losing this fortune. Losing this fortune is another story. But they do have two children who are good enough to buy them a new house, so that makes up for the lost fortune. God takes care of them through their children.

“WE WAIT IN HOPE FOR THE LORD; HE IS OUR HELP AND OUR SHIELD.” Psalm 33:20

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.

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