Clients are seniors who just stopped working two months ago. Husband is 75 and wife is 71. They own a house with $140K equity. Their unmarried son lives with them for free. For free meaning that he doesn’t pay them any rent to live there. This is understandable because parents who love their children would normally just let their children live with them as long as possible for free just like when their children were still minors. Most parents still feel protective of their children no matter how old their children are. However, this situation can morph into something that is not good. 

In the news several months ago was an article about parents in the east coast who sued their 35-year-old son to eject him from their house. Son refused to leave and defended himself claiming that he had the right to live in his parents house for free and even if his parents did not agree. The judge did not agree with his defense and ordered him to leave the house and to take all of his personal belongings with him in two weeks. I would say that this is a rare situation because parents normally still take care of their children as long as they are able to do so. Perhaps parents were afraid that their son would not learn how to support himself if they were no longer around if they allowed him to live in their house for free forever. 

House prices now are so high that young adults are forced to live back with their parents after they graduate from college. Maybe it’s a good idea to build and sell tiny houses for $50K?

In clients’ case, their residence now has equity of $150K, but they still owe $500K on the balance of the mortgage. They pay $2,600/mo. mortgage to Chase bank, and they owe $50K of credit card debt, which requires them to pay $1,500/mo. for minimum interest payments to keep them current. 

Their combined social security income is $2,000/mo. So, obviously they have a problem. They stopped working regular jobs only two months ago. That gave them a net of about $3,500/mo. from their combined regular jobs. When you add $3,500/mo. to social security of $2,000/mo., they had no problem making the house payment and the credit card payments. But starting two months ago, they could not make the credit card payments anymore. They liquidated their $50K of 401K and converted that to cash and used that to cover the shortfall between their social security income, and their monthly necessary expenses.

Not a pretty picture. The $50K will be gone in a little over a year, and when that runs out, they won’t be able to even pay their mortgage of $2,600/mo. 

Their son should now step in to help them financially because after all is said and done their son will be inheriting $150K of the equity in their house. The equity will only increase as the mortgage is paid down and when the market price goes up further. Son can sell it at that time and get $150K to $200K in cash, or live in the house and continue paying the mortgage, or just rent out the extra rooms and receive rent income. So, it’s only fair to his parents that he now helps his parents solve the house payment problem by contributing a significant part or all, of the mortgage so clients do not have to worry about it anymore.

Fortunately, son does make $70K gross income a year so he has the capacity to help out his parents at this time in their lives.  But, is he willing to help out?

If son does provide this help, clients will have $2,000 of social security to cover their monthly necessary expenses, which should all be covered with maybe $1,000 saved every month since they no longer will have a house payment.

The only problem left will be the $50K of credit cards. These can be taken cared of with bankruptcy. Chapter 7 will wipe out the entire $50K without any repayment whatsoever. They get a fresh start in life as they retire without accumulated debt. They can thus save $1K a month and use that for whatever they want to. They can invest or spend it traveling the world.

If you’re about to retire, you must seriously consider getting rid of your credit card debts now because when you retire and rely on social security, your income will suffer a significant reduction. When that happens, the last thing you need to worry about is credit card debt. True? Yes, this is absolutely true. 

Fortunately, son is willing to help out and pay for half the mortgage. This means that clients will still have to pay half or $1300 for their share of the mortgage. After that payment, they would still have $700 of social security left for necessary expenses but with the Chapter 7 discharge of their $50K of credit cards, clients may have $300 left every month as savings. 

If you need debt relief, please set an appointment to see me. I will analyze your case personally.

“YOU HAVE MADE THE LORD YOUR DEFENDER, THE MOST HIGH YOUR PROTECTOR, AND SO NO DISASTER WILL STRIKE YOU, NO VIOLENCE WILL COME NEAR YOUR HOME.”  Psalm 91.  Written by Moses.

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.