SENIORS ELIGIBLE FOR CHP 7 RELIEF FOR $67K CREDIT CARDS DESPITE $260K HOME EQUITY
03/06/2021 楊清泉律師事務所SENIORS ELIGIBLE FOR CHP 7 RELIEF FOR $67K CREDIT CARDS DESPITE $260K HOME EQUITY;
DEBTORS ELIGIBLE FOR CHP 7 RELIEF FOR $120K CREDIT CARDS DESPITE $200K HOME EQUITY
Gone are the days when debtors who owe lots of credit cards but have home equities that surpass the homestead exemption limits depending on age and the number of relatives living in the house have to use Chapter 13 instead of Chapter 7 to get rid of debilitating credit card debt. Let’s analyze the cases of two clients to see the difference between the new amended 704.730 of the California Code of Civil Procedure and the old 704.730.
In the first case, clients are husband and wife. Husband 65. Wife is 60. Together they owe $67K of credit cards. Husband is retired. He has social security of $1,800. Wife is employed and makes a gross of $3,500 monthly. They own a house that has a current market value of $500,000 in LA County. It’s an old house constructed in 1960, and it’s small, about 1000 S.F. They have one mortgage with a balance of $240K. This means that they have equity in their home of $260K. The $67K of credit cards requires a minimum of $2K a month to keep them current. $2K a month, that’s a huge amount, considering their mortgage payment is only $1600 a month, including real estate tax. It’s almost absurd but the math is correct: they pay $2,000 a month for $67K of credit cards monthly, just to keep them current so they don’t go on default, while they pay only $1600 a month, including real estate tax for a mortgage that has a balance of $240K. Yep, it’s more expensive to live in their house of plastic cards, $400 more, than it is to live in their real house. Something’s not right here.
Clients did not feel the financial pressure of keeping the cards current until husband retired last year. He used to make $4K a month when he was still working so most of his salary was used to keep their credit cards current every month. They were de facto slaves to MasterCard and visa for many many years. In fact, they had been paying the $67K of cards at the rate of $24K a year for the last ten years. That’s a total of $240K that they have paid to their credit card masters. But today they still owe the same $67K. If they had used that $240K to pay off their house, their house would have only a balance of $20K today!
Now that husband has retired and relies on social security of $1,800, $2K a month to keep their credit card masters happy is nearly an impossible task. Just the idea of using social security to feed the unquenchable plastic monsters satisfied every month is so irritating. They have a worksheet logging each minimum payment to about ten credit cards. Let’s see is the Bank of America visa card that’s owed a balance of $7K already paid the $210 minimum due this month? And is the Wells Fargo MasterCard that’s owed $10K already paid the $300 minimum due this month? You know how nasty they can get if they don’t get their monthly minimum stipends on time. You get a phone call immediately to remind you that your $210 or $300 payment is late. Since it’s late you now owed another $50 in late penalty charges. So what’s the difference between a slave and you? Well, a real slave is owned by his master and he has to work for free for his master, you know work the plantations under the hot sun from the crack of dawn to dusk. For that labor, the slave gets paid nothing. He even gets sold to another slave owner if his master decides to. In the case of the credit card debtor, he has to pay his credit card master a minimum payment every month. So debtor goes out and work and gets paid for his labors, but in turn, he has to fork over his hard earned money to his credit card master every month. So same difference. Both you and the real slave have to answer to your masters. Yes master! No wonder you feel like a slave, because you are one. Get rid of those plastic shackles and be free!
Under the old 704.730 law, my senior clients would not qualify for Chapter 7 even if their income qualifies them under the means test for Chapter 7. Or, let’s just say that if they choose Chapter 7 to get rid of the $67K credit cards, they would have been able to, but in Chapter 7 under the old law, they would lose their house to the Chapter 7 trustee. The Chapter 7 trustee would sell their house, give them their homestead exemption of $100K, and use the rest of the sale proceeds to pay off the $67K of credit cards. They lose their house to pay off credit cards. That’s just too stupid and mean, right? But that’s the way the old law worked. So under the old law, clients would have to choose Chapter 13 where the trustee has no power to sell the house. But in Chapter 13, they would have to pay the $67K in full over 60 months (5 years) without interest. After the 60th payment, the court discharges or wipes out the $67K. In other words, in Chapter 13 then, because the large equity in their home that surpasses $100K, they would have to pay about $1,100 a month. Sure that’s still better than paying $2K month perpetually. In Chapter 13 then, they would pay the $1,100 for 60 months and after that they wouldn’t owe anything at all anymore. So that’s still a lot better than paying $2K forever.
Fortunately for clients, the new law which just took effect this year will allow them to obtain a Chapter 7 discharge of all of their $67K of credit cards, without a single payment, and still allow them to keep their home even if it has $260K of equity. That’s a sweetheart deal under the new law. Thank you our Lord God Almighty! For me, God Almighty is Yahweh, Adonai, El Shaddai, El Elohim, Jehovah, who loved us so that He sent his only Son, Jesus Christ to die for us and redeem us from the consequences of sin, to give us eternal life, because He loves us so very much! We who are all sinners who are not worthy of His love! What an awesome and wonderful God He is! For you, your God may be Allah, or Bhuddah, or Krishna. I believe He manifests Himself to different people and cultures and a way that each of us can understand and relate to. That’s how great our God is. Yes, former Pope Benedict, the predecessor of the current Pope Francis said this, if I recall correctly. Everyone who believes in God in his heart can enter heaven because God is love and God is merciful. That’s basically what he said with emphasis on merciful. A Catholic priest told me about this about two years ago. I said that’s great because it’s really good to know that all the people in China and India and everywhere else can still go to heaven despite not being Christian. So let’s just all just have peace, friendship and prosperity here in this world, after all is said and done, we all will see each other in heaven anyway. We don’t have to all look alike you know. Even animals have different colors. Horses have all kinds of colors. Flowers have all kinds of shapes and colors, and so do birds. Imagine how dull the world would be if we all looked like minions of despicable me. We wouldn’t be able to tell each other apart. Come on man, let love and peace and harmony be our guiding path back to the light. Everyone needs to be respected and let everyone respect the humanity of each other irrespective of race, religion or whatever. God wants us to love each other. That’s why He sent Jesus Christ, his only Son, to die for us! Let’s all get rid of the hate in our hearts. It’s about time.
The next client is only 50. Believe, that’s young. Her equity in her home is $200K. She owes $120K of credit cards. She had a business prepandemic. She used her credit cards to run the business. She doesn’t think her business can recover from the pandemic. She needs a fresh start now. Thank God she can now do a Chapter 7 to wipe out the $120K of credit cards and she can still keep her house, which is now fully protected pursuant to the new amended 704.730 homestead exemption.
If you need debt relief, please set an appointment to see me. I will analyze your case personally.
“GOD SAYS, ‘I WILL SAVE THOSE WHO LOVE ME AND WILL PROTECT THOSE WHO ACKNOWLEDGE ME AS LORD. WHEN THEY CALL TO ME, I WILL ANSWER THEM; I WILL RESCUE THEM AND HONOR THEM. I WILL REWARD THEM WITH LONG LIFE; I WILL SAVE THEM.” PSALM 91. Written by Moses a long time ago, maybe 3000 years ago.
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 20274 Carrey Road, Walnut, CA 91789 or1000 S. Fremont Ave., Mailstop 58, Building A-10 South Suite 10042, Alhambra, CA 91803.
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