楊清泉律師專欄：CLIENT FILES CHAPTER 7 TO DISCHARGE $500K MOSTLY CREDIT CARDS（Ⅰ）
楊清泉律師事務所
CLIENT FILES CHAPTER 7 TO DISCHARGE $500K MOSTLY CREDIT CARDS;CLIENT FILES CHAPTER 7 TO DISCHARGE $10K CREDIT CARDS
CLIENT NO. 1
Looks like I signed up two clients in opposite ends of debt last week. Client no. 1 is 55 years old and divorced for 10 years. She lives by herself in a house that she owns. The house has no equity because she has 2 mortgages on the residence. The second trust deed is for $200K, which she used for her business enterprises, which have all failed in the last 8 years. Client still has a lot of drive and ambition. She still works as an independent sales contractor but doesn’t make much from it. Since she hasn’t had much income from work or business in the last 8 years, she has defaulted on the 2nd trust deed for a long time. Since the house has no equity, it doesn’t make sense for the 2nd to foreclose. If the 2nd forecloses, creditor would have the sell the house so the first can be paid off, or creditor would have to keep the first mortgage current by paying the monthly mortgage payments to prevent the first from foreclosing. It only makes sense that the 2nd will bide it’s time until the value of the property increases to such value that a foreclosure sale of the property will pay off both the first and all of the 2nd, so that the 2nd will recover it’s loan to client completely.
Client is a businessperson who was engaged in several businesses in the past. She had 3 companies, which were all profitable before. But with recent changes in the world economy, all her businesses eventually started losing money. To keep them afloat, client borrowed from all available resources, including credit cards. With credit cards alone, client owes $300K to $400K. The amount owed already reflects interest and penalties for the last 8 years, so the principal owed as of the last payment probably was about $200K. Several credit card companies have sued her in the last couple of years and there are judgment liens on her residence for about $100K.
Client decides that it’s about time for her to get a fresh start with no debt. Her chapter 7 bankruptcy will discharge all of the $500K unsecured debt. She will also be able to cancel the $100K judgment liens on her residence in the bankruptcy via motions to avoid judgment liens. She will not be able to strip or avoid the 2nd t. deed of $200K, but most certainly, that mortgage will be discharged. This means that creditor cannot sue her to collect on the mortgage, but creditor still holds the house as collateral. So, creditor still has the remedy of foreclosure. However, because the property is so upside down at this point, there is no incentive for creditor to foreclose.
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CLIENT NO. 1
Looks like I signed up two clients in opposite ends of debt last week. Client no. 1 is 55 years old and divorced for 10 years. She lives by herself in a house that she owns. The house has no equity because she has 2 mortgages on the residence. The second trust deed is for $200K, which she used for her business enterprises, which have all failed in the last 8 years. Client still has a lot of drive and ambition. She still works as an independent sales contractor but doesn’t make much from it. Since she hasn’t had much income from work or business in the last 8 years, she has defaulted on the 2nd trust deed for a long time. Since the house has no equity, it doesn’t make sense for the 2nd to foreclose. If the 2nd forecloses, creditor would have the sell the house so the first can be paid off, or creditor would have to keep the first mortgage current by paying the monthly mortgage payments to prevent the first from foreclosing. It only makes sense that the 2nd will bide it’s time until the value of the property increases to such value that a foreclosure sale of the property will pay off both the first and all of the 2nd, so that the 2nd will recover it’s loan to client completely.
Client is a businessperson who was engaged in several businesses in the past. She had 3 companies, which were all profitable before. But with recent changes in the world economy, all her businesses eventually started losing money. To keep them afloat, client borrowed from all available resources, including credit cards. With credit cards alone, client owes $300K to $400K. The amount owed already reflects interest and penalties for the last 8 years, so the principal owed as of the last payment probably was about $200K. Several credit card companies have sued her in the last couple of years and there are judgment liens on her residence for about $100K.
Client decides that it’s about time for her to get a fresh start with no debt. Her chapter 7 bankruptcy will discharge all of the $500K unsecured debt. She will also be able to cancel the $100K judgment liens on her residence in the bankruptcy via motions to avoid judgment liens. She will not be able to strip or avoid the 2nd t. deed of $200K, but most certainly, that mortgage will be discharged. This means that creditor cannot sue her to collect on the mortgage, but creditor still holds the house as collateral. So, creditor still has the remedy of foreclosure. However, because the property is so upside down at this point, there is no incentive for creditor to foreclose.
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