[COLUMN] Retiring senior needs bankruptcy relief for $45K

[COLUMN] Retiring senior needs bankruptcy relief for $45K

THE husband is 65 and has just handed in his application for retirement from his job.

He makes a gross of $5,000 a month with overtime. Upon retirement, he will net about $3,700 as pension. That’s not bad at all. In fact, that’s a lot better than social security benefits. If it were social security, he would probably get only about $1,800. He works for the government. They have good pensions, to say the least. The government of the USA takes care of its own. All of us private citizens have to rely on our pittance of social security after having paid so much tax during our productive years. At least we have Medicare if we get sick.

The problem that senior client has is that his wife won’t be retiring for at least four more years and she’s grossing about $7,000 a month. She says her take-home pay is only $3,000 and doesn’t know what all the deductions are for. The good thing is they don’t own a home with more than $600,000 of equity; otherwise, they’re looking at Chapter 13 at least to the extent of the non-exempt equity.

However, after doing the means test analysis, senior clients must do a Chapter 13 because they do have qualifying disposable income. For $45,000, the minimum monthly payment to credit cards is at least $1,400 a month. For sure, their plan payment in Chapter 13 would be much lesser than that. And don’t forget at $1,400 a month, they’re just paying interest, no principal is being down. It’s indisputable that Chapter 13 would be beneficial for them at this time. For one, even if they pay 100% of the $45,000 over 60 months, the plan payment would only be half, or $750 and that whole amount is for paying down principal, since in Chapter 13, there is no interest applicable.

Of course, my job is to try to bring down their plan payment to a minimum amount. Let’s just say that the range of possible plan payment would be somewhere between $160 and $750. Less is better.

Tour operator shuttered by virus problem seeks BK relief 

Now the second client is a business owner. He operates a tour business that relies mostly if not entirely on tourists from Asia. It’s common knowledge now that people are afraid to travel abroad because of that stupid virus that all the superpowers together cannot kill.

So we can say that this virus killed the client’s tour business. He said that his business practically has no more revenues. He was able to pay February bills, but nothing is coming in, so he can’t pay bills coming due next month. He asked whether or not his creditors, particularly the secured ones will give him some breathing time to ride out the virus crisis. I said I have no idea. Normally secured creditors will pick up the collateral upon one or two defaults. They then sell the collateral at wholesale, then, collect the balance unpaid.

For instance, the client operates three tour buses. All three buses are being purchased with loans secured by the buses themselves. If the client cannot pay March, then there is a strong possibility that the lender will repossess the buses and sell them at wholesale; then collect the “repo deficiency” forthwith. He will lose the buses and still owe a ton of money. That’s not fair but that’s the way it works. Just read the purchase and loan contract.

Apparently, the client operates the business via an S corporation. That’s well and good. Hopefully, he has not personally guaranteed the bus loan. Otherwise, the creditor can collect the “repo deficiency” from him. For example, one bus has a loan of $300,000. The creditor is able to sell it for $150,000. That means the client will owe $150,000 because of his personal guaranty if there is one. Multiply that by three buses. The client will owe the creditor $450,000 after losing all three buses and with no business coming in.

What’s that thing about “mice and men?” “The best laid plans of mice and men often go awry.” Just ask Kobe. He decided to rent a helicopter to beat LA traffic to bring his daughter to a basketball game. That was all it was. The pilot, it turns out, had a record of accidents. Tomorrow is not guaranteed.

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

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Disclaimer: None of the foregoing is considered legal opinion and no attorney-client relationship is created between the reader, any third party and attorney.

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Lawrence Bautista Yang specializes in Bankruptcy, Business, Real Estate and Civil Litigation and has successfully represented more than five thousand clients in California. Please call Angie, Barbara or Jess at (626) 284-1142 for an appointment at 20274 Carrey Road, Walnut, CA 91789 or 1000 S. Fremont Ave., Mailstop 58, Building A-10 South, Suite 10042, Alhambra, CA 91803.

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