[COLUMN] Why the inequality in monthly credit card payments? –

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THE first customer is a senior who, as a registered nurse, still makes $ 120,000 a year but owes $ 130,000 in credit cards. The second customer is also a senior who just lost her job as an accountant and is now dependent on social security of $ 2,000 per month. At first glance, one might think that the first senior woman to earn $ 120,000 a year should pay more because not only does she have a high income of $ 10,000 a month, but she also has a sizable amount of credit cards from Owes $ 130,000. The minimum monthly credit card payment of $ 130,000 is a minimum of $ 4,000 per month. That’s $ 48,000 a year just for interest payments. In 10 years she would have paid $ 480,000 credit card master, but she would still owe the slave owners the same $ 130,000 in principal!

This first customer is 62 years old. When she first came to me, she was visibly stressed. In earnest. Her face was literally contorted and she looked pale. Her husband could no longer work. He had a stroke some time ago and just couldn’t go back to his old self. So he just stays at home and has a good time. The client is still working a lot of overtime and her gross income is $ 13,000 a month with overtime. But she says that due to the deteriorating health condition, she can no longer work overtime. Her regular wage is $ 10,000 excluding overtime. Without the overtime pay, she can’t even set aside $ 4,000 a month for minimal credit card payments. It is time to break free from the chains of slavery in debt. It is likely that she will have a heart attack if she continues to work overtime, and no one wants that. As I have said many times before, you owe money to your creditors. You absolutely don’t owe them your life.

I had a client who was 55 years old. He was a professional and well known in his field. He made $ 500,000 a year. That’s right, half a million dollars was his annual professional income. He also invested in some business ventures that started losing money and those of his started to make up for the losses. First he had to cover losses of $ 5,000 a month, then $ 10,000 a month, then $ 20,000 a month. That drained him financially and emotionally. He had kept me for bankruptcy restructuring and I thought everything was going well. But the day before he was due to sign the bankruptcy petition, he killed himself. Unfortunately, I have to say that I never told him to take it easy because what he owed his creditors was money, not his life.

So I’m telling you now, if you are in debt, take it easy, we can get rid of those pesky debts that weigh on you every day of your life with Chapter 7 or Chapter 13. Don’t even think about killing yourself. It is not worth. Think how your family will survive without your taking care of them. Instead, come to me and we’ll discuss how we can make your life easier and more productive again by getting rid of this nasty debt.

Back to our high-income client who owes $ 130,000 in credit cards and who needs $ 4,000 in monthly minimum payments, owns a new home with $ 90,000 in equity. The home is valued at approximately $ 500,000 and her mortgage balance is $ 410,000 so her equity on the home is $ 90,000. The total of $ 90,000 is within the $ 100,000 exemption. So if her income were much less than $ 120,000, let’s just say if her income was only $ 80,000 a year, she would qualify directly for Chapter 7 and be able to unload the entire 130,000 US dollars on credit cards without a single payment.

But given her income of $ 120,000, she has some disposable income on the means test. The means test shows she has at least $ 400 / month of disposable income. This means that she will have to pay this amount for 60 months or five years. After completing the plan, she would have paid $ 24,000, or 18% of $ 130,000, in credit cards. The court will settle the difference between $ 130,000 and $ 24,000, or $ 106,000. In other words, she no longer has to pay the $ 106,000; The court will simply wipe it out to give her a new start in life without the $ 130,000 in credit card debt.

The second senior is 68, an accountant. She was making $ 80,000 a year until last month. It has shrunk. Now she only needs $ 2,000 a month in Social Security. The problem is, she owes $ 40,000 in credit cards, which have to be paid at least $ 1,200 a month. She owns a house and the mortgage payment is $ 1,500. So you can see that there is now a math problem here. Your equity in the home is $ 400,000. Since she is over 65 years of age, her homestead leave is $ 175,000. This means there is $ 225,000 in tax-exempt equity. This amount of non-tax-exempt equity poses a distinct problem. This means that in a Chapter 13, the $ 40,000 must be paid in full over 60 months with no interest. This means that in Chapter 13 their monthly payment would be around $ 700 per month. She says that now that she has lost her job, she cannot produce $ 700 a month.

So what’s the solution here? Well, she can’t do Chapter 13, and she can’t do Chapter 7. In Chapter 7, she would certainly lose her house to the trustee who would sell her house and use the net proceeds to pay the $ 40,000 off credit cards; Then give her the rest of the money you got from selling the house. That would be too bloody. Nobody wants to lose their home for $ 40,000 on credit cards. That would be like cutting your nose to brave the face, right? In other words, it would be like amputating your leg for an ingrown toenail or trying to kill a mosquito with Thor’s hammer. You understand my drift.

I suggested the second client develop a hybrid debt consolidation strategy. I came up with this myself from many years of experience in dealing with creditors. I once had a case where a debtor owed a bank $ 700,000. Believe it or not, the bank settled that for $ 25,000. That is a severance payment of 3.5%. It’s almost unbelievable, I couldn’t believe it myself when the bank accepted our settlement offer. It’s effective to some extent and works almost like a reorganization, but it’s not bulletproof. But what other choice does the customer have in this case? A hybrid debt consolidation strategy has at least legal representation so it has some protection instead of being completely unprotected. The goal would be to avoid a judgment lien on their house. The goal is to protect your home and ultimately be able to get out of that $ 40,000 in credit cards.

If you need debt relief, make an appointment with me. I will analyze your case personally.

“For God loved the world so much that he gave his only Son, that all who believe in him might not perish, but have eternal life.” John 3:16

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Disclaimer: None of the foregoing is intended to provide legal advice to anyone. There is absolutely no lawyer-client relationship established from reading this article.

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Lawrence Bautista Yang specializes in bankruptcy, business, real estate and civil litigation law and has successfully represented more than 5,000 clients in California. Please call Angie, Barbara or Jess at (626) 284-1142 to arrange 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, to be agreed.

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