FIRST client is 45 and single. His gross income last year was $98K, which is good. It reached $98K because of bonus. Without bonus, his gross income is $72K. This year started out for him with nothing to expect by way of bonus. So his last four months gross income was $6K a month, net of $4,500. His rent is $1500. He lives by himself but claims his 70-year old dad as his dependent. For a household of 2, his gross income is $10K of $72K is $10K over the median income.. This fact complicates the means test analysis because a presumption of abuse may arise if there are insufficient IRS allowable deductions. So, this is what I call a borderline Chapter 7 case. It can be filed as a Chapter 7 case assuming client has enough allowable deductions so that the presumption of abuse does not arise, but if the trustee objects to the reasonableness of deductions taken, then a conversion to Chapter 13 is required. Of course, client prefers a Chapter 7 discharge where he pays nothing to creditors. On the other hand, Chapter 13 would require a partial payment of debt at least.
Client has $60K of credit card and payday loans. Of that amount, $50K is credit card debt and $10K is payday loans. These are both high-interest debt but payday loan interests are sky-high. Once you start using payday loans, you know you’re in a deep hole that you cannot get out of. So it’s really time to get rid of these debts. It’s time to get a fresh start in life without accumulated debt. This is a no brainer. Client pays $2000 a month for minimum monthly interest payments on his unsecured debt from his net income of $4,500. That’s almost half his net income every month! No one should be under the yoke of so much debt. Wise up and get rid of these debts now and be productive again. Even Walt Disney filed for Chapter 7 twice before Mickey and Disneyland became successful. Now his business is multibillion and worldwide. Shanghai Disney just opened and its so successful that they are expanding the park. There’s Hong Kong Disney and one in Japan too. Before all of this success, Mr. Disney had to file for bankruptcy twice. His second fresh start from Chapter 7 led to business success beyond imagination! Milton Hershey also filed for Chapter 7 once before Hershey chocolate products became successful. Now, his business is probably the biggest chocolate business in the world. I’m sure you must have brought your family to Disneyland and you must have bought Hershey chocolate products for yourself and children at some time in your life. These businesses were borne from successful fresh starts after Chapter 7 bankruptcy!
President Trump’s businesses filed for bankruptcy 4 times during the nineties. He nuked his business debts with reorganization under bankruptcy law. Argentina filed for sovereign bankruptcy in 2000. It could not pay back even the interest on its loans and bondholders were left holding the bag. Greece is has been under bankruptcy reorganization for the last 3 years. I was in Athens last year and I could feel the depression of the people there. The city has no vitality because it has too much debt; same thing happening to debtors with too much debt. They have no vitality because their income goes mostly to debt service. They are debt slaves who practically work for nothing because they have lost the ability to save money and cannot be productive. If you are a debt slaves, get rid of your debt ball and chain now with a Chapter 7 discharge. Who knows, you might become the next Walt Disney, Milton Hershey or Donald Trump. Pick your choice of who you want to be. You can become the next billionaire or the next president of the USA with your fresh start.
Second client is 58. His is going through a divorce. Wife filed for divorce after 10 years of marriage, and now asks for alimony or spousal support. Your spouse is not as dumb as you think. Or, you may not be as smart as you think. In this case, client makes about $100K a year in his profession, while his younger wife makes $20K a year. This means that wife can and surely will ask for $1600 spousal support. Now, where did all the love go to? It all went to alimony. So think twice and thrice before you make the big jump. If you do make the jump, make sure your clock yourself and if you are the higher income spouse, if you think you made a mistake, better end the marriage before you reach your 10 year mark. Otherwise, you will be on the hook for alimony.
Client had a previous Chapter 7 discharge in 2012. He now owes $50K of credit card debt. I guess he used these cards to pay for travelling the globe with his younger wife. Wife is 10 years younger. Whatever the reasons are, his situation now is he only has one amount of $1600. He can use this to pay alimony or pay the minimum on $50K of credit cards. Either way, it’s not a pretty sight because instead of saving $1600 a month, he’s paying that out to a person who no longer is his wife. Between paying alimony and credit cards, the choice is clear. He has to pay alimony.
Client is however fortunate that the current value of his house does not exceed the balance of his first mortgage. This means that Chapter 13 will allow him to strip the 2nd mortgage of $76K. The $76K was discharge in his 2012 Chapter 7, but the mortgage lien survived. Although creditor cannot legally collect on the note because it is discharged, the fact that the mortgage survived the discharge leaves creditor with the legal remedy of foreclosure, which it will not do because foreclosure will yield zero for payment of the 2nd mortgage.
Chapter 13 now plus Chapter 7 in 2012, makes this case a Chapter 20. So he loses his wife and has to pay alimony of $1600 but he gets to strip his 2nd mortgage and make a partial payment on his $50K credit cards over 60 months. As the 2nd mortgage is stripped, client doesn’t have to pay the mortgage because the note has been discharged in Chapter 7 previously.
If you need bankruptcy relief, please call my office for an appointment and I will analyze your case personally.
“Cast all your anxiety on God because He cares for you.” — 1 Peter 5:7