Asian Journal- The Filipino-American Community Newspaper

The economic and debt problems of our country have been highlighted in the last two weeks. Very large and very old banks as well as the largest insurance company in the United States have all become bankrupt because of their exposure to bad mortgage loans. Both presidential candidates inserted themselves into the $700 billion bail out package last week with both saying that the bail out was necessary to prevent the meltdown of the entire financial system of the United States. It is unfortunate but true. In the last 20 years, Americans have generally been living lavish lifestyles financed by easy credit, and spending money as if there was no tomorrow. Half a million dollar houses were the norm with zero down. Luxury cars were purchased for $40,000 seven-year loans with zero down. Vacations abroad were taken several times a year and placed on credit cards. Thus, Americans spent way beyond their means and relied on debt to finance their luxurious lifestyles. The party started to end last year when homeowners who bought houses they could not afford began defaulting on mortgages that started to adjust upward.

Countrywide, Lehman Brothers, Bear & Stearns, AIG, Freddie and Fannie, Washington Mutual, Wachovia, all heavyweights in our financial system have all collapsed and become bankrupt requiring them to be sold to financially solid entities at fire sale prices, be taken over by the Federal government, or declare bankruptcy.

What is clear is that using debt to finance your lifestyle only gives you a sense of prosperity but that prosperity is false. Eventually, you will reach a point when you will not be able to continue paying debt despite high income. When you reach that point, you will have the same options that the banks that have been collapsing have: 1. Ask your rich uncle to bail you out, 2. Sell your assets to raise cash, or 3. Seek bankruptcy protection.

If you are already neck high in debt, quickly call your rich uncle and ask him to give you cash to pay off all your debt. If you have a 2008 Lamborghini in your garage, try to liquidate it for cash; you might get $150,000 for it on e bay. Use the cash to pay off your debts. If you do not have a rich uncle or a Lamborghini, you’re out of luck. Face the music now. Like Lehman Brothers, which had been doing business since the civil war and had $600 billions of assets but could not survive $60 billion of bad mortgage loans, you might have to declare bankruptcy to survive.

Don’t worry about your credit score. All of the banks that went under had perfect credit scores until the day they collapsed. So your credit score is purely cosmetic. A perfect credit score does not mean that you are financially healthy. In fact, it might mean that you have too much debt and are about to fall off the cliff.

Like all of the banks and businesses that have sought bankruptcy protection to survive, you might seriously consider a chapter 7 petition to wipe out all of your accumulated debt or a chapter 13 petition to reorganize your financial affairs. With a chapter 7 case, you can start life again, be a productive citizen again and start saving money again without accumulated debt. With a chapter 13 petition, you can discharge your debts with less than full payment. For instance, you might owe $50,000 of credit card debt, and need only pay $150 a month for 36 months, or pay only 5.4% of your credit card debt to discharge 94.6%. In other words, after paying $5,400, $44,600 will be discharged.

If you need debt relief, contact my office. I will analyze your case personally.

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 1000 S Fremont Ave Bldg A-1 Suite 1125 Unit 58 Alhambra, CA 91803.

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