It’s the start of a new year again. It’s a good time to reflect on how things should be in our lives. If your debt burden is unbearable, now is the best time to seriously consider starting fresh again. Mistakes made in the past can be corrected. In the United States, there is Federal law that gives debtors a chance to start fresh again.
Perhaps you bought several real estate properties in the past thinking their values would go up, and their rents enough to pay their mortgages. But things did not work out. Instead of appreciating, the houses lost their equities and now are upside down. You owe more money on them than they are worth. Maybe you ran out of savings to cover mortgage shortfalls, and used your credit cards to finance the difference. As a result, perhaps your credit card debt is no longer manageable. For instance, client bought two houses two years ago with zero down. He bought one for $500,000, thinking it would increase in value to $600,000 a year after. He bought another one for $700,000, thinking it would increase in value to $800,000 a year after. In the meantime, he thought that would be able to rent them out at a rate that would cover their mortgage payments. In reality, the rent for one house is short $1,000 to cover the mortgage, and there is no renter for the other house. As a result, you have used up all of your savings of $50,000, and have used up $80,000 of credit card debt to cover shortfalls. Further, the first house is not worth $600,000 now; on the contrary, it has lost $100,000 in value. The house you bought for $500,000 is now worth $400,000 and it is still decreasing. And the house you bought for $700,000 is not worth $800,000 now, on the contrary, it has lost $150,000 in value. The house you bought for $700,000 is now worth $550,000. Thus, you finally realized that you made a bad mistake in buying the two houses because you will not be able to sell these two houses for profit in the next 5 years.
Thinking of making the problem worse by raiding your retirement account so you can continue maintaining the 2 houses? Don’t. Do not raid your retirement account. Your retirement account is for your retirement. You will need money to survive your retirement. If you are in your fifties, retirement is just around the corner. If you are in your sixties, retirement is already staring you in the face. If you are in your forties, raiding your retirement account now, will set you back decades. Whatever you do, do not touch your retirement account. You will regret it. Instead of raiding your retirement account, seriously consider a fresh start by asking the court for chapter 7 relief provided by Federal law. Chapter 7 gives you complete debt relief while allowing you to keep your house, cars, furniture, and most importantly, it allows you to keep your retirement account, up to $1.0 million. In client’s case, it will allow him to do the following:
1. He will keep the house where he lives in because the viable equity is within the exempt limits.
2. He will keep his 2007 RS 330 Lexus which is he is still paying for. He will also keep his 2007 Camry which is he is still paying for.
3. He will wipe out $250,000 of foreclosure deficiency when he loses the 2 houses to foreclosure. Best of all, he will owe nothing to the IRS, or creditors when the houses are foreclosed.
4. He will wipe out $80,000 of credit card debt.
5. He will keep his retirement account of $200,000.
As a result, chapter 7 will give client a fresh start in life without accumulated debt while allowing him to keep his house, cars, other assets, and retirement account of $200,000. Only in America is this kind of deal possible. Take advantage of the fresh start Federal law if you qualify. Consult a bankruptcy lawyer of your choice.
If you need debt relief, contact my office. I will analyze your case personally.
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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 1000 S. Fremont Ave., Bldg. A-1 Suite 1125 Unit 58, Alhambra, CA 91803.
( Published on December 6, 2008 in Asian Journal Los Angeles p. C4 )
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