“  Yes, your credit score increases yearly after bankruptcy and you do get new credit cards and new credit lines. I just suggest that you pay off the cards completely every month. Don’t leave any balance outstanding. Otherwise, the balances start accumulating again, and you’re on the hook again.”

BEST wishes and Happy New Year to one and all! Do you want more debt, less debt or zero debt for 2019?

    Why do we say, ‘break the shackles’ of debt? Because debt ties the debtor to the creditor in a slave master relationship until the shackles of debt are broken for good. No one wants to be a debt slave. A debt slave uses all of his or her disposable income to pay debt, daily, monthly, yearly and forever, and even until death, debts have a claim on the estate of the deceased!

    The client is 60. His wife is 62. They’re about to retire sooner than later. What happens when they retire? Obviously, their household income goes down because they stop working and start relying on social security. The average social security for Americans in 2018 is about $1,400 a month. So, the client gets $1,400 and wife gets $1,400, or a total of $2,800 a month of social security. While working, clients make $50,000 a year, and the wife makes $40,000 a year, or a total of $90,000. That’s about $7,500 a month of income. When they stop working, instead of getting $7,500 a month gross, they will get, let’s say $3,000 a month as combined social security benefits. That’s a 60 percent reduction in client’s household income. 

    I have another client who is 68 and he continues to work and make a salary of $4,000, plus his social security of $1,600. However, his wife who is 69 has stopped working and draws social security of $900. She used to make $2,500 a month when still working as a cashier at a supermarket. So, even in that case, where one spouse continues working, there’s a reduction in household income.

    As they say, “you gotta do what you gotta do.” Once the household income drops, the first problem that rears its ugly head is debt service. The client owes $30,000 of credit cards. They need $1,000 a month to keep those cards current. That’s paying minimum interest only. They’ve been paying $1,000 a month on this very same $30,000 of credit cards for the last 20 years. So they’ve paid a total of $240,000 to keep $30,000 of credit cards current for the last 20 years! How much do they still owe now after paying $240,000? They owe the very same $30,000. It’s really a big deal because the client has transferred $240,000 of the household’s hard earned money, that’s a quarter of a million dollars in the last 20 years, just to keep $30,000 of credit cards current. 

    Isn’t that just plain dumb? They could have filed a Chapter 7 15 years ago and gotten rid of the $30,000 of credit cards. What would they have now if they did that? They would have $180,000 of savings, which probably would be about $300,000 now if wisely invested in equities, notwithstanding the present wild stock market gyrations, they would have no debt, and their credit score would be perfect if they handle new credit in a timely manner. 

    Yes, your credit score increases yearly after bankruptcy and you do get new credit cards and new credit lines. I just suggest that you pay off the cards completely every month. Don’t leave any balance outstanding. Otherwise, the balances start accumulating again, and you’re on the hook again. Your credit score will be good enough to buy a car immediately after bankruptcy, just bring the discharge order to the dealer. That’s all they look for. In three years from filing bankruptcy, your credit score is good enough to buy a house, albeit at higher interest than one with perfect credit.

    In year six or seven, your credit score is over 700, and in year 10, your credit score is perfect once more. It’s over 800.

    No matter what your age is, if you have accumulated significant credit card debt that you are not able to significantly pay down and you just keep making minimum payments on these cards, you really are a slave to debt. That’s your life. You are shackled to debt for the rest of your life. That’s not a good idea, is it? Being a debt slave for life is a bad idea. You will be living in darkness. Your family will be living in darkness. 

    If you don’t agree with me, go ahead and add to your debt and see what happens. Each year that goes by, these accumulated credit cards will become bigger and bigger and demand more and more of your household income. 

    If you need debt relief, call our office to set an appointment. 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, Mailstop 58, Building A-1 Suite 1125, Alhambra, CA 91803.

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