Chapter 7 debt relief for a fresh start

THE YOUNG: The first set of clients are in their late twenties, the epitome of youth. They have their whole life ahead of time. They married three years ago. Right after they got married, they spent all of their money to buy a retail business thinking that the business would flourish and provide their new family with financial security in the future. Their new family is indeed growing as the wife is expecting their first baby early next year. But their business has turned into a losing money pit. The business was profitable in 2015 and 2016 with some profits, not much, less than $20,000 a year. But $20,000 a year of profits is still pretty good compared to a loss of even $10,000 a year. The problem with retail business is that once it starts losing money, it’s difficult to turn it around into profit because a retail business is basically stuck where it stands, or once the novelty of the business has passed, you’re looking at a loss every month.

I am reminded of a client who set up a restaurant. The first year did great. Then after that, fewer people came to eat. He then changed it from a sit down to a buffet. It didn’t work either. So after one and a half years, he closed the business. Here, young clients are not restaurant owners but their retail business runs on almost the same principles as a restaurant. They depend on repeat customers. If these repeat-customers become less and less, then the business has no future.

Seeing no future anymore for their business, young clients decided to stop operating and close it. Of course, the problem when you close the business is that the landlord will sue you for the rest of the lease payments. They calculated that they would owe the landlord about $100,000 in the lease. And, the landlord has indeed sent them a letter demanding payment for the rest of the lease. Why can the landlord do this? He can ask for the lease payments for the rest of the lease even if the business stops operating because, by contract, the landlord expects to get a total amount of lease payments from the tenant. For instance, in a five-year contract that terminates after the first month, the landlord can demand payment of 59 months for the rest of the lease contract because he expected 60 months of lease payments from the tenant.

If the lease is $1,000 a month, 59 more months would be $59,000 that the landlord can demand the tenant pays even if the tenant moves out on the first month. It’s the same principle at work when you return a car with a car loan — the creditor can demand the rest of the car payments even if you gave back the car to the creditor. Of course, the creditor can sell the car, but if there is still a shortage, he can demand you pay him the unpaid balance after sale proceeds are received. So if you have a car loan on a brand new Mercedes Benz 300 with a five-year payment of $500 a month, the creditor expects to get a total of $35,000. If you return the car after the first month, he can sell the car, say for $20,000, and you would still owe creditor about $14,000. This happens because you bought it at retail, while creditor sells it after repo at wholesale, which is 50% less than retail.

Aside from $100,000 of lease liability, the young clients also have about $40,000 of credit card debt. With Chapter 7, they get rid of $140,000 of debt at this stage in their young lives! It’s a fresh start without accumulated debt so these young clients can become productive again. Just like Walt Disney who filed for Chapter 7 twice when he was still young and right before he hit the right business of Disneyland, now a multibillion-dollar global company. That business started from a fresh start with two Chapter 7s for Mr. Disney! Maybe my young clients, after they get their fresh start, will become the next Jack Ma in the business of artificial intelligence, the next Steve Jobs, the next Bill Gates or the next Mr. Hershey of Hershey Chocolates, the world’s biggest chocolate business. He also filed for Chapter 7 when he was young to get a fresh start and went on to build his Hershey chocolate business!

THE NOT SO YOUNG: The husband is 60, while the wife is 61. These clients are still young, but when compared to the young clients in their twenties, they are not so young. But physically if you look at them, they look maybe about 50. Don’t forget that the World Health Organization classifies the young as 17 to 65, and middle age starts at 66. Together they owe $50,000 of credit cards. They pay $1,500 minimum to keep the $50,000 current. For the last 10 years, they have paid $150,000 to keep these cards current, but today, they still owe the very same $50,000.

The husband was self-employed as a contractor and made good money in home remodeling. But at 60, he says he doesn’t feel that strong anymore for the contracting business. This reminds me of the contractor I retained to extend our kitchen 10 years ago. He was just 55. I noticed a bump on his forehead. He said that he had skin cancer and was going through chemotherapy. I suggested for him to wear a hat because he was so fair that he had no pigmentation at all. If you are this fair, you better wear long sleeves and a hat when you go out in the sun because skin pigmentation protects you from the rays of the sun, too much of which can cause skin cancer! Anyway, he went to the City of Hope and I thought everything was cool. Then I found out that his cancer had spread to his lymphatic system and other organs. He died at 56, leaving behind a son who was only 10. His wife was a homemaker and his daughter was a nurse. His daughter had just married a good guy just before he died.

The client says he’s now driving Uber and makes about $2,500 a month net, while the wife just retired and will be getting a pension of $1,000 a month.

It’s definitely time to get rid of the $50,000 credit card debt with Chapter 7 for a fresh start at 60. With so much credit card debt, the client may not be able to drive safely for Uber as he keeps on thinking about how to pay the $1,500 a month to keep the $50,000 credit cards current. With Chapter 7, no more $50K credit card debt!

THE NOT SO OLD: The client is 69. He owes only $10,000 of credit cards. He has a pension of $2,500 a month. His rent is $600/mo. He asks me if it’s worth doing a Chapter 7 to get rid of $10,000 of credit cards. I told him it sure is. He needs $300-$400 minimum to keep the $10,000 current every month. That’s at least $4,000 a year spent to keep $10,000 current. In two years, he would have spent $8,000 to keep $10,000 current, and still owe the same $10,000.

Certainly, get rid of the $10,000 now with Chapter 7, and just save the $4,000 yearly. At 79, his credit is perfect again and there is no record of his bankruptcy anymore.

So if you are young, not so young or not so old, or even if you are old, come see me for debt relief if the accumulated debt is making you miserable and weighing you down. So, stop being a slave to debt and get your freedom now!

If you need debt relief, please set an appointment to see me. 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 20274 Carrey Road, Walnut, CA 91789 or 1000 S. Fremont Ave., Mailstop 58, Building A-10 South Suite 10042, Alhambra, CA 91803.


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