THERE’S a time to be born and a time to die, a time to plant and a time to harvest. There’s a time for everything.
So states Ecclesiastes 3: “For everything, there is a season, a time for every activity under heaven… A time to kill and a time to heal; a time to tear down and a time to build up; a time to cry and a time to laugh…”
The client is was 72. Three years ago, the client and his wife became my clients for a Chapter 13 case. They had a relatively small default on their residence, less than $20,000. And they owed about $18,000 to the IRS for back taxes, which were not yet dischargeable. The client and wife were still working, gainfully employed as members of a profession. But all of a sudden, the client’s kidneys start to fail. Diabetes is the culprit, and he needs to go for dialysis three times a week. He says he’s too old to wait for a kidney transplant as the wait is about 10 years. So, he’s decided to tough it out, just continue living with dialysis. It’s not hard to imagine that once you start needing dialysis, your whole life is now centered-around dialysis. Three times a week, each time four hours at least tethered to the machine to filter your blood. I wish God had not allowed diabetes to exist.
So they fall behind on their mortgage since all of a sudden, their income gets substantially reduced from regular paychecks to social security. They owed about $14,000 of arrears in their mortgage, and they could no longer pay the $18,000 of income taxes that were due. Clients decided to file for Chapter 13. The plan allowed them to pay off the $14,000 owed on the mortgage over 60 months, and the $18,000 owed to the IRS over 60 months as well, without interest. The plan’s payment each month was about $650. Shortages were covered by family contributions by their children who are both adults and working.
By year 3, the client died of a massive stroke at 72. The wife, who is a joint debtor, is now wondering what she will do. What are her options?
Option no. 1: since the house has $200,000 of equity now, she can sell the house while in Chapter 13. We will need to file two motions. One is to suspend plan payments. Another is to ask for court permission to sell the house subject to comments by the Chapter 13 trustee. The right time to do these motions and when there is a firm offer for the purchase of the house. The motion to sell will tell the court how much the sale price is, the net proceeds and who the escrow agent is. From the sale proceeds, the unpaid balance of the plan, since it has two more years to go, will be paid off. The balance will be given to the surviving spouse who happens to be the co-debtor’s wife. Let’s do the math. Net proceeds are $200,000. About $12,000 of this will be used to pay the balance of what is owed on the plan. $188,000, less whatever trustee expenses are, will be given to the wife.
Option no. 2: Continue paying on the plan for another 24 months and complete all plan payments. On the 60th month, the wife will not have any arrears on the house, will be back on the current status with the lender, and will not owe anything to the IRS. And she will still own the house with equity of at least $200,000, and rising. Since she will still own the house, she can continue living in it, or rent it out and get rental income.
Option no. 3: Ask the lender for a loan modification because her husband died to reduce mortgage payment. If this is approved, then the arrears will be added to the principal and she will be back to current status. The plan can be reduced by a motion to modify plan payments since only what is owed to the IRS will be left proportionately unpaid.
These are three basic options available to the surviving co-debt spouse. Which is the best option to go for? Well, this all depends on how the wife feels about the house and what the children want to do with it. Right now, of course, the wife does not want to live in the house by herself, which is understandable. So she has quickly been able to rent the house.
I feel bad for her but as stated by Ecclesiastes, there’s a time to be born and a time to die. There’s a time for everything. This is so true. All of us will be called by God one day and on that day; it will be our time to go. Even if you had all the money in the world, you can’t pay someone to die for you. You can’t even pay someone to be sick for you. Because of the original sin by Adam and Eve, we now have these frail bodies that suck. We all succumb to sickness and death. In heaven, I understand we will have glorified bodies that last for eternity and will never get sick or die. So, the client now has a glorified body in heaven with Jesus and God the Father and God the Holy Spirit that will last him for eternity. Never again to need dialysis ever. Well, that’s a really sweet deal, right? So all you have to do is believe that Jesus is the Son of the one true God who died for our sins that we may have a chance to enter heaven.
If you need debt relief, please set an appointment to see me. I will analyze your case personally.
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Disclaimer: None of the foregoing is considered legal advise for anyone. There is absolutely no attorney client relationship established by reading this article.
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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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