[COLUMN] Client relies on 3 bankruptcies in 12 years to save house, wipe out debts

I recently finished attending the telephonic bankruptcy hearing with my client and am reminded of his bankruptcy saga over the last 12 years. The client is married and 82 years old. By any standard, he’s a senior. The first time he and his wife, who is 10 years younger than him, walked into my office, he was 70, and his wife was 60. That was in 2007. That was the time when the mortgage crisis was full-blown. House values plummeted. Many big banks had gone under and needed rescuing by President Obama’s Marshall plan. Lehman Brothers, one of the biggest investment banks, had gone kaput. This was the time when the banks were buying and selling shares or parts of mortgages. It was great for a while then the whole structure collapsed. It was a financial debacle that started here with global consequences. The stock market lost 40% of the value over a span of several months.

The client was one of those who were able to put an $80,000 downpayment on the purchase of their house, with a second trust deed. It was so easy to buy a house then. They financed the entire purchase price of the house with two trust deeds. No money for a downpayment? No problem. They just finance your entire downpayment with a second trust deed.

In 2007, the client was employed and making about $4,000 gross a month. His wife was also employed and making about $2,000 a month. He was healthy, although I would say that it was obvious that he was about 40 lbs. overweight. But he had no major health issues. On the financial side, clients had about $100,000 of credit card debt that they had accumulated over 10 years. Yes, despite being highly leveraged, they were still able to buy their dream house with 100% financing. During that time, even your dog could buy a house. Just get him a social security number and they’ll give him 2 trust deeds to pay for his fancy doghouse.

He told me that he was paying for two trust deeds, his house was upside down (no equity), and there was no way for him to pay for his credit cards. With $100,000 of credit cards, he needed $3,000 a month of minimum monthly payments to keep them current. He said he was also having a difficult time paying the second trust deed of $700 a month.

Chapter 7 wiped out all of the $100,000 of credit cards and gave clients an opening to ask for a loan modification on the second trust deed. This was held by the bank, which had acquired the trust deed from another bank, which was in bad shape. Upon receiving our request to modify the terms of the second trust deed and presented with the discharge of client’s debts in Chapter 7, and faced with an upside-down property, Bank decided to forget about the second trust deed entirely. The bank gave clients a reconveyance on the $80,000 second trust deed so this trust deed completely disappeared.

Clients had a fresh start at the age of 70 and 60 with zero credit card debt, zero second trust deed, and left only with the first trust deed of $250,000. Everything was going very well.

After five years, at the age of 75, the client lost his job. He started defaulting on his first trust deed. In about six months, he had a default of $12,000 on the house. The bank sent him a notice of default with the intent to foreclose. This meant that he had 90 days to cure the default of $12,000 (of course in 90 days the default would become $18,000) or else his house would be foreclosed and sold on auction sale.

The problem was it’s not easy for a 75-year-old individual to get a job. The fact is only Walmart wants to hire seniors as gatekeepers. That’s just the way things are. Our society dotes on the young and neglects the old. Even if the old Prius is running well, people want the new Tesla. Sophia Loren still has her voluptuous shape but doesn’t turn heads anymore. Blame this on Adam and Eve. If they had not eaten of the forbidden fruit that the serpent Lucifer had convinced them would make them “like God”, when Lucifer himself had such a big head and thought he was so perfect as an angel before his fall, and wanted to “replace God,” we, their descendants would have bodies that would never die, get sick or old. But that’s all water under the bridge for us. Fortunately, God loved us so much, that he asked his one and only beloved Son, Jesus Christ, to die for us, the redeem us from sin, and Jesus willingly obliged, because he also loved us so much, that he died for us, so we can have eternal life with them in heaven! That is awesome! Watch out for the sin of pride, it opens the door to many bad and evil things into your life and the life of your loved ones.

Lucifer refused to serve God, thinking he was greater than God, so God damned him eternally to hell. He can’t really fight God, so he’s busy turning us humans to betray God. Lucifer says “nonserviam” to God, meaning he refuses to serve God.

Back to the client, on the seventh month, his employer hired him back so he’s able to pay the current portion of the first trust deed, but cannot pay the $18,000 default in time to stop the auction sale. We filed a Chapter 13 for him in 2012 to stop the foreclosure of his house and to give him 60 months or 5 years to pay off the $18,000, that’s about $300 monthly.

So the Chapter 13 saves his house and allows him to pay off the $18,000 default in five years, which ends in 2017.

Last month, the client sees me again and says his health is not so good anymore as he is now 82. He is sick with diabetes and cancer. He can’t work anymore and is just receiving social security. His wife is also receiving social security. They can pay for the first trust deed, which is down to $200,000. The house is now worth $400,000, so the equity is $200,000. But they’ve accumulated another $80,000 of credit cards!

They can file another Chapter 7 because it’s been six years since the filing of their Chapter 13. Chapter 7 now will get rid of the $80,000 of credit cards so they can keep on paying the first trust deed on their house. Their children now help them with some contribution once in a while to help them make ends meet. The wife is still working part-time so that brings in some extra income too.

Multiple bankruptcy filings are not unusual. Life’s circumstances change and debt accumulates.

Believe it or not, Walt Disney filed for Chapter 7 not once, but twice before his Disney global empire became successful. He went on to become a billionaire after getting rid of all his debt twice. Milton Hershey, of Hershey chocolates, the biggest chocolate business in the world, also filed for Chapter 7 once before he became successful and a billionaire.

If you need debt relief, set an appointment to see me. I will analyze your case personally.

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Disclaimer: None of the foregoing is considered legal advice 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.

               (Advertising Supplement)

 

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