[COLUMN] Defrauded seniors left with $100K debt need Chapter 7 relief 

SENIOR no. 1 and senior no. 2 are in the same boat. They each have car repossession deficiencies of over $100,000 and business credit card debt of $50,000.

Just by looking at these figures, you know there’s something not right. At their age, why should they each have several car repo deficiencies of over $100,000?

What is a car repo deficiency? A car repo deficiency arises when debtor becomes delinquent on the car payment or lease payment. The creditor then goes to your house in the dead of night and hauls your car away. When you wake up in the morning, your brand new car on the driveway is gone. The creditor then sells your car at wholesale which means they get a lot less than what they should get if it’s sold at retail. They apply the net proceeds from sale to what you owe them, and collect the unpaid balance from you. Thus, it’s aptly called the car repo deficiency.

For example, you bought a brand new M-Benz E-350 for $50,000. You got a car loan for $48,000 at 9% p.a. interest. Total payments for five years will be $60,000. You become delinquent on the car payments. Creditor reposes the car. They sell the car at wholesale for $30,000. The repo deficiency, which you owe, is $30,000. Yes, you still owe them $30,000 even though you don’t have the car anymore. Why? Because by contract that you signed with creditor, you agreed to pay them $60,000. When they sold the car at wholesale, they only got back $30,000. So, they can still collect $30,000 from you, because by contract, you we them $60,000. I know it’s not fair to you, but that’s how contract law works.

In the case of these two seniors, one of them owes repo deficiencies for five expensive cars. If each repo deficiency is $30,000 then five times that, senior owes $150,000 of repo deficiencies. This senior also owes a business credit line of $50,000. So, easily, senior owes probably $200,000. But why will a senior buy five expensive cars and get a line of credit for business of $50,000?

The answer of course is that there is a story that needs to be told so other seniors won’t be defrauded too.

Senior is approached by an acquaintance who offers her an opportunity to participate in a business that will give senior $30,000 profit if she does something. This something is that senior will fill out a form giving her personal financial information to acquaintance. Acquaintance will then use the personal information to apply for business credit cards in the name of the business and senior, as well as to buy or lease several expensive cars. These cars will be rented out so that the rent income will be used to pay the car loans and car leases. The money generated from this business endeavor will be so good and immediately that the business will very shortly give senior $30,000 of cash back just for letting the business use her name and good credit.

Of course, what actually happens is that once the credit lines are available for use, acquaintance sucks out the money and the business pays the bank zero. The cars are rented out, and acquaintance collects all the rent money for the cars but does not pay the car loans or leases, so eventually, the cars are repossessed with senior holding the bag.Acquaintance ends up with a lot of cash, whichis used to buy acquaintance a house, for instance. OK, here’s another good scam. I can let you stay in the white house for $2,000 a month payable one year in advance sent to my Wells Fargo account no. 123. Believe it or not, someone will believe that for $24,000 he will be able to stay in the white house with rent paid one year in advance. The saying that there’s a sucker born every minute is true; hopefully that sucker is not you. As a general test, just use this standard to avoid being scammed: If it sounds too good to be true, then it’s not true. Remember this, a fool and his money are soon parted. All these sayings are true.

All the money is sucked out but acquaintance while senior’s name is on record as being the debtor so all collectors go after senior to get repaid whatever is owed to them.  Pretty good scam for scammer.  Very bad for the senior victim who certainly doesn’t need this kind of problem during her retirement years.

I recommend that the seniors both file for Chapter 7 relief. What will happen in Chapter 7? Seniors will be relieved of all liability for these credits and car loans and leases that were fraudulently obtained in their names. Creditors will not be able to sue seniors to collect on the repo deficiencies and it doesn’t matter that seniors do not have the cars in their possession. Creditors will have to locate the cars at their own expense.

Of course, what actually happened leading to the defrauding of the seniors will have to be adequately explained to the bankruptcy court so that the UST will not object to the discharge of these debts. Otherwise, it may be argued that seniors are not victims but participants in this fraudulent scheme. Creditors may show up at the 341A hearing to ask debtors how this came about because it is the signatures of the seniors that appear on all loan applications. This must be handled properly or a UST objection to discharge may arise.

Certainly if they had come to see me before signing all these documents, I would have told them not to proceed as this was clearly a scam. But since it already happened, the best remedy for a fresh start for seniors is Chapter 7.

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 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.

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