Senior opts for chapter 7 to discharge $50K credit cards

Court allows postpetition creditor client to deny discharge of debtor
Client No. 1
CLIENT is 74. She was married to her husband for 30 years. Husband was a lot older than her when they got married but it was a fairytale marriage. Husband was a good man who loved her so. They met each other in their country of origin. He was 50. She was 20. They met in a family party. Despite the age difference, they fell in love with each other, the classical May-December couple. Since he was an American and she was a foreigner whose lifelong desire was to set foot in America, they got married abroad, and in less than 3 months, they started their marriage and family life in California. She found her Prince Charming, though a little older than what she had envisioned, and she realized her lifelong dream of living in America. Soon thereafter, their son was born, and they became a typical American family living in the suburbs of Los Angeles. Later, she also landed her dream job, working as an accountant in a large company. Her pay was good. She was making $70K a year with full benefits.
But all good things come to an end. Because of the age difference, her husband died of a massive stroke at the age of 80. She misses him so. They never argued in 30 years of marriage! Now, that is really something. I guess it’s true that older men make better husbands? And he let her do whatever and go wherever she wanted to. She thanks the Almighty for blessing her with such a good man! In any event, client retired 8 years ago at 66. Her current income consists of a pension and social security with a combined total of $4,000 a month. It is good retirement income. The problem is that she still has $50K of credit card debts. These require a minimum of $1,500 a month just to keep them current. 6 months ago, she signed up for debt settlement, paying the business, $700 a month.  With $4K a month of retirement income, even the $700 a month for debt settlement is a hard squeeze. Her rent is $1,200. That leaves her $2,800 for every other monthly necessity. She figured she already paid $150K to the credit card companies in the last 8 years, but she still owes the same principal of $50K. It’s just too much. At the very least, with $150K paid, she should owe nothing by now. Sadly, after having paid $150K, she still owes the same $50K!
So at 74, she decides to get rid of the $50K credit cards with a Chapter 7 petition, which she should have done 8 years ago. $1,500 a month to pay credit cards at 74 is just not feasible by any standard of calculation. She would have $150K in savings now, giving her maybe a 5% returns in dividends and bond income of $750 a month. That extra $750 gives her security and will allow her to travel more since she is still perfectly healthy. But she says she needs to stay home to do what? You guessed it, to take care of her grandchildren!
Client No. 2
Client is 60. In 2012, she purchased round-trip tickets for her family because her son was getting married abroad. She paid cash of $10K for all the tickets to an agent. I have to tell you, this is a strange case. Agent did not use the $10K to buy the tickets. I don’t know what happened to the money but client ended up buying another set of tickets for another $10K from another source. The family is able to attend the wedding but at double the cost. So, naturally this circumstance caused the family a lot of grief, because even the bride and groom had to pay double for their tickets. I mean, what a way to start your married life by getting defrauded out of your hard-earned money. When client returns to California, she asks agent to refund what she paid since the tickets were never issued. Client then files a small claims case to recover the $10K. Client gets a judgment in her favor at the limit of small claims. Before the trial, client attends somebody else’s trial similar to hers. Same situation, another person who paid for airline tickets but never got them from same agent. In the hallway, agent tells client that she is filing for bankruptcy such that client will be subject to the bankruptcy stay which prohibits creditors from further collection efforts.
Client receives a letter from agent’s bankruptcy lawyer saying that client has filed a bankruptcy and that client is subject to the bankruptcy automatic stay and that continued collection efforts may lead to penalties against her for violation of the stay. So client does nothing more for 3 years, until last month when she receives a court notice saying that agent has completed her Chapter 13 and now seeks a discharge.  Then client comes to see me and presents her situation. When I read the bankruptcy documents, nothing makes sense. The dates don’t make sense at all. It appears that agent filed Chapter 13 in 2009. But client bought the tickets in 2012. It is unclear why agent advised client that she was going to file bankruptcy when in fact she was already in bankruptcy 3 years before client bought the tickets. Even the lawyer’s letter didn’t make any sense. Bankruptcy covers all debts before filing. It does not cover new debts, which occur after filing. Something smells really fishy.
We filed a motion to object to discharge based on intentional fraud, and to have the court determine that client’s debt is post-petition, or occurred after filing, therefore even if a discharge is entered, client’s debt is not covered by the discharge. Hearing was held this morning and fortunately for client, the court stated that her claim is post-filing, not covered by discharge. The court went one step further and decided to deny discharge to agent. It’s sad for me to say that there was clear abuse of bankruptcy law to defraud client and 40 other claimants similarly situated. All these people paid cash for airline tickets that were never issued, and all of them mistakenly think to this day that their claims were stayed or barred by bankruptcy. I wish it did not have to happen this way. But the evidence was so clear and overwhelming that the court took the further step of denying agent discharge.
 “Speak to one another with psalms, hymns and spiritual songs. Sing and make music in your heart to the Lord, always giving thanks to God the Father for everything, in the name of our Lord Jesus Christ.” – Ephesians 5:19.

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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 appointme nt at 1000 S Fremont Ave Mailstop 58 Bldg A-1 Suite 1125 Alhambra, CA 91803.

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