Clients fit into classic Chapter 7 profile & eligibility for honest debtors

Debt Relief

DIFFERENT clients have different financial and asset situations, which make them start thinking about getting rid of accumulated debt. Nobody starts with borrowing money with the intention of defaulting and not being able to pay back.

Certainly, in my over 30 years of practice in bankruptcy law, I have seen potential clients — not many actually, very few — who have deliberately perpetrated fraud by borrowing a lot of debt without any actual intent of paying back. But by and large, clients are referred to in bankruptcy law as “honest debtors.”

Bankruptcy law provides “honest debtors” with the opportunity to start fresh again in life without the burden of accumulated debt.

This is a very important right and privilege given to individuals in the U.S. to give every individual the chance to become productive people again without the burden of accumulated debt, with the caveat that this privilege is given only to an honest debtor.

Who is an honest debtor?

Let’s give an analogy. You live everyday without the intention of getting sick. But then everyone who is human actually does get sick once in a while. When you do get sick, then you need medication to get well. Say you’re perfectly healthy, enjoying life then, all of sudden, you get COVID-19 that’s so severe that you can’t breathe and you need to get intubated. Intubated means that since you can’t breathe on your own, a procedure that involves sticking a tube down your throat into your windpipe forces air in and out of your lungs using a ventilator. Our Latino brothers and sisters refer to this as the dreaded “El Turbo”.

Imagine your lungs to be a balloon and the ventilator forces air into the balloon then sucks it out again, air forced in, then sucked out continuously. Then, you’re given maybe a host of new medicine like Remdisivir to fight the inflammation in your organs and lungs. If the medical treatment works, then you eventually recover and you’re back to normal good health.

So the analogy is that you go through life living and enjoying life every day. You like to travel and eat. So year after year, you travel and tour a country that you haven’t been to before. You charge all the costs and expenses to your Visa and MasterCard. In year one, you owe $5,000; in year two, $10,000; in year three, $15,000; in year four, $20,000; in year five, $25,000; and in year six, $30,000.

In addition, you like to eat in restaurants, not even the high class ones like Mr. Chow, just the ordinary restaurants that serve good food. Every time you eat out, it costs $100. You eat out 3X a week. So in one month, your eating out costs you $1,200 a month, all of which you charge to your credit cards. Every year of eating out, you add $14,000 to your credit card debt. Do the math, in just six years of eating out costs you more than traveling abroad every year. Six years of eating out adds $80,000 to your credit card debt.

Therefore, in six years of enjoying life by traveling abroad and eating out, your total credit card debt is $30,000 plus $80,000; you now owe $110,000 just by enjoying life. Now you walk into my office and tell me you owe $110,000 of credit cards and you need $3,500 to keep them current every month. Your income before the pandemic hit was $100,000 a year. Your wife used to make $50,000 a year. With the pandemic, your income is reduced by half, and your wife lost her job. She’s been getting pandemic unemployment of $3,000 a month. You own a house and the mortgage is