[COLUMN ]Young client chooses Chapter 7 as company dies with $80,000 in credit cards due –

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THE client is young in his fifties. Believe me, it’s young.

The client owns and operates a business that was generating $800,000 in revenue per year with good profits for the past 10 years. But even before the virus hit, his business was really slowing down.

Last year, its gross receipts were down 30%. With the lockdown and general downturn in business, he no longer sees any light beyond the tunnel. He got a $50,000 PPP loan, but it ran out. There is simply no money left to pay all the monthly expenses that keep piling up. He still has $70,000 worth of inventory that no one wants even if he were to give it away for free. You need storage space to store $70,000 of inventory; they take up a lot of space.

The client used his credit cards to fund the business. He owes $80,000 in credit cards. And he just got the $50,000 PPP loan or grant. You know how PPP works. If the $50,000 was used to maintain and pay employee salaries at pre-COVID levels used for business expenses, it may become a grant that does not have to be repaid.

But the client decided to throw in the towel. He notes that even Walt Disney threw in the towel twice with two Chapter 7 cases before success materialized. Mr. Hershey of Hershey Chocolates also started fresh with no accumulated Chapter 7 debt once before his chocolate company became the largest chocolate company in the world. Sure, Disney suffered a major downturn because of COVID, but once the vaccine was found and distributed, Disney’s business rebounded like a coil spring, no doubt.

So, the client decided to make a fresh start in life without accumulating debt, just like Walt Disney and Milton Hershey. His credit score will increase very quickly. Next year, his credit rating could already exceed 600 depending on how he handles new debt. I suggest getting one or two of the pre-approved cards that debtors get soon after they get discharged. There are banks that specialize in sending the debtor just out of Chapter 7 with new credit cards. Just get them, but pay the full balance each month so the credit score goes up much faster. The client will be able to obtain new car loans immediately after his release, but the interest will be higher. Life is good with the new beginning! Just imagine the customer paying a minimum of $2,500 per month to keep $80,000 worth of credit cards current. It’s $30,000 in 12 months and $60,000 in 24 months, but the main remains at $80,000 despite $60,000 minimum payments in 24 months!

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DISCLAIMER: NONE OF THE ABOVE IS CONSIDERED LEGAL ADVICE. EACH CASE IS DIFFERENT.

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Lawrence Bautista Yang specializes in bankruptcy, business, real estate and civil litigation and has successfully represented over 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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