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cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience:  Bankruptcy professor.
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My Question is very simple, My Father-in-Law owns is own Watch

Resolved Question:

My Question is very simple, My Father-in-Law owns is own "Watch Repair Business" ,
which litle by litle is going downhill, Just lost his wife ( Mother in Law ) and presently
have over 40K in credit card debits, over half of these obligations were in my Mother's
in law name only.

They have a home, now for sale, and would like to just get out of these obligations by
filing under a chapter 11 or 7 bankruptcy. My understanding is that the rules have cha-
nged, but not fully informed as to what these changes are.

Can You Please provide some basic options.

Thank You
Submitted: 5 years ago.
Category: Bankruptcy Law
Expert:  cfortunato replied 5 years ago.
Hi JACustomer,
The main change in the Bankrutpcy laws - which occurred in October 2005 - was to place a limit on the income a debtor could have and file a Chapter 7, which is the preferred Bankruptcy. To file a Chapter 7 now, the debtor's income must be below the state median for his household size. Before October 2005, anyone could file a Chapter 7, regardless of their income.
(Chapter 7 is preferred because the debtor pays nothing to have his debts discharged. With a Chapter 13, the debtor must make monthly payments for up to 5 years.)

I think this is what you wanted to know. If not, please let me know.
Thank you!
Customer: replied 5 years ago.

Dear Mr. Fortunato:


Thank you for your answer, but still somewhat confused, What is the so called median

household, and in this case , he is 81 years old , leaves along , and has very litle income.


As for the Creditor's / Credit Cards, do they have the right to file liens without any Court

actions ??? , and finally, can he loose his own residence by filing protection under

chapter 7 ??

Expert:  cfortunato replied 5 years ago.
1) What is his gross monthly income (after deducting business expenses, but not deducting income taxes)?
2) What is the current market value of his home? (How much could the house be sold for?)
3) What is the balance on the mortgage for the home?
Customer: replied 5 years ago.

His approx. monthly income is $ 900.00 from Social Secury, and approx.800.00 from is

work, repairing watches at home.


Current market value of present home is around $500,000 and perhaps the home could

be sold for around $ 460,000.


Current balance on the first and second mortgages are around $ 285,000.

Expert:  cfortunato replied 5 years ago.
The state median income is $4001 for a family of one in California, and Social Security income does not count. So, your father-in-law can file a Chapter 7, which can discharge his unsecured debts, such as credit cards.
If he does file, he will be able to keep his house, since it has less than $175,000 equity (what the house can sell for minus the balance on the mortgage).
Customer: replied 5 years ago.

Thank You, XXXXX XXXXX question, Other than just file ASAP, what can we do to avoid the

placement of liens on the property ??

Expert:  cfortunato replied 5 years ago.
If he does not pay his credit cards, it will take about 6 months to a year before his creditors can place liens on his property. Although a Bankruptcy can discharge the debts and can also remove liens that are already placed, there is nothing that can be done to prevent liens if his creditors are not being paid.
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