September 22, 2019

Retiree With $25,000 of Credit Card Debt Contemplates Bankruptcy

Thank you for your informative web site.  I have 2 questions I am filing for SS as I am 63 my bill are current however I was laid off last year and my health is failing. If I file would I be able to keep my car?   I owe 16K on it as low milage (17K) my son will be giving me the payments.  Also I have been renting this small house for the past 5 years I have never been late with the rent do I have to notify the landlord if I plan to stay here? I own nothing but have 25K credit card debt all these bill are current but I have run out of savings

Jonathan Ginsberg responds:  Christina, thanks for your questions and the kind words about my Atlanta bankruptcy web site.  With regard to your car, in a Chapter 7, you can reaffirm your car note if (1) you are current on the note and the lender agrees to a reaffirmation and (2) you have less than $3,500 of equity in the vehicle.

Reaffirmation is a voluntary process most frequently used in the case of secured debt in which you keep your property and reassume full legal responsibility for the note.  If you are current and you have a source of funding for the payment, you should have no trouble reaffirming.

The $3,500 figure comes from Georgia’s exemption statute.  Under Georgia law (which applies to your bankruptcy case), you can shelter or "exempt" up to $3,500 of equity in your vehicle.  If you have more than $3,500 of equity, you would need to settle up with your Chapter 7 trustee and pay him the non-exempt portion of your equity – which he would use to pay creditors of your bankruptcy estate.

WIth regard to the lease, technically a rental contract is known as an "executory contract."  This means that its terms have not yet been fulfilled (the terms being your monthly lease obligations).  Until the October, 2005 changes to the law, most lawyers did not include current lease contracts in bankruptcy petitions.  Under the new law, however, an executory contract that is not "assumed" is deemed rejected.  So, it probably makes sense to include the lease contract on Schedule G of your petition and to assume the contract.   The potential problem with including the lease contract in your petition is the notice that will be given to the landlord.  Some large apartment complexes may be reluctant to give you a new lease if you have filed bankruptcy – this is rarely a problem with smaller ownership groups.

I would also note that if your only source of income is Social Security, and you have no assets, then you are basically judgment proof.  If you own only $25,000 and you are judgment proof, I wonder if filing Chapter 7 is really a good idea.


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