SENIOR no. 1 and senior no. 2 are in the same boat. They each have car repossession deficiencies of over $ 100,000 and business credit card debt of $ 50,000.
Just by looking at these numbers, you know there is something wrong. At their age, why should they each have multiple car pension deficiencies over $ 100,000?
What is a car repo deficiency? A car pension deficiency occurs when the debtor becomes past due on the car payment or the rental payment. The creditor then comes to your home in the middle of the night and takes your car away. When you wake up in the morning, your brand new car in the driveway is gone. The creditor then sells your car wholesale, which means they are getting a lot less than they should be getting if sold at retail. They apply the net proceeds of the sale to what you owe them and collect the outstanding balance from you. So, this is what is rightly called insufficient car repo.
For example, you bought a brand new M-Benz E-350 for $ 50,000. You got a car loan of $ 48,000 at 9% interest per year. The total payments for five years will be $ 60,000. You become delinquent on car payments. The creditor puts the car back. They wholesale the car for $ 30,000. The pension shortfall you owe is $ 30,000. Yes, you still owe them $ 30,000 even if you no longer have the car. Why? Because by contract that you signed with the creditor, you agreed to pay them $ 60,000. When they wholesaled the car, they only got back $ 30,000. So they can still get $ 30,000 from you because by contract you give them $ 60,000. I know it’s not fair to you, but that’s how contract law works.
In the case of these two seniors, one of them owes pension shortfalls for five expensive cars. If each pension deficiency is $ 30,000, then five times as much, senior owes $ 150,000 of pension deficiency. This senior also owes a $ 50,000 business line of credit. So easily the senior probably owes $ 200,000. But why would a senior buy five expensive cars and get a $ 50,000 business line of credit?
The answer, of course, is that there is a story that needs to be told so that other seniors are not defrauded as well.
Senior is approached by an acquaintance who offers her the opportunity to participate in a business that will net her $ 30,000 in profit if she does something. This something is that the senior will fill out a form giving his personal financial information to an acquaintance. An acquaintance will then use the personal information to apply for business credit cards on behalf of the company and the elder, as well as to buy or lease several expensive cars. These cars will be leased so that the rental income can be used to pay off car loans and car rentals. The money generated by this business venture will be so good and immediate that the business will very soon give a senior $ 30,000 in cash back just for letting the business use their name and good credit.
Of course, what really happens is that once the lines of credit are available an acquaintance sucks up the money and the business pays the bank zero. The cars are rented, and an acquaintance collects all the rent money for the cars but does not pay the loans or car rentals, so ultimately the cars are taken back with the senior holding the bag. Knowledge ends up with a lot of money, which is used to buy a house for an acquaintance, for example. OK, here’s another good scam. I can let you stay in the White House for $ 2,000 per month payable one year in advance and sent to my Wells Fargo account no. 123. Believe it or not, someone will believe that for $ 24,000 he can stay in the White House on rent paid a year in advance. The saying that there is a sucker born every minute is true; I hope that sucker isn’t you. As a general test, just use this standard to avoid being scammed: if it sounds too good to be true, then it isn’t. Remember this, a fool and his money are soon separated. All of these sayings are true.
All the money is sucked up, but knowledge while the elder’s name is registered as the debtor, so all collectors go after the elder to get their money back. Very good scam for crook. Very bad for the elderly victim who certainly does not need this kind of problem during his retirement years.
I recommend that both seniors apply for Chapter 7 relief. What will happen in Chapter 7? Seniors will be released from any liability for such credits, loans and car rentals that have been obtained fraudulently on their behalf. Creditors will not be able to sue the elderly to recover pension deficiencies and it does not matter that the elderly do not have the cars in their possession. Creditors will have to locate the cars at their expense.
Of course, what actually happened leading to the senior fraud will need to be adequately explained to the bankruptcy court so that the UST does not oppose the discharge of these debts. Otherwise, one could argue that the elderly are not victims but participants in this fraudulent scheme. Creditors can come to hearing 341A to ask debtors how this happened, as it is the signatures of the elderly that appear on all loan applications. This must be handled properly or a UST objection to the discharge may arise.
Certainly, if they had come to see me before signing all these documents, I would have told them not to proceed as it was clearly a scam. But as has happened before, the best medicine for a fresh start for seniors is Chapter 7.
If you need debt relief, please make an appointment to see me. I will analyze your case personally.
* * *
Disclaimer: None of the above is considered legal advice to anyone. There is absolutely no attorney-client relationship established while reading this article.
* * *
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 appointment at 20274 Carrey Road, Walnut, CA 91789 or 1000 S. Fremont Ave., Mailstop 58, Building A-10 South Suite 10042, Alhambra, CA 91803.