PROFESSIONAL AND BUSINESS OWNER BOTH SEEK BANKRUPTCY PROTECTION（ PART1 ）

THE PHYSICIAN

Members of the professions are normally doing well financially in the United States because they are highly paid for their skills. However, even with high gross incomes, wrong decisions, or illness can result in financial problems that require bankruptcy relief. This is what happened to my client who is a member of the medical professions. Client has been practicing her profession as a physician for 30 years. She has her own medical practice as an internist. She has an office manager who handles marketing, and two nurses. Prior to all the changes in Medicare and HMO’s, her practice was grossing at least $700,000 a year. After all expenses, her profit was at least $250,000 a year. Due to continuing healthcare law changes, her gross income dropped to $300,000. In addition to all of this, the office manager had been diverting some of the revenues into a separate account for his own enjoyment.

When her practice was doing well, she bought a million dollar house in Pacific Palisades, which had doubled in value. So, she decided to refinance the house several times to cover money lost in her practice over the years had reached $800,000. She owed almost $2.0 million on her first mortgage and, another $300,000 on a Heloc. It turns out that our good doctor also developed a gambling problem when her finances turned sour. She told me that in one night she won $1.2 million but lost the entire amount, plus another $500,000 of gambling loss, which she now owes to the casino in Pechanga. Further, she owes another $200,000 of credit card debt, which she also used for gambling.

She has now decided to retire because she is already 70 years old but she wanted to retire in peace without her creditors hounding her. She decided to file for Chapter 7 relief. Chapter 7 will allow her to keep her house which has a $150,000 of equity, her retirement account of $500,000, both her cars and all her other assets. We obtained court permission with the trustee’s consent to sell her house because she could not afford to pay a monthly mortgage of $15,000. The house was sold pretty fast for $2.4 million. She kept her cash equity of $150,000 and used that for a down payment on a condo in Pasadena, which she bought for $450,000. She will discharge $500,000 owed to the casino and $200,000 of credit cards. Thus, she will start life fresh without debt and retire in peace with an affordable mortgage, social security and $500,000 in her retirement account. I hope she doesn’t gamble her retirement account away.

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