January 2015 Bankruptcy Case
This is the bankruptcy case study for Leo P. who is located in Island Lake, Lake County, Illinois. He is in the office to determine whether or not chapter 7 bankruptcy is going to help with his debt issues. In terms of real estate property, he owns a condominium with a market value of $170,000 and his outstanding balance to the mortgage company is $120,000. In terms of vehicles, he has a 2006 Chrysler Pacifica which is paid in full with an approximate market value of $7000. In terms of personal property he has a checking and a savings account at Chase bank, he has normal household goods valued at $2000, and normal clothing valued at $800.
Income & Expenses
He is currently self-employed and he is recently divorced. Importantly, his income totals $2000 per month. His monthly expenses exceed $2000 per month when you factor in all of his expenses. For example, his mortgage is $1010 per month, water and garbage is $90 per month, association fees are $173 per month, electricity is $70 per month, cellular phone is $54 per month, cable television is $140 per month, food is $400, gasoline is $140, auto insurance is $50, and miscellaneous expenses total about $400.
In terms of financial affairs, he has earned approximately $1000 so far this year, $25,000 last year, and $25,000 the year before. He did have a prior address from 2003 to 2010 in Hainesville, Illinois. He does have an interest in a business started in 2004 which has very little or no value. He is the only one liable on his debts, he does not owe for any student loans and he does not owe for any tax debt. The issue for Leo is that he has over $60,000 in credit card debt assorted among approximately 7 different banks.
Would His Equity Disqualify Him?
The issue here is whether or not the value or equity in his condominium would disqualify him for a fresh start under chapter 7 bankruptcy law. What I would recommend is that he seek out a comparative market evaluation from a licensed realtor in his area. If his home is actually worth $170,000, and there would be $50,000 worth of equity which is too much equity to get through a chapter 7 without a liquidation. If, on the other hand, his home is closer to his purchase price in 2012 of $150,000, then he would be able to protect his home and still eliminate his major credit card debt.
Based on the need to determine the equity in the property, I cannot make a definitive statement as to whether or not chapter 7 bankruptcy would provide the relief requested. If the equity is high, we will discuss the option for a chapter 13 repayment plan at approximately 10% to 20% of what is currently owed.