Facts
This is the bankruptcy case study for Carlton P. from Chicago, Illinois. Carlton filed a bankruptcy case over 10 years ago so he is eligible to file either a chapter 7 or chapter 13 bankruptcy case again. He owns a single-family home in his name only however there is negative equity in the property. This means that the market value of the property is less than what’s owed on the mortgage. He wishes to keep the property because he feels that he would have to rent and pay money somewhere else so he might as well pay money to live in his own home. He has a 2006 Nissan quest which is paid in full with an approximate market value of $5000.
Assets
He has a checking account at Bank of America with a zero balance. He has $300 worth of household goods, $300 worth of clothing, and he has a tax refund that he expects in the amount of $200. In terms of all other personal property, he has nothing. He is currently married and he has three minor children ages seven, nine, and twelve. He works in the healthcare industry and makes approximately $3000 per year, part-time. His wife is a substitute teacher, who is the bread-winner earning approximately $30,000 per year. The couple pays $2200 per month for their mortgage which is due on the first of the month. In terms of other household expenses, they pay $50 for a cell phone bill, $50 for the Internet, $500 per month for food, $200 per month for clothing, $200 per month for laundry and dry cleaning and soap, $300 per month for medical expenses and $200 per month for auto insurance. When we look at their income compared to their expenses, they are either breaking even or losing money each month.
Finances
In terms of finances, Carlton has not been able to maintain full-time employment for several years. His income varies between $2000 per year to $4000 per year. His wife however, does have steady income at the rate of approximately $36,000 to $50,000 per year depending on how much she can work. He did receive unemployment over the past several years but it wasn’t enough to really make a huge dent with the debts. He does not owe any student loans and he does not owe any federal tax or state tax.
Debt
The issue for Carlton much like many other Americans is credit card debt. Now the credit cards are not excessive if you look at them individually. For example, one card he owes $900. Another card he owes $480. Another card he owes $380. However, when you look at everything in the aggregate, his credit card debt totals $6000. Now the issue here is whether it is worth it to file bankruptcy for $6000 worth of credit card debt. This is a personal decision for Carlton. We have to keep in mind that his annual income is only $3000 per year. Thus, his debt is twice what he makes per year. In other words, if we look at a standard wage where someone is earning $30,000 per year and they are carrying $60,000 worth of debt, that is the equivalent of Carlton’s situation.
Recommendation
Based upon this fact, I would recommend strongly a chapter 7 bankruptcy for Carlton. He needs to get out from the credit card debt and start working on a cash basis. He can’t rely on his wife’s income to bail him out of debt in this circumstance. He did bankruptcy 10 years ago and fell back into the same bad trap of using credit cards. He has to learn once again that he can survive without multiple credit cards. So Carlton, based upon my analysis of your case, I would recommend a chapter 7 bankruptcy. Chapter 7 will eliminate all of your debt except for your mortgage debt which you wish to keep. You and your wife will qualify either individually or jointly if she is carrying credit card debt. However, my analysis was limited to Carlton as he is the person who came in for the initial consultation. Thus, I would recommend a chapter 7 fresh start for Carlton P. from Chicago, Illinois.
