This is the bankruptcy case study for JW from Chicago Illinois who is seeking bankruptcy protection. There is no real estate involved in this case. There is no rental situation in this case. The client owns a 2014 Nissan Versa which is financed through Nissan Acceptance Corporation. The vehicle is worth $17,000 and the outstanding balance on the vehicle is $16,000. Thus, there is very little equity in that vehicle and if the debtor wishes to keep paying for that vehicle at $327 per month, he will be allowed to do so. In terms of personal property, he has a checking account and a savings account with an approximate balance of $100. He has minor household goods which include TV, furniture, and appliances, valued at approximately $1000. He has normal clothing which we valued at about $300. He does have a term life insurance policy which provides for a death benefit valued at $20,000. This life insurance benefit is protected since it is strictly a term policy with no cash surrender value. He does have an IRA with a value of $1000 which is protectable. He also has deferred compensation through his employer valued at $500 which is also protectable.
In terms of his household, he is single with no dependent children. He is currently working as a caregiver earning approximately $14,000 per year. He is paid every other week and his net take-home pay per month averages approximately $1300. Looking at his monthly expenses, he pays $755 for rent, $249 for electricity and gas, $30 for internet access, $200 per month for food, $150 per month for clothing, $25 per month for laundry, $100 per month for medical expenses, $200 for transportation expenses, $40 for month for charity, $100 per month for health insurance, $87 per month for auto insurance, $36 for month for life insurance, and $327 per month for his auto payment. When we look at is income versus his expenses, he is running at a negative balance of approximately $900 per month.
Statement of Affairs
In terms of his statement of financial affairs, he has earned anywhere from 17,000 to 22,000 per year over the last three years. He did have a prior address in East Chicago during the 2013 year. He currently has no lawsuits, he has not had any property repossessed in the last year, he has not closed a bank account in the last year, he does not own a safe deposit box, he has not transferred any real estate in the last four years, he has not owned a business in the last four years, and there are no co-debtors that owe any money along with him.
In terms of debts, he has two student loans which are not going to be dischargeable. He also has a very small debt for taxes owed to the state of Illinois which is also going to be non-dischargeable. However, he does have approximately $32,000 worth of credit card debt and medical debt which can be discharged. In this particular situation, I am going to recommend a chapter 7, fresh start bankruptcy. Chapter 7 will allow this client to eliminate the miscellaneous debt and allow him to be able to focus on the debt that he needs to pay such as his rent and living expenses. He can work out a payment plan with regard to the student loans as well as the debt owed to the state of Illinois. This potential client has indicated that he may be willing to surrender the vehicle in an effort to reduce his monthly expenses. He feels that he may be able to use public transportation to get to and from work which would save him approximately $450 per month when you factor in the cost of the vehicle and the cost to insure the vehicle.
In summary, this is a great case for a chapter 7 fresh start. Although not all of the debt will be eliminated, the overwhelming majority of the debt will be eliminated. This will give this client an opportunity to get back on his feet, provide for himself, and start saving some money once again.