This is the bankruptcy case study for Michael S. from Park Forest, Illinois which is located in Cook County, Illinois. Michael comes to see me to find out whether or not he can qualify for a bankruptcy case and get out of debt. Michael does own a single-family home which has a value of approximately $120,000. He has a first mortgage and a second mortgage with a total outstanding indebtedness of $160,000. Thus, he has no equity in his home and he is upside down. He does have a 2004 Pontiac Grand Am which is paid in full. The vehicle is worth approximately $3500 and it has about 150,000 miles on its lifespan to date. He has a checking account, but no savings account. He values his household items at $10,000. He has musical equipment which he uses for his employment valued at $15,000. Other than that, he has no available assets whatsoever.
He is currently separated from his wife and he has no dependent children. He is a self-employed musician and has been working in that capacity for 37 years. He averages approximately $30,000 per year although at the time of his visit he was only bringing in approximately $1000 per month. When you factor in his first mortgage of $1,100.00 and his 2nd mortgage at $200.00, there is nothing left to pay creditors. This also doesn’t even factor in his remaining monthly expenses such as electricity, gas, transportation, food, auto insurance, and clothing.
In terms of his summary of financial affairs, he has earned approximately $30,000 over the last several years. He has no lawsuits currently pending against him, he has had no property repossessed, and he has not closed any bank accounts in the last year. He does not own a safety deposit box, he has not lived anywhere other than his current address for the past two years, he has not sold or transferred any real estate, and he does not technically have a business in his name. He has no co-debtor’s, no student loans, and no tax debt.
The real issue for Michael is $7800 in parking tickets as well as $3,800 in credit card debt. If Michael were to file a chapter 7 bankruptcy, the parking tickets would remain due and owing after his case was completed. The only debt that he would eliminate would be the $3,800 worth of credit card debt. Based on this fact, I would recommend a chapter 13 bankruptcy whereby Michael can pay 10% back on his parking tickets and his credit cards and eliminate the remaining portion of his debt. To do so he needs to complete a chapter 13 payment plan which could last anywhere from 36 to 60 months. I have estimated that his payment will be between $150 and $200 per month if we don’t include his mortgage arrearages. If he wants to save his home which is upside down, he will have to pay anywhere from $500-$600 per month on top of his regular first and second mortgage payments. Thus, it’s decision time for Michael. If he wants to surrender the home he can get into a much lower plan payment. If he is looking to maintain the home, then he is looking at a much higher plan payment. In any event, he’s definitely looking at a chapter 13 bankruptcy to reorganize his debt and pay less than what’s totally owed on his parking tickets and credit card debt. Chapter 13 is something that I can definitely assist him with. He just needs to be committed to the process and understand that this is a long-term, three to five-year payment plan.
