Bankruptcy Case Study For Rosemary E. From Waukegan, Illinois

Case Study

In this bankruptcy case study, Rosemary E. From Waukegan, Illinois is in the office to discuss possible chapter 13. She owns no real estate and she is renting an apartment in Waukegan. She is on a month-to-month lease and she intends on keep that lease. She owns a 2008 Subaru Impreza which is paid in full. She has a checking account with a balance of $100, household goods valued at $2000, clothing and jewelry valued at $500 and no other assets whatsoever. She is currently divorced and she is working for district number 60 as a teacher’s aid. She earns approximately $1000 per month and she receives Social Security in the amount of $230 per month. In terms of monthly expenses, she pays $350 per month for rent, $180 per month for telephone, $400 per month for food, $80 per month for gasoline, $87 per month for auto insurance and $150 per month for entertainment

 Finances

In terms of her summary of financial affairs, she had a student loan garnishment in the past year, she lived in a prior address in Waukegan over the last two years, and she’s earned approximately $3000 so far this year. She owes $80,000 in student loans owed to the Illinois Student Assistance Corporation and she has $1000 worth of federal tax debt. She has another debt which is fairly significant, a $5000 debt owed to consumer financial service.

 Chapter 13

Filing chapter 13 in this case is a way to repay a portion of the student loans over the next five years. This will prevent the student loan company from garnishing 15% of her wages per pay period. She can effectively reduce the amount that the student loans will be paid over the next five years. It will not pay off the student loans in full and she will owe the remaining portion after the case has concluded. In these situations, we typically try to pay the student loans back at 10% on the dollar. This will give the debtor the biggest bang for the buck when filing a chapter 13 bankruptcy. As long as the debtor is paying back at least 10% through the plan, the student loan creditor will be satisfied and will not object to confirmation of the plan.

 End Result

By reorganizing the student loan debt over a 60 month period at less than what is owed, the debtor will have some breathing room over the next several years. Hopefully, the debtor will be in a greater position to repay a larger portion of the student loan debt after her five year case comes to a conclusion. This illustrates the importance of chapter 13 when it comes to student loan debt. A non-dischargeable debt such as a student loan will never be eliminated in a chapter 7 unless it’s determined to be an extreme hardship case. By filing chapter 13 however, the debtor can repay as little as 10% during the time of the bankruptcy case. We are essentially pushing the majority of the debt down the road to a time when the debtor may be in a better position to handle that debt. In the interim, the debtor is getting a great benefit by having more disposable income available to him or herself as opposed to losing it in a wage garnishment for student loans.

 Recommendation

Thus, the recommendation for Rosemary E. of Waukegan, Illinois is to file a chapter 13 and repay 10% to the student loans over a five-year period. Once that period is over, she could either work out a separate arrangement to pay the balance of student loans or possibly even file an additional chapter 13 bankruptcy case if her circumstances have not changed significantly. If you are struggling with student loan debt and you don’t know where to turn, chapter 13 may be a good option for you as well. You can contact my office at 847-520-8100 to learn more about your rights under chapter 13 bankruptcy law.

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