Overview
In this bankruptcy case study, James G. from Chicago is seeking financial relief preferably a chapter 7 bankruptcy. James lives in Chicago and he has resided at that location for more than two years. He has never filed a bankruptcy case before so he can qualify for either chapter depending upon his income. He has a single-family home, however he does not believe there is any equity whatsoever. He owns the property jointly with his sister, so you would have to factor in her 50% interest before you can even determine any equity available for creditors. In terms of a motor vehicle, he owns a 1995 Mercedes which is paid in full and has a value of approximately $6000. The vehicle has 70,000 miles on it and I believe we can protect it between the auto exemption here in Illinois as well as the wildcard exemption here in Illinois.
Assets
In terms of personal property and assets, he does not have a checking or savings account. He has minor household goods worth approximately $1000, normal clothing worth approximately $600, and he does not own an IRA, 401(k), profit sharing, stock, bond or any other retirement account. James does not have the ability to sue anybody for any reason, personal injury, workers compensation or any kind of discrimination claim. He does have a domestic pet which he values at $1300. His marital status is single and he has no dependent children. In terms of employment, he works for Sun Chemical and he has been working there for the past six months making approximately $18 an hour. He claims that his net take-home pay after deductions is $2000 per month. When we look at his income in comparison to his expenses, it appears that he does have available money per month. He was not clear how much he is paying for the mortgage since he is splitting that with his sister and sometimes she pays in full. However, we need to look at his legitimate monthly expenses to determine whether or not he’s going to have any available money per month to be pay creditors. As it stands right now, we need to flesh out in greater detail what he spends money on each month.
Money Matters
In terms of his summary of financial affairs, he earns approximately anywhere from 24,000 to 30,000 depending on how much overtime he receives. Two years ago he received nothing as he was out of work. He has no lawsuits pending against them, he has not had a vehicle 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 been the same address over four years, and he has not sold or transferred any real estate in the last four years. He is the only one who is liable on his debts other than the mortgage which is joint with his sister. He has student loan debt of $4900 which is going to be non-dischargeable in a chapter 7. He does not owe the federal government or the state government for any income taxes.
Issues
The big issue for James is that he is carrying over $30,000 worth of credit card debt. Now it appears that he has the ability to continue to make minimum monthly payments and survive. However, he is looking to make a clean break from those creditors. The way to do that would be a chapter 7 bankruptcy case. Chapter 7 will eliminate all of his debt except for his mortgage debt and his student loan debt. The key once again for James is to determine whether or not he actually has money available per month. As I mentioned earlier, his debts or his monthly expenses were a little bit shaky. I recommend that James go the next month or two by writing down everything he spends money on. It is only at that time that I can realistically make a recommendation for chapter 7 bankruptcy. Otherwise, we might be jumping the gun and filing a bankruptcy case that he doesn’t qualify for. I suggested James go through his checkbook, credit card statements, and receipts to determine approximately how much he is spending on everything from his mortgage, to his utilities, to his recreation. Once he does this, I will be in a position to recommend a chapter 7 bankruptcy, a chapter 13 bankruptcy, or possibly neither case.
I do think that it is great that James made the first step by coming into my office for advice. Many people simple ignore their debt problems and things very often get worse. If you are struggling financially, take advantage of the help that is available for you. There are excellent lawyers who can make a huge difference in your life. They are aware of the Federal laws that were put in place to protect you and to give you the opportunity for a new start.
