Bankruptcy Case Study-Chapter 13: Get Current On Mortgage

This is the bankruptcy case study for E.A. from Montgomery, Kendall County, Illinois. He is here to see whether chapter 13 bankruptcy will provide debt relief for him. Let’s look at the facts of his case: he is currently a homeowner with a market value of $149,000. (www.zillow.com)He has two outstanding loans on the property. The first mortgage is with Seterus with an outstanding balance of $136,000. He also has a second mortgage with BMO Harris with an outstanding balance of $52,000. He is up to date on the first mortgage and is behind on the second mortgage by $14,000. In terms of vehicles, he has a 2008 Nissan which is paid in full with a value of $8000. He also has a 1998 Volkswagen Jetta, which is paid in full with a value of $3000.

To determine the viability of a chapter 13 we must look at the income of the person filing. This person is working for the last 2 1/2 years earning approximately $58,000 per year. His net take-home pay per month is $3300. When we look at his monthly expenses, they include $1000 for the first mortgage, $375 for the second mortgage, $100 for home repairs, $25 for garbage, $100 for electricity, $100 for cable TV, $47 for Internet, $350 for food, $100 for clothing, $100 for laundry, $150 for gasoline, $120 for life insurance, $70 for auto insurance and $100 miscellaneous payments. His monthly expenses total $2700. Thus, we do have a surplus of approximately $600 per month for which to fund a chapter 13 plan payment.

Save The Property, Get Current With The Mortgage

Since the goal here is to save property, we must pay the mortgage arrearage on the second mortgage over a 60 month maximum period. He also has $5000 worth of unsecured debt which must be paid back at least $.10 on the dollar. By looking at his total financial package, it would appear that he does have the ability to reorganize under chapter 13. He will have to continue to make his first and second mortgage payments directly while he also makes a trustee payment of approximately $300 per month. This figure will allow him to pay back the second mortgage arrears over a five-year period and have enough left over money to budget for his other necessary expenses.

Conclusion

This is one of those cases where the person fell behind on a second mortgage because of a lack of work. Now that he is back working for the last two and half years, he has the ability to reorganize and repay his second mortgage arrears over a period of time. If he stays diligent, he should be able to make a chapter 13 work and come out of the case with his mortgages completely up to date.

Call 1 (847) 520-8100ORFREE INITIAL CONSULTATION
  • AS SEEN ON:
AS SEEN ON: