Bankruptcy Software Determines Which Chapter

This is the case of David Hammons who comes from Skokie, Illinois which is Cook County, Illinois.  He is married to Christine but Christine is going to be a non-filing spouse in this case.  Right off the bat, we are not sure whether this is going to be a Chapter 7 or Chapter 13 so let’s investigate it.

David has never filed for bankruptcy before.  He has a single-family home with approximately $380,000.  He is on the first mortgage $320,000 and he is up to date.  So there is approximately $60,000 worth of equity although he is behind on the property tax of approximately $12,000-$15,000 total between the series of several years.  He is not renting from anybody and nobody is renting from him.  He has a 2009 Cadillac CTS which is financed through US Bank.  The monthly payment is $435 per month and he would like to keep it.  That’s actually a lease; he would like to keep the lease.  He also has a 2010 Chevy Traverse which is financed through Allied Bank which is also least, $565 per month and he indicates he wants to keep both vehicles, one for himself and one for his spouse.

He has a checking account at Chase Bank.  He has household goods, normal clothing.  No 401(k), IRA, profit sharing, stocks or bonds.  He cannot sue anybody for any reason.  He does not expect to inherit any money in the next six months and has no pets.

He is married.  He has four children in the house in addition to his wife so we are looking at a six person household.  He is working for Sprint Corporation for the last 15 years.  He earns approximately $100,000 per year.  His wife does not work.  The net coming in after tax is approximately $5400 per month.  Let’s look at the monthly expenses.  That mortgages $1800.  Property taxes paid separately and that’s $900 per month.  He’s got $800 in food, he’s got a big household; $100 in clothing, $100 in medical, $300 in transportation, $100 in recreation, $100 in religious charity, $1200 in tuition; his son goes to a private school.  And we have approximately $1000 in auto payments.

In terms of income the last three years, he made $130,000 in each of the last two years and he’s on pace to do the same this year.  He has not closed the bank account.  He has not been sued.  He has not own a business.  He has not been at any other address other than his current address for the last four years.  There are no co-debtors.  It’s just him on these debts.  He does not owe any student loans and he has no tax debt.

In terms of debt, though, he has $80,000 in general unsecured creditors such as credit cards, medical bills and personal loans.  The breakdown is approximately $70,000 in credit cards, $10,000 in medical and loans.

This is a case where we are going to look and see what we can do in terms of the means test.  If we can show that David does not have the ability to repay his debt over time, then were going to recommend a Chapter 7 despite his high income.  If, on the other hand, the means test showing he has the ability to pay a small amount back over time, then were going to try and propose a very low and Chapter 13 so that he does not have to pay back the full amount owed to his unsecured creditors.  So we are going to study the paycheck stubs, put all the information up in the software and then get back to David on a recommendation of either a Chapter 7 fresh start or a Chapter 13 bill consolidation through the court.