High Value Assets
This is the chapter 7 bankruptcy case study for Kim DePelitor who resides in round Lake Beach, Lake County, Illinois. Kim is an owner of a single-family home located in Round Lake Beach Illinois. The home has a market value of $99,000 and she purchased it four years ago for $162,000. She has a first mortgage owed to Wells Fargo Bank in the amount of $95,000, a monthly payment of $612 and she is currently up to date. She has a second mortgage on her real estate owed to Charter One Bank, with a balance of $44,000, she pays $351 per month and she is up to date. So right off the bat we can see that her real estate is underwater by over $40,000. In terms of vehicles, she has a 2002 ford truck which she claims is only worth $500 and it’s paid in full. It has 250,000 miles on it so she’s probably accurate with her value of $500. She has a second vehicle, a 2003 Chevy express truck which she uses for work that she values at $2000. That vehicle has 145,000 miles on it so she is probably accurate on that value. She also has a paid-up vehicle, at 2004 Ford escape with 98,000 miles on it which she values at $4000.
Personal Property
In terms of her personal property, she has a checking account and a savings account at Consumer’s co-op credit union with an approximate balance of $835 between the two accounts. She values her household goods at $1000, her clothing at $400, and she has a domestic pet which is priceless. She is currently divorced and she has no dependent children whatsoever. She works for the United States Postal Service as an independent contractor driver. She earns approximately $41,000 per year and she nets $4000 per month take-home pay. In terms of her monthly expenses, her first mortgage is $612, her second mortgage is $351, her property taxes $416, homeowners insurance is $35, her home repair is $200, her water is $100, the Internet is $67, her cellular phone is $60, her food is $500, her clothing is $100, her laundry is $100, her medical is $100, her gasoline is $1000, recreation is $20, her charitable contributions are $20, and her automobile insurance is $150. Thus, she is just breaking even between her monthly income and her monthly expenses.
Financial Affairs
In terms of her financial affairs, her income has been steady at $41,000 per year over the past three years. She has made a large payment to discover card in the last 90 days totaling more than $1000. She is not being sued by any creditor, she has not closed a bank account in the last year, she does not have a safe deposit box, she has not lived at any other address in the last three years, she has not sold or transferred any real estate, and she has not owned her own business in the last four years. She is the only one responsible for this debt as nobody else co-signed with her. She does not owe for any student loans. She does owe the IRS from tax years 2005, 2008 and 2009 for a total of $20,000. In terms of other debt, Kim has medical bills consisting of $10,000, credit card debt totaling $25,000 and the IRS debt which I mentioned previously at $20,000.
Analysis Under Chapter 7
Based upon the fact that Kim does not have equity in her home and based on the fact that she is breaking even each month between her income and her expenses, I would recommend a chapter 7, fresh start bankruptcy case filing. The bankruptcy case will eliminate the medical bills totally. The bankruptcy case will eliminate the credit card debt totally. I also believe the bankruptcy filing will eradicate the IRS debt since the debt is more than three years old and since she filed a return on time for all of those years. She can continue to maintain her home provided she makes her first and second mortgage payments and she can maintain her vehicles because they do not exceed the value provided under Illinois exemption laws. What Kim really needs to do is to take action. She has struggled with this debt for months and years with no end in sight as to how to get out of debt. Her income has not change over the last three years. Her expenses have only gone up slightly over the last three years. However, there is no available money per month to enable her to get out of debt on her own. Chapter 7 bankruptcy is the avenue that will give her a fresh start and allow her to put more of her disposable income towards her mortgage and eventually towards a new vehicle as her vehicles are currently very old. Hopefully, she will take my advice, do some soul-searching and decided that chapter 7 is going to be in her best interest and that it is not a death sentence. If she decides to file bankruptcy, she will soon realize that life goes on. The only difference is that she will not be carrying the burden of nearly $50,000 worth of dischargeable debt.
