Bankruptcy Chapter 7 Filing Recommended

This is the case of Thomas Vermoni who comes to me for a Chapter 7 bankruptcy consultation. Thomas lives in Chicago, Illinois on Lake Street. Thomas filed a Chapter 7 bankruptcy back in 2005 so he is eligible for another Chapter 7 filing. He owns no real estate. He is renting month-to-month from Hermitage Management. He has a 2003 Ford Mercury Marquis worth approximately $2000. He owes $9000. The finance company is Car Credit. His payment is $320 per month and he wants to keep the car despite the fact that he is very upside down.

He has a checking account with Bank of America with $500 on account. He has minor household goods worth $5000 in minor clothing worth $300. He does not have an IRA, 401(k) or other profit-sharing plan. He does not receive any kind of additional income. He does pay support, $200 per month. And that’s for his minor child, his daughter by the name of Rae Ann. He is single, he is currently not working. The only source of income that he has is disability which is $1300 per month.

In terms of monthly expenses, his rent is $456 per month. He has a $38 per month cellular bill, $300 in food, $200 in clothing, $100 in laundry, $100 in medical, $200 in transportation, gas and tolls; $100 in recreation, $200 is the child support that he pays for his minor child and then he has the auto payment of $320.

In terms of income, he has not worked in the last three years so he is just receiving the disability income. He has been at his same address over two years. He does not have a safety deposit box. He does not own a business; he has not sold or transferred any property in the last four years. There are no co-debtors. He does not owe any student loans. He does however have tax debt from the year 2007 in the amount of $34,000. That tax debt is over three years old so it might be dischargeable in a Chapter 7. We will have to wait and see. In terms of debt, he owes Capital One $600, Credit One $600, Jupiter $600 and the Cook County Hospital $2000.

He’d like to get a fresh start and he would like to only owe the ongoing child support obligation. There is a big medical bill of $48,000 that he needs to get rid of in addition to the other debts.

Well, here’s what I would recommend. Thomas, I would recommend a Chapter 7 fresh start. You can eliminate the medical bills, the credit cards and all of your other debt except for the child support obligation. You can also keep paying for your vehicle, provided you want to reaffirm that debt. By reaffirming the debt, you are going back on the hook for that debt even though you are upside down; the court might allow you to reaffirm the debt and continue to make payments on that vehicle. Personally, I think you are better off surrendering the vehicle, getting out of the debt completely and getting into something that is at a more even keel in terms of debt to equity ratio. So Chapter 7 is going to be the winner for Thomas from Chicago, Illinois.

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