Ms. Wilson comes to me from Chicago, Illinois, 60653. She is currently separated and is thinking about filing a bankruptcy to get a fresh start. She filed a similar bankruptcy back in 2006 so she is eligible once again to file for that type of relief. She does not own any real estate. She is currently renting and her rental obligation is strictly month-to-month. She currently has two vehicles. She has a 2006 Chevy Impala which is paid in full with an approximate market value of $3000. She also is a co-signer for a 2014 Dodge Durango. That vehicle is worth $28,000 and she owes along with the co-debtor approximately $29,000. If she will qualify for chapter 7 bankruptcy, she will not agree to reaffirm the debt on that vehicle but will rather let the co-debtor pay the outstanding debt.
In terms of personal property, she has a checking account at Chase and no savings account. Her balance in the checking account is typically less than $200. She has some minor household goods which she values at approximately $500. Her clothing is valued at only $200. She has a life insurance policy with a death benefit only and a secondary life insurance policy which has a cash surrender value of $6000. She has no retirement accounts. She does not expect to inherit any money in the next six months. She cannot sue anybody for personal injury or workers compensation claims.
She is currently separated from her spouse and she is retired. Her sources of income are Social Security of $1995 per month and a pension valued at $598 per month. In terms of her monthly expenses, her rent is $1055 per month. Renters insurance is $15 per month. Her electricity and gas is $75 per month. Her cellular phone is $100 per month. Her food and grocery expense is $325 per month. Her clothing expense is $100 per month. Her laundry and dry cleaning is totaling $25 per month. She has out-of-pocket medical and dental expenses of $100 per month. Her gas and transportation expenses are $215 per month. She contributes to charity through her church is $150 per month. Her auto insurance is $70 per month. Other than what I mentioned above, she has no other ongoing monthly expenses.
In terms of her financial affairs, she has not worked a job in the last three years. Her sole source of income has been her pension and her Social Security. She is currently being sued by portfolio Recovery Services with an upcoming court date in July. She owes the IRS from tax years 2005, 2006, 2007, and 2008. She is unsure of the total amount owed but she feels it is in excess of $10,000. In terms of other debt, she has $30,000 in credit card debt, $28,000 in the co-signed auto, and $2000 owed to a payday loan store. With regard to the lawsuit, she’s worried about a potential garnishment. She should be aware that her income being Social Security and pension is 100% protected from any type of garnishment. However, she is looking to eliminate the outstanding debt and put the collection efforts behind her.
In this case, I would recommend a chapter 7 bankruptcy case. Chapter 7 will eliminate the outstanding credit card debt as well as the payday loan debt as well as the old IRS debt. So even though we’re in a situation where creditors cannot actually collect money, it makes sense to put the bill collection efforts behind her. She filed a chapter 7 back in 2006 so she understands the type of relief that she will get, the effect on her credit, and her prospects for credit going forward. In many cases where the person cannot be collected upon, I may not recommend a bankruptcy filing. However, in this case, it would appear that the filing of bankruptcy would put an end to the collection efforts and to the outstanding debt in its entirety. Based upon this fact, I strongly recommend a chapter 7 bankruptcy to eliminate the debt and to get a fresh start.
