Will Chapter 7 Bankruptcy Work For Erica In Waukegan?

Set-Up

This is the bankruptcy case study for Erica who resides in Waukegan, Illinois. Erica has been struggling financially for over six years. Finally, she is at the point where she cannot continue to live the way she is living anymore. For that reason, she has done her research and she has sought out my office to assist her with a potential bankruptcy filing. When I sat down with Erica, this is what I discovered:

Assets

Erica is not a homeowner. She has not been fortunate enough to save money for a down payment or acquire financing to purchase her own home. Thus, she is a renter in Waukegan on a year-to-year lease agreement. She is locked into her lease until March, 2016. She does own a vehicle; a 2002 Mercury Mountaineer which she would like to keep. The vehicle is financed through Consumer Financial Services.  She owes approximately $5300 to pay off the debt and her monthly payment is $288. She is current on her auto lease and she wishes to continue to own the vehicle. In terms of personal property, she has a checking account and a savings account at TCF Bank with very little, if anything, in either account. Her security deposit with her landlord is $1380 per month and that is protected under Illinois exemption laws. Her household goods she values at $1200, her clothing she values at $500, she has a 401(k) with $1100 in value and she has a potential injury case as a result of the minor fender bender.

Expenses

Her household consists of herself and her eight-year-old daughter. She is currently working at FedEx and she has been working in that capacity for the past 4 1/2 years. Therefore, she does have steady income of approximately $1000 per month, net take-home pay. We now need to examine her monthly expenses to determine whether or not she will qualify for the chapter 7 fresh start. We have to make certain that she does not have disposable income available from which to pay her creditors. In terms of rent, she pays $380 per month, electricity $30 per month, cellular phone $140 per month, food $180 per month, laundry $33 per month, transportation $215 per month, auto insurance $100 per month, and her auto payment is $288 per month. As I calculate the quick math, I can see that she does not have available money per month to pay her creditors. In fact, she is running at a slight deficit each month and this does not even include the minimum payments that she makes on credit cards.

Financial Pitcure

In terms of her statement of financial affairs, she has earned approximately $5600 year to date. During the past two years she has earned approximately $12,000 in each of those years. She has had two prior addresses within the last three years. During the greater part of the preceding year, she lived in Beach Park, Illinois. Prior to that, she resided for eight years in Lincolnshire, Illinois. She has one co-debtor relating to the vehicle which she is going to keep and reaffirm. She also has a student loan owed to Sallie Mae with an outstanding balance of $10,000. In terms of other debts, she has a payday loan for $500, another payday loan for $150, credit card debt totaling $2000, medical debt totaling $1000, and an assortment of utility expenses including ComEd, Peoples Gas and Sprint, which total $600.

Recommendation

Although her debt is not excessive in terms of the typical filer, repayment is not feasible based upon her relatively low monthly income and by the fact that there is not disposable income available to any extent per month. For these reasons, I would recommend and advise that she file a chapter 7 bankruptcy case through my office to gain a fresh start on all of her debt except for the student loan which is nondischargeable. This will allow Erica to make ends meet and provide for herself and her daughter to a greater extent than what she is able to do today.

If you or someone that you know is struggling financially and is having a great difficulty making ends meet, you may want to consider whether chapter 7 bankruptcy can be a good option. You can sit down with me or a qualified member from my office and learn all about your rights under the federal bankruptcy code without charge. If you decide to move forward with the case, we can put together an incredible payment plan so that you can finally get some relief.

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