Overview
In this bankruptcy case study, we are going to analyze the financial situation for Ms. L., who resides in Chicago. She resides on Woodland Park Avenue of the East side of the city. She filed a chapter 13 bankruptcy back in 2006. Thus, she is eligible for either a chapter 7 bankruptcy case or a chapter 13 bankruptcy case at this time. She does not own a home. She is currently renting. She has a yearly lease which expires in about one month. She owns a 2008 Hyundai Accent, financed by Credit Acceptance. She would like to keep that vehicle and she is current on her monthly payment of $153 per month. She purchased the vehicle approximately six months ago and would very much like to reaffirm the debt on that vehicle.
Personal Property Information
In terms of her personal property and assets, she has a checking account at Chase Bank with a zero balance. She has a security deposit on hand with her landlord for $600. She has household goods including TV, audio, furniture, and other items valued at $300. She has some minor clothing and some cosmetic jewelry which she values a $300. She does have a term life insurance policy which contains no cash value. This means that she is not able to borrow anything against that policy and upon her demise; there will be a death benefit payable to a beneficiary. She has no other assets whatsoever. She has no retirement account, no stocks, no support, no tax refund expected, no inheritance expected, no lawsuit for personal injury or workers compensation or any other asset.
Income & Expenses
She is currently single with no dependent children. She is working for the past six years as a home healthcare aid. In that capacity, she earns approximately $800 per month. She has been working steadily; however, she is not getting significant hours or assignments. In addition to her monthly income from wages, she does receive food stamps in the amount of $168 per month. In examining her monthly expenses, I note that her income is not sufficient to support or pay for all of her expenses. Her rent is $445. Her electricity and gas is $200. Her cellular phone is $30. Her food is the $160 which is what she receives for food stamps. Her gasoline and transportation expenses are $200. Her automobile insurance is $33. Finally, her auto payment is $153 per month.
Financial Affairs
In terms of her statement of financial affairs, she earns approximately $8,000 to $10,000 per year on average. In the past three years she has been working in the same capacity and earned the same amount of money. Other than the food stamps at $160 per month, she receives no other governmental benefits. She has not received any unemployment benefits or Social Security benefits in the past three years. She is not currently being sued and is not a party to any lawsuit, garnishment or attachment. She has not closed a bank account within the last three years. She does not have a safety deposit box, and she has been at her current address for over three years. She has not owned a business in the last four years. She has not transferred any real estate in the last four years and she has not made any payment of more than $1000 to any creditor in the last 90 days.
Debts
In terms of her debts, she has approximately $8000 in credit card debt. These credit cards have been used over the past 6 to 10 years and have accumulated increasingly high balances over the years. She also has approximately $6000 in unpaid medical debt. These bills were due to an illness and not an injury. Additionally, she has approximately $1400 owed to a series of payday loan companies. These loans were taken out to try and bridge the gap between her expenses and her upcoming pay period. Unfortunately, on several of those instances she was required to rollover the payday loans because she could not pay the entire balance in full. This has led to high interest, high fees, and ongoing debt which she simply cannot manage.
Attorney Recommendation
Based upon my review of her entire financial package, I’m going to recommend a liquidation bankruptcy under Chapter 7. This type of bankruptcy will allow for the complete elimination of her unsecured debt. Thus, the credit card debt, medical debt, and payday loan debt can all be eliminated under this form of bankruptcy. Additionally, her vehicle can be reaffirmed and she can continue to make her monthly payment and keep the car. She would also have the opportunity to surrender the car in full satisfaction of the debt. However, she has indicated a desire to keep this vehicle which she needs for work. Further, the monthly payment of $153 is manageable based upon her budget and it is a fair percentage of her income as it relates to transportation. Thus, I would recommend a chapter 7 bankruptcy case for Miss L., who is residing in Chicago.
