Background Facts
This is the chapter 7 bankruptcy case study for Reginald who resides in Palos Heights, Illinois. Reginald is here for a chapter 7 bankruptcy consultation to see if bankruptcy is going to provide some financial relief for him and his spouse. The couple has never filed for bankruptcy before. They do not own any real estate as they are renting on a yearly lease which expires in June. In terms of personal property such as automobiles, the parties have a 2010 Honda Odyssey with a current market value of $13,000 and an outstanding debt of $4500 total. The couple also has a 2005 Scion vehicle which is worth $2500 and it is paid in full.
Personal Property
In terms of personal property, the couple has a checking account at Bank of America with an approximate balance of $80. The security deposit that they have on hand with their landlord totals $1450. The couple has minor household goods valued at $400 and minor clothing valued at $100. There is an IRA worth approximately $300 between the two parties. In terms of family size, the couple has four minor children ranging from ages 3 to 14. Husband is employed as a teacher earning approximately $45,000 per year and his wife is currently unemployed. When we look at the total household income after taxes, insurance, and retirement, there is a net of approximately $2900 per month.
Expenses
Moving to the expense section, rent is $1450, electricity and gas is $240 plus an additional $200, food is $800 per month, transportation is $250 per month, automobile insurance is $194 per month, and the auto payment is $302 per month. When we analyze the income versus the expenses, we see that there is a shortfall of approximately $300 per month. This would bode well for chapter 7 as it is evident that the parties clearly don’t have the ability to reorganize and repay debt under chapter 13.
Financial Affairs
In terms of the statement of financial affairs, the Husband has earned approximately $20,000 so far this year from employment. They have made a large payment of over $1000 to a single creditor and they do have a garnishment pending. They have lived at two different addresses in the last four years, there are no co-debtors, and there is no tax debt. They do have over $100,000 worth of student loan debt which will not eliminated in a chapter 7 bankruptcy case.
Recommendation
My recommendation for Reginald is a chapter 7 bankruptcy without a doubt. The parties have the ability to eliminate approximately $17,000 from an auto deficiency as well as other miscellaneous debt by filing a chapter 7. The credit card debt would be eliminated, the vehicle would be able to be maintained as long as they continue to make monthly payments and the student loan is something that they can deal with outside of the bankruptcy by working out a payment plan. Thus, I would recommend chapter 7 bankruptcy in this case.
