This is the bankruptcy case study for Michael M., who resides in Aurora, DuPage County, Illinois. Michael is currently being garnished for a hospital bill and is seeking protection under the bankruptcy code. He is inquiring as to whether or not he can file a Chapter 7 to stop the garnishment and yet keep all of his personal property free from the trustees reach. He did file a Chapter 13 bankruptcy case more than 10 years ago and that case failed. He simply was unable to make monthly payments on a consistent basis. In this effort, he does not feel he has the ability to make monthly payments. For that reason, in addition to the current garnishment, he needs the help of a knowledgeable, bankruptcy attorney.
Secured Property Listing
In terms of property, Michael does not currently own a home. He had a prior home which he sold nearly 12 years ago. There were no significant proceeds from that sale. Instead, he is currently renting and he is doing so on a month to month basis. In terms of vehicles, he has a 2012 Toyota Tundra which he values at $25,000, healed $23,000, and he is up to date on his $500 per month payment and he makes that payment to his credit union. He wishes to keep that vehicle by reaffirming the debt. The vehicle only has 27,000 miles on it and he uses it on a daily basis. He also has a 1992 Cadillac Eldorado which is paid in full with a value of approximately $1000. Under Illinois exemptions for personal property, he will be able to protect the equity in both vehicles.
Personal Property Listing
In terms of personal property, he has a checking account and a savings account with the credit union with a very small balance. He has minor household items such as a TV, furniture and electronics which he values at $1100. He has very limited clothing and states he has not purchased anything in several years. He values his clothing at $500. He has term life insurance which means there is no cash surrender value. Upon his demise, there will be a death benefit paid to a third party. He has a 401(k) through his employer, however, it has very little value and he has an outstanding loan against it.
Description Of Household
For his description of household, he is currently married and his wife is not employed. Thus, he is the sole income provider and he does so by working as a drafter; he has worked in that capacity for the past 14 years. His annual income is approximately $60,000 per year gross or $4000 per month net. Taking a look at his monthly expenses: his rent is $1150, renters insurance $30, water $15, electricity and gas 300 hours, cellular telephone $180, cable-television $120, Internet $80, food 700 hours, clothing 100 hours, laundry $50, medical expenses 200 hours, transportation expenses 100 hours, auto insurance $105, life insurance to hours, and is auto payment $503. When we look at his monthly expenses in total and subtract that from his net take-home pay, it appears that Michael does not have the ability to reorganize his debt under Chapter 13. Instead, he will be best served by a Chapter 7 fresh start.
Nature Of Debt
Let’s now analyze the nature and type of debt that Michael is fighting against. He has IRS debt dating back to 2010 in the amount of approximately $7000. Provided Michael filed the tax return either on time or prior to two years before filing, there is a good chance that the IRS debt can be eliminated under Chapter 7. In terms of other debts, he has a $20,000 medical debt, $18,000 credit card debt started among many providers as well as a small personal loan for $2000. He has been trying to stay on top of the debt by making minimum payments to some of the cards while using other cards for cash advances. Now that the garnishment has hit his wages, he doesn’t have the funds available to make minimum payments nor to cover some of his monthly household expenses. For these reasons, I’m going to recommend a Chapter 7 fresh start.
Chapter 7 Solution
Chapter 7 will allow Michael M. to keep his vehicle provided he makes payments as well as all of his personal property and effects. We can stop the garnishment immediately upon filing his Chapter 7 bankruptcy case. He will also eliminate the outstanding medical debt, credit card debt, personal debt, and even the IRS debt under Chapter 7. This filing will give Michael the breathing room that he desperately needs. He will have to appear at one court date and he will be accompanied by an attorney from my office should he decide to file. Thus, Chapter 7 bankruptcy relief is my strong recommendation for Michael M. from Aurora, Illinois. For more information on Chapter 7 bankruptcy and your rights and responsibilities, you may contact me directly at 847-520-8100.
