This is the bankruptcy case study for Ms. Jones who resides in Joliet, Illinois. Ms. Jones was in the office today to determine whether or not Chapter 7 or Chapter 13 bankruptcy will provide some needed relief. Let’s go through the facts and details of her case. Ms. Jones is not a homeowner. She is currently renting on a month-to-month basis. She is current with her landlord and wants to keep making those payments. In terms of personal property, she has a 2014 Nissan Altima, financed by Nissan Motor Acceptance. She owes approximately $15,000 on the vehicle and she feels it’s worth less than that. Her current monthly payment is $360 per month, she is current on the payment and she wishes to reaffirm the debt and maintain that car through the bankruptcy process. This is definitely possible under either chapter of the bankruptcy code.
Personal Property
In terms of her personal items, she has a checking account and a savings account at Chase Bank with an approximate balance on hand of $2000. She has a security deposit with her landlord in the amount of $1000. She values her household items such as TV, furniture and appliances at $1000. She has clothing which she values at $300. She has term life insurance which has no cash surrender value. This is a death benefit only policy, whereby when she dies, the death benefit will be paid to one of her heirs. She also has a very small 401(k) savings account through her employer with about $53 in it. Other than the items listed above, Ms. Jones has no other personal property whatsoever.
Household Description
Turning now to the description of her household, she is currently married and she has two adult children ages 20 and 24 who reside with her and her husband in the property. She is working as an assistant manager and has been working in that capacity for the last four months. She earns approximately $46,000 per year. Her spouse, who is not interested in joining her in a bankruptcy filing, is a truck driver earning approximately $55,000 per year. When we combine the two incomes, there is significant disposable income available per month by which to repay debt under Chapter 13. Let’s keep that fact in mind as we move forward with the analysis.
Monthly Expenses
Examining the monthly expenses, we have the following: rent is $1600 monthly, repairs $80, water $60, electricity and gas $200, cellular phones $380, cable TV $269, food $800 monthly, clothing $100, laundry $50, medical expenses $25, transportation $160, auto insurance $268, life-insurance $60, auto payment $593 per month combined. As you can see from this breakdown, the couple is going to have significant available money per month from which to repay their creditors.
Debt Scenario
Let’s examine the real issue facing Ms. Jones. The debt includes $40,000 worth of credit cards, two cars between husband and wife, medical debt of $6000, tollway violations totaling $800, a personal loan of $8000, and a payday loan with an outstanding balance of $800. When we look at this type of debt, it is the kind that can typically be eliminated for the most part in a Chapter 7 fresh start. However, when a couple has disposable income per month above and beyond the IRS allowances, then the means test will show that the couple has the ability to repay all or a portion of the debt over time. That is exactly what is happening in this case. Despite the fact that the couple does not have any equity in any real estate or any equity in vehicles, they do have significant income which would allow for a repayment of a portion of their debt. Thus, Ms. Jones would only qualify for Chapter 13. The problem is that her non-filing spouse does not wish to participate in the case, yet his income is a major factor in determining whether or not she can file a Chapter 7 or Chapter 13.
Summary
In summary, this case involves typically dischargeable debt which can only be repaid back under these facts in a Chapter 13 reorganization. This is due exclusively to the fact that the couple has available income per month above and beyond their expenses. For this fact, Ms. Jones would have to reorganize under Chapter 13 and her spouse’s income, although he does not wish to file officially, is considered as a factor of how much needs to be paid per month to a Chapter 13 trustee in an effort to repay creditors.
