Bankruptcy Case Study

Introduction Of Debtor

This is the bankruptcy case study for Ms. R., who resides in Berwyn, Illinois. She is here to seek bankruptcy protection and to eliminate the struggle that she has been in for some time regarding debt. To determine whether or not she can file and get the relief needed, we need to conduct a thorough intake examination to learn all of the details. We begin with the fact that she has never filed for bankruptcy protection in the past. This opens the door to availability for chapter 7 and Chapter 13. In terms of real estate, she is not an owner of any such property. She is currently renting on a month-to-month basis. She is current on her rent and she would like to continue to lease the property. In terms of her vehicle, she has a 2015 Chevrolet Cruz which is co-owned. The finance company is Ally Financial, the monthly payment is $419 and she is current on those payments. There is no equity in this vehicle so she may continue to pay for it and maintain it if she winds up filing for chapter 7.

Personal Property

Taking a look at her personal property and assets, we note that she has a checking account at Chase Bank. There is currently less than $200 in that checking account and that amount of money falls within the $4000 exemption limit in the state of Illinois. She has minor household items which she values at $300. She has normal clothing and apparel which she values at $300. She does have two life insurance policies. However, these are death benefit only policies so there is no cash surrender value. For this reason, the policies are protected under Illinois law. She can continue to make the premium payments on those policies as they will survive the bankruptcy process. She claims to have no other personal property whatsoever. This would include no retirement accounts, no stocks, no maintenance or support, no tax refunds expected, no inheritance expected and no other item that produces income for her.

Household Details

In terms of the description of her household, she is currently single with no dependent children. She is currently working as a consultant and has been working in that capacity for the past four years. She earns approximately $1400 per month from her job. She is also working as an Uber driver, part-time. The additional driving is only bringing in approximately $100 per month. Let’s examine her monthly expenses to determine whether or not there is any disposable income available per month to go towards creditors. Her rent is $800 per month. Her electricity and gas is $100. Her cellular phone bill is $150 per month. She has Internet access for which she pays $50 per month. Her food, including groceries and eating out consists of $350 per month. She spends approximately $185 a month on transportation expenses as it relates to gas. She also has her auto payment of $419. By doing a quick analysis, it’s apparent that she does not have available money per month to pay her creditors. This explains why she is in the office seeking some form of bankruptcy relief.

Financial Affairs

In terms of her statement of financial affairs, she has earned approximately $16,000-$19,000 per year for the past three years. She has not received any unemployment or Social Security in the past three years. She has not been involved in any formal lawsuits against her in the past three years. She has not had any of her property repossessed or return in the last year. She has not closed a bank account nor given away any property in the last year. She does not have a safety deposit box nor is she holding any property for anyone else. She has been at her current address for more than three years and she has not sold or transferred any real estate in the last four years. Finally, she has not owned her own business in the last four years.

The Debt Scenario

Turning towards her debts: she has student loan debt totaling $12,000. This debt would be non-dischargeable in a chapter 7 bankruptcy. She also has credit card debt exceeding $38,000. This credit card debt was incurred over a period of about 14 years. She has been making the minimum payments on many of these cards.  However, the actual balance remains high. Her hope is to eliminate both the credit card debt and the student loan debt and get a complete fresh start. Since the student loan debt is non-dischargeable, she will not get a complete fresh start under Chapter 7. However, I do recommend chapter 7 bankruptcy due to the fact that there’s a high amount of credit card debt. By eliminating the credit card debt, the individual will have a better chance of making the minimum payments on the student loans. This should provide a significant amount of breathing room from her current situation.

Recommendation

Thus, I am recommending a chapter 7 bankruptcy. The credit card debt will be eliminated in its entirety. The student loan debt will remain. However, the debtor can work out a monthly payment plan based upon her income in an effort to repay the student loans. Eliminating $38,000 worth of credit cards would be a wise decision in this case.

Bankruptcy Case Study

This is the bankruptcy case study for James Stromberg who lives in the 6200 block of South Dorchester in Chicago, Illinois. James is here to talk about his financial situation and to see whether or not bankruptcy is going to be a solution for him. He did file a chapter 13 many years ago and that case was dismissed. He is currently renting and he does not own any real estate whatsoever. He has a 2002 Ford Explorer which is paid in full and has an approximate market value of $4500. In terms of personal property, he does not own a checking or savings account. He has a $600 security deposit on hand with his landlord and he values his household goods at approximately $400. He has no other property whatsoever. He does not have the ability to sue anybody and he does not expect to inherit any money in the next six months.

In terms of his life situation, he is single with a 19-year-old dependent son. He is not working as he is receiving Social Security in the amount of $1400 per month. In terms of monthly expenses, he pays $680 for rent, $100 for electricity, $60 for home phone, $60 for cable TV, $400 for food, $20 for clothing, $80 for gasoline, and $100 for auto insurance. Over the last three years he has earned Social Security income only. He had a truck that was repossessed in the last two years which is currently at the auto pound. He had a prior address in Bolingbrook, Will County Illinois. He does not have a student loan, he does not owe any income tax debt and is the only debtor on his accounts. The issue for James is that he owes $33,000 in medical bills, $4000 in parking tickets and approximately $500 in personal loans.

My recommendation to James is to file a chapter 13 bankruptcy so that he can undo the driver’s license suspension that he currently maintains. Instead of owing the city of Chicago $4000, he may be able to pay back as little as $400 on that particular debt. The same is true with his medical bills which total $33,000. He may be able to spend $3300 over the next 3 to 5 years to satisfy that debt. In terms of the monthly plan payment amount, I’m approximating that $140 per month over the next 60 months will complete his case. He will need a filing fee of $310 which gets paid directly to the Clerk of the United States Bankruptcy Court. Provided James can make those payments and budget accordingly, he will be able to get a huge savings on his debt and protect his driver’s license. Thus, I strongly recommend that James file a chapter 13 bankruptcy case to solve his debt problems.

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