In this bankruptcy case study, Anthony who lives in Chicago, Illinois is hoping to determine whether or not he and his non-filing spouse can eliminate their debt. The parties filed a chapter 7 case over 30 years ago. Thus, they are eligible, technically, for a chapter 7 once again. They have a single-family home worth approximately $200,000. The outstanding debt between the two mortgages on the property is $180,000. Since there is only $20,000 worth of equity, the parties would be able to protect that item if they are able to file for chapter 7. However, the home is in arrears. The only way to save it is with Chapter 13.
The couple does not own any vehicles, they have a checking account with $300 in it, they have minor household goods worth $700, normal clothing valued at $800, term life insurance with a death benefit only, and no other property at all. They are currently married and they have no children. Husband is currently working and he is working at the same job since 1998. Wife is working as well part-time. When we take a look at their monthly income combined, they are bringing in approximately $4300 per month. Let’s take a look at their expenses:
The first mortgage is $1170, the second mortgage is $650, water is $100, electricity is $300, home phone is $200, cellular phone is $160, food is $400, clothing is $100, laundry is $100, transportation is $300, auto insurance is $200, and auto payments as they’re using another person’s vehicle is $700.
In terms of their statement of financial affairs, the parties are currently in foreclosure as they have not made their mortgage payments in over six months. Husband had a separate business which has very little in the way of assets. There is IRS debt from 2005 to the present totaling $5000.
What the parties would like to do is to save their home from foreclosure. Although they are significantly behind on their payments, we can stretch out a reorganization plan for 60 months. This will allow the couple to make the regularly scheduled first and second mortgage payments and provide a small payment to a chapter 13 trustee. The trustee will repay the arrearage over that three to five-year period. As long as the debtor’s stay employed and can budget accordingly, chapter 13 would work.
The filing fee for a chapter 13 bankruptcy is $310. The typical attorney fee is paid over a three to five-year period as part of their monthly plan payment. The amount of the plan payment will be determined by their income, expenses, assets, and outstanding debt. So in this case, I’m strongly recommending a chapter 13 as it is the debtor’s goal to save their home from foreclosure. Chapter 13 will provide that very type of relief.
