Bankruptcy Case Study For February, 2016

This is the bankruptcy case study for Ms. P., who currently resides in Aurora, Illinois. Aurora encompasses multiple counties and this person resides in DuPage County. This is important as it relates to the location where the individual will appear before a Chapter 7 or Chapter 13 trustee. Let’s examine the facts of the case.

The debtor has a single-family home which she has owned since the year 2000. There is currently a first mortgage with Chase with an approximate balance of $107,000. The monthly payment on the property is $1165 and there is also an association of $228 per month. The debtor is uncertain as to the value of the home but believes that there may be significant equity beyond what we can protect in a chapter 7. The debtor is going to get a market evaluation from a local realtor so we can make that final determination. For the purpose of this case study, let’s proceed on the premise that the debtor will have to file a chapter 13.

In terms of personal property, the debtor has a 2015 Hyundai Sonata which is paid in full. That vehicle has an approximate value of $20,000. The equity or ownership in this vehicle is going to prohibit the debtor from being able to eliminate the debt under Chapter 7. Thus, this confirms that we should be examining this case under Chapter 13 laws since the equity in the vehicle exceeds what we can protect in a chapter 7. By way of other personal property, the debtor has a checking account with $2000 therein, household goods which she values at $2000, normal clothing and jewelry which she values a $2000, and no other personal property whatsoever. She is currently widowed and she is working two jobs. The first job is a full-time job where she is an operating room assistant earning approximately $46,000 per year. Her second job is part-time as a CNA earning approximately $10 an hour. Her income will vary based upon how many hours she can work for the second job.  Her income from all sources is approximately $2600 per month. When we look at her monthly expenses, we can see that she does have a slight surplus per month. Her expenses are relatively low. Her mortgage is $1165, property tax $416, homeowners insurance is $70, the association is $228, electricity is $120, cell phone is $110, cable television is $60, food is $800, clothing is $200, laundry $100, gasoline is $400, health insurance is $250, auto insurance is $180, and life insurance is $80. When we look at her income versus her expenses it appears that she does have available funds from which to pay a Chapter 13 trustee.

Moving to the debts, there is approximately $25,000 worth of credit card debt, $1700 worth of medical debt and an outstanding lawsuit against her for $16,000. She also feels that she has a loan outstanding for $9000. Based upon the equity in her car, we would probably have to pay back at least $15,000 to a Chapter 13 trustee over the next 60 months to satisfy the requirements of Chapter 13 bankruptcy law. However, the repayment plan would be less than the total amount that she owes so she would be getting a decent benefit by filing chapter 13. I’m going to advise her to get a fair market evaluation on the home, as well as a Carmax appraisal on the vehicle. We can then run the numbers to see approximately what she would be required to pay each month for Chapter 13. Thus, my recommendation this case is a chapter 13.  We just don’t know approximately how much she will pay at this particular moment. However, we will have that information very soon.

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