This is a recent bankruptcy case study for JT, from Joliet, Illinois. He was referred to me by a former client and he is seeking advice on bankruptcy. He is looking to retire and wipe out his individual debts. He also claims that his house payment is too high and he wishes to relocate and rent. Here are the facts: JT is currently living in Joliet, Illinois in a single-family home valued at $116,000. The outstanding debt on the mortgage owed to Wells Fargo is $163,000. So right off the bat I can tell that the house is completely underwater and significantly. He is current on the mortgage payment, he owns it jointly with his spouse who does not wish to file and he intends on surrendering the property and getting out of that debt
In terms of vehicles, he has a 2010 Toyota Corolla which is financed through Toyota Motor Credit. The vehicle is worth approximately $10,000 and he owes $9900 to pay off the debt. His current monthly payment is $379 and he is up to date. The second vehicle is a 2005 Ford Taurus which has a value of $4000 and it is paid in full. His wife is joint on the Taurus so we can reduce his equity by 50%. In terms of personal property, he has a checking account at Chase with a balance of $146. He has typical household items such as a TV, furniture, appliances and assorted items valued at $2000. His clothing is normal as well and he values at $600. He has a 401(k) plan with $11,300. He has no other personal property of any nature, he does not expect to inherit any money in the next six months and he does not have any lawsuits pending for personal injury or workers compensation claims.
In terms of his household situation, he is currently married and the couple has a 14-year-old son. He is working as a salesman and has worked in that capacity for the past 17 years. His non-filing spouse is a rehab aide and she has been in that practice for the past 10 years. In terms of monthly income, JT is bringing in approximately $2500 per month from his job, $416 from a separate business venture and his wife is contributing $2100 to the household income. When we look at his monthly expenses, he pays $1,322 per month in mortgage payments. His electricity and gas is $550, home telephone is $47, cellular phones are $200, cable television is $135, food and toiletries are $600, clothing is $150, laundry and dry cleaning are $45, medical and dental expenses are $50, transportation costs of $400, recreation is $150, auto insurance is $360, the child’s tuition is $200, and the auto payment is $379. When we look at the income minus his expenses, it appears a JT does not have enough money to get by per month.
In terms of his statement of financial affairs, he has earned approximately $21,000 so far year to date. In the prior two years he earned approximately $35,000 to $39,000 in each of those years. He is not being sued by any creditor, he has not had any property repossessed in the last year, he has not closed a bank account, he does not own a safe deposit box, and he has not resided in any other address during the past two years. This separate business is very minor and it has no assets.
Bankruptcy Assessment
The issue with JT is that he has over $65,000 in credit card debt. He’s been making minimum payments on some of the cards and not making minimum payments on others. This fact along with the situation with an underwater home has led him to seek bankruptcy advice. The recommendation for JT from Joliet, Illinois is clear. I would recommend a chapter 7 bankruptcy case to eliminate the miscellaneous credit card debt and to remove the mortgage liability. He can continue to live in the home if he chooses until a complete foreclosure case is brought and concluded. However, he mentioned that he wishes to move within the next several months to a new state and get a complete fresh start in life. Based on that fact, he should file chapter 7 before he moves out of the state of Illinois and start again with a complete fresh start.
