In this bankruptcy case study, Mr. M. from Chicago is interested in finding some sort of relief from his debt. He is currently living on Ridgeway Avenue in Chicago, Illinois and has lived at that address for the last three years. He is married; however, his spouse is considered a non-filing spouse at this moment. He does not own any real estate. He is currently renting on a month-to-month lease. He owns a 2002. Toyota Corolla which is paid in full. The vehicle is valued at $3000 and it has over 130,000 miles on it. He has a second vehicle which is financed, a 2011 Toyota sienna. Toyota Financial holds the lien, the amount owed is $12,000, the value of the vehicle is $20,000 and the current monthly payment is $580 per month.
In terms of personal property, he has a checking account at PNC bank with a total balance of approximately $300. He has normal household goods such as a TV and furniture with a value at $1000. His clothing is valued at $500 and there is nothing extravagant in terms of furs or jewelry. He had a 401(k) in the past however he has nothing in the account at this time. He does expect a tax refund every year in the amount of approximately $9000. He is currently married with four dependent children living in the house, ages twelve, seven, six and two. He is the sole breadwinner as his spouse does not work. He has been working for the past 16 years as a machine operator earning approximately $50,000 per year. When we look at his monthly income, he brings in net pay of $2712 per month. Let’s now take a look at his expenses.
His rent is $700 per month, electricity is $300 per month, home phone is $80 per month, cellular phone is $220 per month, cable television is $130 per month, Internet is $40 per month, food is $800 per month, clothing is $400 per month, laundry and cleaning is $100 per month, medical and dental expenses are $100 per month, transportation expenses are $500 per month, health insurance is $260 per month, auto insurance $120 per month, and the auto payment is $580 per month. His monthly expenses in total exceed $3300 per month. Thus, we have a situation where the household expenses exceed the income by a fairly decent margin.
In terms of his statement of financial affairs, he has been earning approximately $50,000-$60,000 per year for the past several years. He did make one large payment to a creditor within the last year totaling more than $1000. He does have a current lawsuit pending for a credit card collection against him which has been reduced to a judgment. He did close a checking account at PNC bank back in 2015. There was nothing in the account at the time it was closed. His wife is a joint debtor on many of the credit cards that are involved in this case. For this reason, his wife would benefit by joining in on the filing. As it stands right now, he did not intend for his wife to file. However, if he files a chapter 7 bankruptcy to get a fresh start and his wife does not file, the credit cards that she is joint on can pursue her individually after his filing. He does not owe any money for student loans and he does not owe any tax debt either state or federal.
The real issue in this case is the joint credit card debt as well as a prior foreclosure which totals approximately $70,000 combined. This is one of those situations where I will recommend that both parties, husband and wife, file for chapter 7 bankruptcy relief to eliminate the outstanding obligations. The couple can continue to rent as they are up-to-date, they can continue to make their auto payment as they are up-to-date, and they can eliminate all of this miscellaneous credit card debt and foreclosure debt. Thus, chapter 7 joint bankruptcy would be my recommendation for this particular case.
