Initial Facts
This is a bankruptcy case study for Ms. F. who resides in Aurora, Illinois. She is in the office to determine whether or not she can qualify for chapter 7, the fresh start bankruptcy. Otherwise, she is potentially interested in a chapter 13 bankruptcy case which is a reorganization of debts. Let’s look at the facts of the case. She is a homeowner with a market value of $158,000. She is current on her first mortgage with Everbank and the outstanding balance totals $124,000. When we calculate in her homestead exemption of 15,000, costs of sale, and associated fees for transferring real estate, there does not seem to be significant equity in the property. For this reason, chapter 7 is still a possibility. In terms of her vehicle, she has a 2011 Ford Edge, financed by a credit union. The vehicle is worth $7700 and she owes $8200 to pay it off. Thus, chapter 7 is still in play since she could always reaffirm that debt as she is current. In terms of personal property, she has a checking account at Chase Bank, normal household items totaling $500, regular apparel totaling $400, a 401(k) valued at $8000, and no other personal property whatsoever.
Getting Personal
She is currently single and gainfully employed. She is working for the airlines and she averages approximately $65,000 per year. Since she has no dependents, as it is only her in the household. This will hurt her in terms of means test qualifications. Turning to her monthly expenses, she pays a little over $1000 for her mortgage, $62 for water, $90 for association fees, $55 for home phone, $86 her cellular phone, $110 for cable television, $450 for food, $20 for laundry and cleaning, $50 for medical expenses, $250 for transportation, $110 for auto insurance, and $375 for her auto payment.
Summary Of Financial Package
Looking at her summary of financial affairs, she has earned approximately $35,000 year to date, 64,000 in the prior year, and 59,000 in the year before that. She has not sold any real estate in the past four years, she has not owned a business in last four years, has not closed a bank account in the last two years, has not had a car repossessed or returned in the last four years, she does not have a safe deposit box, and she has not earned any other income other than her current job.
The Dreaded Debts
In terms of debts, she is inundated with credit card debt. She has over $80,000 worth of debts owed to an assortment of credit cards. These debts were incurred over a period of about 14 years. At some point during those years she was unemployed and utilized the cards for living expenses. In some cases, the cards were used for purchases that were not necessary, but were desired.
Means Test Analysis
Upon further analysis of her paycheck stub in great detail, it appears that she does not qualify for chapter 7. She simply cannot pass the means test. However, she is eligible for a chapter 13 bankruptcy at a repayment rate of only 10%. This is due in part to the fact that there is not significant equity in the home and that there is no equity in her vehicle. If she can make consistent payments to a chapter 13 trustee over a period of 3 to 5 years, at approximately $150 per month, she will eliminate 90% of her credit card debt and come out of bankruptcy with a discharge.
For more information on how you could be helped with bankruptcy, please contact the office at 847-520-8100. We always offer a free initial consultation at all of our locations which include Chicago, Wheeling, Westchester, Aurora, Joliet, and Waukegan.
