Bankruptcy Case Study, May 1, 2015

This is the bankruptcy case study for Ms. B. who resides in Chicago Illinois.  She is here in the office to determine whether or not bankruptcy is going to provide a financial solution to her current problem. She had filed a prior bankruptcy case back in 2014 under chapter 13. She also had a prior case back in 2010 which was converted to a chapter 7 case. As we examine her current situation, she is not a homeowner. She is currently living with family and contributing towards the rent. She owns a 2013 Nissan Pathfinder which is financed through Capital One auto financing. She is current on her payments and she pays $656 per month. In terms of personal property, she has a checking account and a savings account, household goods valued at $5000, clothing valued at $5000, a whole life insurance policy with a cash value of $25,000 and no other property.

In terms of her description of household, she is currently single with six children all under the age of 18. Two of those children are grandchildren, however, they are under her care and control. She is currently working as a faculty member at the city colleges of Chicago earning approximately $65,000 per year. When we examine her income as compared to her expenses, she does have a small amount of money available which would go towards her creditors. As for her creditors, she owes $40,000 for student loans owed to two different providers. She also has credit card debt totaling $4000, a prior auto deficiency totaling $5000, her current auto at $29,000 and some miscellaneous medical bills at $1000.

When the potential client came into the office, she stated that her expenses were greater than her income. As we did a full budget analysis, we were able to highlight certain areas of her budget which could be adjusted downward. Thus, I believe she does have some disposable income per month that can go towards a 10% repayment plan of her debt. Now the student loans will not be discharged at 10%. However, the student loans can be managed over a 60 month period at 10%. Once the case completes, the student loans would still be able to collect on the remaining 90% which was not paid, plus interest.

So although it looked like a bleak outcome at first, I would strongly recommend a chapter 13 bankruptcy to reorganize her debt. She can deal with the student loans five years down the road when she hopefully is in a greater position to make more than minimum payments. Her vehicle can be paid through the chapter 13 as well as all of her other debt. Provided she can stay employed at her current job which pays well, she will have the ability to reorganize under chapter 13 and hold the collection efforts off.

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