Bankruptcy Case Study For D. L.

This is the bankruptcy case study for D.L. who resides in Prospect Heights, Illinois. She is here to get some advice and help regarding bankruptcy. She has a lot of creditors and she realizes that she must take some action to improve her situation. With that in mind, she has appeared at the office to learn more about bankruptcy and how she could be helped. Let’s look at the particular facts of her case.

Assets

In terms of major assets, she does not own a home. Instead, she is currently renting an apartment. She does have two vehicles. The first vehicle is paid outright, which is a 1990 Honda which has very little value. The other vehicle is a 2011 Toyota Camry, financed by BMO Harris, and the value is approximately $18,000. She owes a little over $20,000, her monthly payment is $410.00, and she is current on the vehicle and would like to keep it. This is very possible through a reaffirmation agreement. In terms of personal property, she has a checking account and a savings account at Bank of America with no balance. She has household goods which she values at approximately $600, normal clothing and apparel valued at $300, a 401(k) with an approximate balance of $100, and a tax refund that she expects next year in the amount of $800.

Income

In terms of employment, she is currently working as a cashier assistant earning approximately $14,000 per year. She also has a second job or part-time job as a technician earning approximately $16,000 per year. When we take the two jobs combined, she is making approximately $30,000 per year which breaks down to about $2500 gross income per month. Looking at her expenses, she pays $780 per month for rent, $140 per month for cellular phone, $260 a month for cable TV, $350 a month for food, $100 a month for laundry, $160 a month for transportation, $115 for auto insurance, and $410 per month for her auto payment.

Finances

Switching to her statement of financial affairs, she has earned approximately $15,000 so far this calendar year. In the prior two years, she is earned approximately $36,000 in each of those years. She did have a vehicle which was repossessed or returned back in May. She has not closed a bank account in the last year.  She does not have a safe deposit box, has not sold or transferred any real estate in the last four years. Further, she is not subject to any current lawsuit, there are no co-signers on her debt, she does not have any student loans and she does not owe for any tax debt state or federal. However, what she does have is payday loans. She owes approximately $6000 in payday loans owed to several different institutions. She also has credit card debt totaling about $8000 between three different merchants. She does have parking tickets of approximately $2000. She also has a furniture debt of approximately $500. The question is whether or not a chapter 7 bankruptcy filing will provide enough of a fresh start. The answer is definitively yes.

Solution

Chapter 7 will allow D.L. to eliminate all of her debt except for the parking tickets and the furniture provided she wants to keep the furniture. If she is willing to surrender the furniture, then she can eliminate that debt as well. Chapter 7 will run approximately $1400 and that will include the court filing fee. We can work a payment plan where she can put a portion of the fee down and make payments every two weeks on the balance. Provided she is on the electronic fund transfer agreement payment plan, she could be filed prior to being paid in full. She will have a court date 4 to 6 weeks after her case is filed and she will receive her discharge approximately two months thereafter. Thus, chapter 7 would provide a great benefit financially for D.L. from Prospect Heights, Illinois.

Bankruptcy Case Study

This is the bankruptcy case study of Adrienne Aranda who lives on Parkside Avenue in Chicago, Illinois. Adrienne has never file a bankruptcy case before so this is his first time going through the process. He owns a two flat that has a current market value of $250,000. The mortgage lender is Chase bank with an approximate balance owed of $460,000. Thus, he is over $200,000 underwater in terms of debt versus value. He is not renting any property as one of the flats is sitting vacant. In terms of vehicles, he has a 2005 Chevy truck valued at $3000 and it is paid in full. He also has a 1998 Toyota Four Runner with an approximate value of $1500. The two vehicles combined have over 250,000 miles on them. In terms of personal property he has bank accounts at TCF Bank totaling $4000. He has household goods, TV, audio, furniture, and minor accessories totaling up to two thousand dollars market value. He has normal clothing which he values at $500. He has a term life insurance policy which contains no cash value. He is expecting a tax refund in the amount of $800. He has a Honda ATV with $13,000 still owed on it. He is not in possession of the ATV as his friend had possession and stopped paying for it.

In terms of the description of his household, he is currently separated with two minor children: a 10-year-old son and an 8 year old daughter. He is a self-employed carpenter and has been doing carpentry for 11 years. He works out of Chicago, Illinois and earns approximately $22,000 per year. In terms of monthly expenses, he pays $1800 for the mortgage, $40 for water, $200 for electricity, $50 for a cell phone, $20 for Internet access, $300 for food, $20 for clothing, $10 for laundry, $200 for transportation, $100 for recreation, $50 for auto insurance, $15 for life insurance, and $50 for charity.

In terms of his summary of financial affairs, he has earned $8700 so far this calendar year. In prior years he has earned $22,000 and $35,000 respectively. He has not received any unemployment in the last three years. He has not been involved in any lawsuits in the last year. He has not closed a bank account in the last year. He has not lived at any other address in the last three years. He has no student loans and he owes no federal or state taxes.

The issue for Adrian is that he owes over $100,000 in credit card debt. Some of that credit card debt was used to prop up and maintain his business. However, there were no significant assets purchased on credit. He does have one minor piece of equipment that is valued at less than $2000 and would clearly be protected under the tools of trade exemption. This case would be a perfect opportunity to get a fresh start under chapter 7 bankruptcy laws. The debtor can simply eliminate the credit card debt, eliminate the mortgage debt and get back on his feet. He can continue to live in the property until the foreclosure process has gone through to completion. In the state of Illinois, a typical mortgage foreclosure case will last anywhere from 1 to 3 years depending upon your attorney. During this time, he should be able to save money as he will not be paying his current mortgage company. Once the bankruptcy case is over, Adrian will have the ability to reestablish some credit by purchasing a new vehicle financed through one of the many finance companies that cater to people who file for bankruptcy. By filing chapter 7 bankruptcy, Adrian will be in much better position to care for his two minor children. Hopefully, Adrian will get out of debt and then stay out of debt by being smart about credit in the future.

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