Bankruptcy – Filing Chapter 13 Is The Solution

This is the case of Lewis Kent who comes to me for a bankruptcy consultation.  He lives in Lake Zürich, Illinois which is Lake County, Illinois.  He has never filed for bankruptcy before.  One of the things I noticed about Mr. Kent right off the bat is that he’s got a single-family home which is paid in full, no mortgage whatsoever and it’s worth approximately $290,000.  So right off the bat I know that Chapter 7 is not going to be an option for him due to the equity in his home.  So what we should do now is geared towards Chapter 13 and seeing if we can help in that regard.

He has a 2013 Volkswagen Jetta financed through VW Credit.  He is current on the vehicle.  He owes approximately $7000 and the monthly payment is $214 per month.  In terms of personal property, he has a checking and savings account at Lake Forest Bank and Trust.  He has household goods worth $3000, clothing worth $1000 and an IRA worth approximately $5000.  He has no lawsuits pending.  He has no life insurance.  And he has no animals.  He is single.  He works two jobs; he works for the Waukegan School District and the Des Plaines School District.  He is a substitute teacher at both locations and he is earning between the two jobs, approximately $800 per month.  He is also receiving disability of $1100 per month.  So he’s got $1800 or so coming in per month from his job.  He has no mortgage because remember I told you his house was paid for.  He just has property tax at $471 per month.  He has insurance at $300 per month, home repairs at $200 per month.  He’s got gas and electric at $48 per month, home phone at $130 per month, gas and transportation at $200 per month.  Automobile insurance at $130 per month and his auto payment once again is $214 per month.

In terms of his Statement of Financial Affairs, he has made approximately $12,000 so far this year and he also receives the other income he was receiving unemployment for a time there of approximately $7500 per month.  And then he gets disability which amounts to about $12,000 per year.  He did have a lawsuit back in 2003, a small claims lawsuit where the judgment was entered against him in the amount of $7000.  He has no student loans, he has no tax debt.

Let’s look at his actual debt to see what we can do for him.  He has the lawsuit which is $7000, the judgment was entered.  He’s got a construction lien for $750.  And he has a credit card debt of $1000 and medicals of $215.  So if you take away his vehicle which is going to continue to pay, he’s got about $10,000 worth of debt.  What we can do is a Chapter 13 where he can repay approximately $230 per month over the next 3 to 5 years which will include his vehicle payment.  He can eliminate the debt to the lawsuit.  We can work on some of these construction liens and get those removed and eliminate the credit card debt.  So despite the fact that he has a paid off house, there is a solution under Chapter 13 to reorganize the debt and repay all of it over a period of 60 months.  So that is my recommendation for Mr. Kent, Chapter 13.

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