This is the chapter 13 bankruptcy case study for Natalie Taro who lives in Chicago, Illinois. She is here to decide whether or not chapter 7 or chapter 13 bankruptcy is going to work for her. She does not own her own home and she is renting on a month-to-month lease. She owns a 2005 Chevy Malibu which is paid in full, which has an approximate value of $5000. She also is on the hook for a 2008 Audi, $33,000 owed to TD finance. She has a co-signer and the other party to the debt has possession of the vehicle and is not paying for it.
In terms of personal property, she has a checking account at Chase bank as well as a savings account with the credit union with an approximate balance of 1300. She has minor household goods valued at $700, normal clothing valued at $300, and she has a term life insurance policy which is a death benefit only so no value to the bankruptcy estate. She is currently divorced, has no dependent children and she is working two jobs. The first job is at Mount Sinai Hospital earning approximately $53,000 per year and her second job is a part-time job making approximately $6000 per year. The two jobs together net her approximately $3900 per month.
When we look at her monthly expenses she is definitely showing a surplus. She pays $830 per month for rent, $80 per month for electricity, $80 per month for telephone, $125 per month for cell phone, $80 per month for cable TV, $350 per month for food, $40 per month for clothing, $20 per month for laundry, $20 per month for medical, $260 per month for transportation, $100 per month for recreation, $55 per month for auto insurance, and $75 per month for life insurance. When you look at her income minus her expenses she is showing a significant surplus. For this reason she will not be able to eliminate her debt under chapter 7 free and clear. She has approximately $12,000 in credit card debt, $16,000 and personal loans, $10,000 owed to the credit union, and of course the vehicle debt to TD finance in the amount of $33,000. What I recommend in this case for Natalie is a chapter 13 repayment plan whereby she pays back 100% of the debt over a 60 month period. This will roughly be a payment of anywhere from $750 per month to $1000 per month depending on which creditors file proof of claims.
The other option would be to try and negotiate lump sum cash settlements with some of her creditors. As far as the vehicle financed by TD finance, she can wait until that vehicle is repossessed to see whether or not she’s going to owe on a deficiency. So for this case, it’s a tough call. We can rule out a chapter 7 as it is not feasible. We can recommend a chapter 13 at a fairly high monthly plan payment or simply try to negotiate with the creditors as they come after her.
