Debt – Is Chapter 7 or Chapter 13 Better?

This is the case of Amy Jackson who resides in Chicago, Illinois who was visiting me for a consultation on debt relief.  Ms. Jackson filed a Chapter 7 bankruptcy more than 10 years ago so she is eligible to file once again.  She does not own any real estate.  She is currently renting.  No formal lease but she is paying $900 a month for rent.  She has no vehicle in her name and she is not using a vehicle.

In terms of personal property and assets, she has a checking and savings account at Citibank with an approximate amount on account between the two accounts of $400.  Her security deposit is $900 per month.  Her household goods which includes her TV, her furniture and her other minor possessions are valued at $2000.  Her clothing is valued at $1000.  She has no 401(k), IRA or profit sharing of any kind.  She cannot sue anybody for any reason.  She does not expect to inherit any money and she has not given away or sold anything for less than its fair market value in the last year.  She is currently separated and she has for dependent children in the house ages ranging from 16 to 20.

Her employment information: she is currently working as a security officer for the past 12 years for Securitis Security earning approximately $1600 per month.  She is paid every other week.

In terms of her monthly expenses, on average she has $900 listed per month, $200 for electricity and gas, $200 for her cellular telephone bill, $130 for cable television, $250 for food and groceries, $200 a month for clothing, $60 for laundry and dry cleaning, $50 for public transportation.  Those are her expenses and they pretty much a better income of $1600.

During the past three years, she has earned approximately $20,000-$24,000 per year.  She has not received any unemployment or Social Security in those three years.  She does have a lawsuit in the past year from 2012, Portfolio Recovery suing on a credit card debt.  She does not have a safety deposit box.  She has not closed the bank account in the last year.  She has been at her same address for at least three years.  She does not own a business.  There are no co-debtors on her case.  She does not have a student loan and she does not owe any income tax debt.  The problem basically is credit card debt for Amy of approximately $11,000, medical bills of $300 and utility expenses of $1300.  When you add it all together, she’s got anywhere from $12,000-$15,000 worth of debt and since she is bringing in exactly what she is spending per month, not even counting the minimum payments on the credit cards, there is just no way to pay off this debt.

This is one of those circumstances where if you said to somebody hey, I’m struggling with $10,000-$15,000 worth of debt, they might tell you it’s not worth it to file.  However in this case, when I see a person who is just getting by income minus expense wise and there are for dependents in the household, I see a person who needs a fresh start, a person who will benefit from the fresh start and a person who is actually entitled to a fresh start under federal bankruptcy law.

So Amy Jackson from Chicago, Illinois, I know you are struggling financially.  This is an opportunity to get out of debt under Chapter 7 and get back on your feet financially.



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