Solid Debt Relief Advice From Chicago Bankruptcy Attorney

This is the case study for Mr. Washington, who lives on Bennett Street in Chicago.  He comes to us with a Chapter 7 scenario.  He filed once before back in 1992 or 1993, he wasn’t sure.  He does have a single-family home worth about $670,000.00, and his mortgage balance is at least $670,000.00, so he has no equity in the house.  He’s not renting.  Nobody’s renting from him.  He has a Mercedes, a 1999 Mercedes, which is paid for, worth about $5,000.00.  In terms of personal property, he does have a checking and savings account.  He has about $5,000.00 worth of household goods, normal clothing, and he has a life insurance policy with a death benefit of $1,000,000.00, but he cannot borrow against it.  He does not expect any kind of tax refund. 

He’s divorced, he has two minor children, and he is working in Chicago, president of a company that he owns, and he’s bringing in approximately $7,500.00 per month from his job, plus an additional $1,500.00 in rent, totaling $9,000.00 in income per month.  When we go through his monthly expenses, you’re going to see that he doesn’t have any available money per month.  The mortgage is $5,200.00 per month, he’s got an auto payment of $1,200.00 per month in addition to the paid-off vehicle, and he’s got debt servicing (credit cards and loans) of approximately $600.00 per month.  So his expenses per month are $13,000.00, so there’s really nothing available of which to pay creditors back.  He made great money in 2007 and 2008, but this year, he’s struggling.  He’s about $15,000.00, so things have gone south. 

He does have a pending lawsuit against him.  He does not have a safety deposit box.  He’s lived at a prior address a few years ago in Flossmoor, Illinois, and the business that he owns is still operating.  It was opened back in 2004.  He had another business that was opened in 2005, and a third business that was opened in the year 2000.  So that’s his source of income.  There are no co-debtors.  There are no student loans.  IRS debt from 2006 is approximately $80,000.00.  That may go away, depending if he filed the return on time.  A lot of loans, credit cards, medical bills, past-due auto, a personal loan with HFC in the amount of $26,000.00, and a line of credit of $6,000.00.  That additional real estate is on Evergreen in Chicago.  It’s a condominium.  It’s currently on the market for $425,000.00.  The mortgage balance is $350,000.00. 

He has another property, a single-family home that he’s renting on Drexel in Chicago.  That has a value of $300,000.00 and a balance due on the mortgage of $460,000.00, so he’s upside down on that one.  This is definitely a case where Chapter 7 may be a good way to get a fresh start, maybe keep one property and liquidate the other two, keep the vehicle that’s paid for, let the vehicle go that you’re making payments on, and kind of determine whether it pays or not to keep the rental property.  If the rent is paying for the mortgage, even though the mortgage is upside down or the property is upside down, it still might be a good idea to keep that cash flow coming in.  Eventually, the market will turn around.  There’s no reason to let go of the property if you’re bringing in enough to pay the mortgage, taxes, utilities, and insurance.  The gentleman was referred to me, and again, we’re going to talk about Chapter 7 bankruptcy to get him out of trouble.