Bankruptcy Case Study

This is the case of Dan and Emily Rady who come to me from Chicago, Illinois.  They are here to talk to me about Chapter 7 or Chapter 13 bankruptcy.
In terms of information concerning their debt, they have real estate with an approximate equity of $25,000.  They each have a vehicle but there’s very little in the way of equity in the vehicle.  The husband is up-to-date on his car payments; wife is not up-to-date on her car payment.  In terms of income and expenses, there seems to be a little bit of excess income if we eliminate the amount that they are paying for credit cards which is $650 in minimum payments per month.  Since neither person has filed bankruptcy before, they are still eligible for either Chapter, whether it is a Chapter 7 or a Chapter 13.
However, we want to do what’s best by the clients.  We want to make sure that if there is disposable income per month that the clients submit to a Chapter 13 repayment plan which could effectively lower the amount that they are paying for their cars and all of their remaining debt.  We are going to do this by looking at their paycheck stubs and scrutinizing their expenses.  Once we put that information into the bankruptcy software, I will be able to determine whether or not the Chapter 13 plan is feasible and more importantly or equally importantly, what is the amount that they are going to have to pay per month and what is the percentage that the unsecured creditors are going to receive under their plan.
An experienced bankruptcy attorney will be able to manipulate the numbers, enter the proper numbers and make the proper adjustments so that the clients will be paying the proper amount to the Chapter 13 trustee over the course of 3 to 5 years.
Just on my vision of the paperwork in front of me, I do believe that a Chapter 13 would be in their best interest.  I simply don’t know at this point what the exact dollar figure that I would propose to the Chapter 13 trustee.  However, once we do a Chapter 13, these clients will no longer have to make a car payment directly and since wife was behind on her car payment and subject to repossession, the Chapter 13 will stop any risk whatsoever of the vehicle being repossessed.  Provided the clients can make their trustee payment on time each month, the creditors will have to accept that plan payment and they will be prohibited from contacting the debtors, trying to collect on the debtors and most importantly, prohibited from trying to repossess the vehicle.  So my strong recommendation is a Chapter 13 for Mr. and Mrs. Rady from Chicago.