Most of the Indianapolis area residents I have represented in bankruptcy wish they knew what they learned after bankruptcy prior to coming to my office. What I mean is that most of the people I recommend file bankruptcy probably could have moved on with their financial lives months if not years ago had they come to see me sooner. I am often saddened to hear the story of how they cleaned out their 401ks and all of their savings prior to meeting with me, but are still not able to escape their financial hole. So, I thought it would be helpful for me to talk about a make believe client we will call Janice Smith and show you how her finances look both before and after bankruptcy. I apologize in advance for the length of this blog, but this is what I thought it took to fully illustrate a typical before and after Chapter 7 bankruptcy picture in Indiana.
When Janice comes in to meet with me at Halcomb Singler she lays out her financial picture, and it looks something like this:
Debt
Home Mortgage: $125,000.00 (House is worth $135,000.00)
Car Loan: $15,000.00 (Car is worth $13,000.00)
Credit Cards: $35,000.00
Medical Bills: $3,000.00
Federal Income Tax: $1,200.00
Indiana State Income Tax: $500.00
Student Loans: $30,000.00
Assets
Home Equity: $10,000.00
Household Goods/Furnishings: $4,500.00
Bank Account Balance: $750.00
Jewelry: $1,500.00
Clothing: $250.00
Sporting/Hobby Equipment: $200.00
Income After Taxes/Deductions Per month: $3,500.00
Monthly Expenses
Mortgage Payment: $900.00 (includes taxes & insurance)
HOA Dues: $25.00
Car Payment: $355.00
Gas Utility: $77.00 (budget plan)
Electric Utility: $55.00 (budget plan)
Water/Sewer: $35.00
Trash: $15.00
Cable/Internet: $150.00
Cell Phones: $175.00
Food: $300.00 (Janice and her 2 children)
Entertainment: $0.00
Clothing: $0.00
Car Insurance: $65.00
Life Insurance: None
Gas/Oil Changes/Car Repairs: $400.00
Children School Expenses: $50.00
Out of Pocket Medical Expenses/Prescriptions: $130.00, but typically only buys $50.00 worth
Haircuts/Personal Hygiene: $0.00
Student Loan Payment: $225.00
Payment Plan with Federal Gov't for Taxes: $100.00
Payment Plan with State for Taxes: $50.00
Payment Plan for Medical Bills: $150.00
Credit Card Minimum Payments: $612.50
Janice is left with ($289.50) per month. Janice is what I call scrimping by. What I mean is that Janice is not buying all of the prescriptions prescribed by her doctor, she is spending no money on clothing (which is impossible), no money on entertainment (also impossible), is cutting her children's hair on her own, is behind on her student loan payment and is feeding herself and her children on only $300.00 per month. While Janice is not a real person, this is a fairly typical scenario for those I meet with who are considering bankruptcy. It is common for them to tell me that they spend what they have left at the end of the month on food and that they don't buy any clothing. They also tell me things such as their children need braces, but they cannot afford them and that they are worried because they still owe money on their car, but that it is in terrible condition.
Now I'm Going to Go Through Janice's After Chapter 7 Bankruptcy Budget, still based on her $3,500.00 after tax monthly income.
Monthly Expenses
Mortgage Payment: $900.00 (includes taxes & insurance)
HOA Dues: $25.00
Car Payment: $355.00
Gas Utility: $77.00 (budget plan)
Electric Utility: $55.00 (budget plan)
Water/Sewer: $35.00
Trash: $15.00
Cable/Internet: $150.00
Cell Phones: $75.00
Food: $500.00 (Janice and her 2 children)
Entertainment: $75.00
Clothing: $100.00
Car Insurance: $65.00
Life Insurance: $20.00
Gas/Oil Changes/Car Repairs: $400.00
Children School Expenses: $50.00
Out of Pocket Medical Expenses/Prescriptions: $130.00
Haircuts/Personal Hygiene: $50.00
Student Loan Payment: $225.00
Dental/Orthodontist: $150.00
Savings; $50.00
As you can see, Janice is not going to be dining at Ruth Chris every night. She is still on a fairly tight budget after her Chapter 7 bankruptcy has been discharge and is not "living high on the hog" as they say. However, Janice is able to better provide for the needs of herself and her children. She is also able to save a little bit of money each month for the emergencies that will arise. Most importantly, Janice is able to provide proper meals for her family, has protected her children if something should happen to her with a moderate term life insurance policy, is buying all of the medicine prescribed by her doctor and is able to start a plan with the orthodontist to pay for braces for her children. In short, Chapter 7 bankruptcy can often help a debtor by allowing them to provide for their family by getting a fresh start. Instead of taking all of her money to pay creditors and having what was left to take care of her family Janice now has sufficient funds to provide for her family.
Again, this is a made-up hypothetical, but it is a fairly realistic picture of what a persons' finances may look like before and after bankruptcy. If you find yourself in a position similar to the hypothetical where you feel like you are scrimping by with little money to provide for the basic needs of yourself or your family because a large chunk of your income goes to paying creditors you may be a candidate for bankruptcy. Contact me for an appointment and I will answer your questions and let you know whether or not I believe bankruptcy might help your financial situation. There is no charge for this initial consultation. If you are struggling financially I may be able to help you, whether it be through bankruptcy, through debt settlement, or by giving you a plan to pay down your debt yourself. Call for your appointment at (317) 575-8222. I look forward to meeting with you myself.
Halcomb Singler, LLP, is a debt relief agency. It helps people file for bankruptcy under the bankruptcy code. No attorney-client relationship with the firm of Halcomb Singler, LLP, is created through this blog. Also, please note that Erika Singler is an attorney licensed in Indiana and does not seek to practice law in any jurisdiction in which they are not properly authorized to do so. The information contained in this blog is general in nature and should not be relied upon for the circumstances of any individual(s) or businesses.
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