IL State Representative Files for Chapter 13 Bankruptcy

February 8, 2012

By: Brenna Working

Illinois state Representative Ron Stephens has announced that he has stepped down from his state's legislature in part because of his decision to file for Chapter 13 bankruptcy protection, according to BND.com, which reports on issues in southwestern Illinois.

Stephens’ Chapter 13 case illustrates a classic example of how even those with significant income can find themselves in serious debt if that income is not well managed. According to sources, Stephens earned $14,700 per month, or $176,400 per year, an income that would disqualify him from filing for Chapter 7 bankruptcy in most circumstances.

At the time of his bankruptcy filing, Stephens listed $572,000 in assets and $615,000 in debts. Reports indicate that Stephens has said his decision to step down from the Illinois House was largely apolitical (he has served for 27 years in the legislature), but that it was closely tied to his Chapter 13 case.

Whether he believed a bankruptcy filing would affect his chances at getting re-elected, or whether he simply didn't have enough money to run another campaign is unclear. Recently, the Democrat-controlled Illinois legislature redrew district lines and Stephens' district was affected by the change.

In all likelihood, the combined stress of bankruptcy and challenge of running in a new district made Stephens' decision to step down seem like the obvious choice to the politician. In media reports, Stephens noted that he is "not proud" of his decision to file for bankruptcy, but has pointed out that, on his repayment plan, he will fully repay all the debts he owes.

Bankruptcy court documents indicate that Stephens filed his Chapter 13 case jointly with his wife, Lisa. Their combined monthly expenses totaled $9,400, including $3,687 for a home mortgage, $980 for a second mortgage, and $1,200 in car payments.

Like so many other Americans, the Stephens are currently living in an underwater home: valued at $310,000, the home is connected to a primary mortgage on which the Stephens reportedly owe $411,000, and a second mortgage on which they owe $71,000. The Stephens are also underwater on their cars, which are worth $19,000, and on which they owe roughly $29,000.

Among the Stephens’ unsecured debts was a balance of more than $90,000 on various credit cards. Analysts suggest that running as a Republican candidate after filing for Chapter 13 bankruptcy would have been difficult, as the Republican party tends to identify itself with fiscal responsibility.