I know some authors do it, but I, like Karen, I would never take someone (or a plot) straight from real life. Though I am pillaging my experiences as a hostel warden mercilessly for background and incidents in the current novel, I'm not lifting wholesale. Partly this is because in real life, things don't have to be believable; they just are and if it happened, it happened and there's no arguing about it. Fiction, on the other hand, has to be believable -- even when it isn't really. Hence the term suspension of disbelief. When the mountain flies at the end of my current WIP, with the fiction reading part of the mind, the reader has to really believe that it's happening, even though the rational part knows that it's nonsense.
Some beginning writers take stuff from life and, when challenged that it's implausible, retort with, "But that's what happened to me/my sister/my neighbour/this bloke in the paper!" But it's not good enough; it has to be believable in context without knowing anything about real life precedents.
The reason I don't use the lives of my students for my plots is because they're either too mundane and boring, or far too unbelievable. I mean would you believe this as the outline of a novel?
A chap is going to restore and re-open a local cinema in a run-down ex-slate mining town, but the scheme founders when his business partner (who was funding the venture) turns out to a serial killer targeting gay men and leaving their bodies on beaches and other beauty spots. With the now ex-partner arrested, tried, found guilty and in prison, the protag not only can't re-open the cinema but also finds he has an incurable brain tumour; the NHS say they can do nothing. But the townsfolk rally round and raise the money to fly him to the States where he is cured and he decides to learn how to use a computer in order to write about his experiences.
I thought not. Neither would I, but it happened to one of my students, which is why I stick to making things up. Stories are much more believable that way. *g*
OK, before anyone says it, yes, I suppose I could get that tale to hang together and be believable, but it would take a lot of work and setting up to be internally consistent. You can't just say, well that's how it happened in real life and expect people to believe it in a book.