Having a fresh start from bankrupcy

Answer the 4 questions passed on the information given. Then discuss your a position on the

Debate This topic.

Debate This: Personal Bankruptcy

From Business Law II

Chapter 26 p. 631

Three months ago, Janet Hart’s husband of twenty years died of cancer. Although he had

medical insurance, he left Janet with outstanding medical bills of more than $50,000. Janet has

worked at the local library for the past ten years, earning $1,500 per month. Since her husband’s

death, Janet also has received $1,500 in Social Security benefits and $1,100 in life insurance

proceeds every month, giving her a monthly income of $4,100. After she pays the mortgage

payment of $1,500 and the amounts due on other debts each month, Janet barely has enough left

over to buy groceries for her family (she has two teenage daughters at home). She decides to file

for Chapter 7 bankruptcy, hoping for a fresh start. Using the information provided in the chapter,

answer the following questions.

1. Under the Bankruptcy Code after the reform act, what must Janet do before filing a

petition for relief under Chapter 7?

2. How much time does Janet have after filing the bankruptcy petition to submit the

required sched-ules? What happens if Janet does not meet the deadline?

3. Assume that Janet files a petition under Chapter 7. Further assume that the median family

income in the state in which Janet lives is $49,300. What steps would a court take to

determine whether Janet’s petition is presumed to be substantial abuse under the means

test?

4. Suppose the court determines that no presumption of substantial abuse applies in Janet’s

case. Nevertheless, the court finds that Janet does have the ability to pay at least a portion

of the medical bills out of her disposable income. What would the court likely order in

that situation?

Debate This:

Rather than being allowed to file Chapter 7 bankruptcy petitions, individuals and couples should

always be forced to make an effort to pay off their debts through Chapter 13

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