Question

Suppose a friend of yours is insolvent and asks for your assistance in choosing between filing for a straight bankruptcy under Chapter 7 and filing under Chapter 13. Your friend has multiple debts including a mortgage to Chase Bank, student loan debt, unpaid taxes, child support payments, a loan from GMAC for her car, a $8,000 loan she incurred for a bike that she bought last month, and credit card debt. Based on the scenario, answer each of the following questions as completely as possible: Describe to your friend the major differences between the two types of proceedings. (5 pts) Explain why Chapter 11 is not applicable in this case. (5 pts) If your friend does file bankruptcy, what property would be exempt? (5 pts) Again, considering your friend, what types of debts would not be dischargeable in bankruptcy? (5 pts) Assume your friend decides to file Chapter 7 bankruptcy, but does not have enough assets to satisfy all of her debts. Which creditors would have priority? (5 pts)

Answer 1

1) Answer: Chapter 11 is not applicable in this case because it is designed to cater towards the business entities and allows only business entities to file bankruptcy.

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2) Answer: If my friend files bankruptcy her assets would be inclusive of her house, equipment or properties she uses for her work and her unsecured car

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3) Answer: The student loan debt, unpaid taxes payments, child support payment, bankruptcy cost and unsecured loan meet to be paid firstly.

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4) Answer: The creditors hold the priority over the money owned for her unpaid taxes and child support. My friend would have to pay off them first and then the remaining money from other assets would be utilized pay off her other debts.