Question

Use the following table to help answer the question below.
State
Single-Earner
2-Person
3-Person
4-Person
Florida
$41,226
$52,259
$58,574
$69,009
Georgia
$40,691
$55,258
$61,104
$68,502
Missouri
$39,645
$51,568
$60,371
$71,059
Texas
$38,940
$55,859
$59,222
$66,381
Virginia
$48,362
$65,122
$74,151
$85,939

A couple has one child. They live in Virginia and have a combined annual income of $91,215. The couple has a mortgage, a car loan, student loans, and credit card debt. When one of them loses their job, their monthly income is reduced by $3,200. If they felt the need to file for bankruptcy, which of the following statements is true?
a.
They could file for Chapter 7 bankruptcy and discharge all of their debt.
b.
They could file for Chapter 7 bankruptcy and discharge most of their debt.
c.
They could file for Chapter 13 bankruptcy and discharge all of their debt.
d.
They could file for Chapter 13 bankruptcy and discharge some of their debt.

Answer 1

Answer: b.

Reasoning:
- Household size = 3 (two adults + one child). Virginia 3-person median from the table = $74,151.
- Their original monthly income = $91,215/12 = $7,601.25. After a $3,200/month reduction, new monthly income = $4,401.25 → annual = $4,401.25 × 12 = $52,815.
- $52,815 < $74,151, so they pass the means test and can qualify to file Chapter 7.
- Chapter 7 can discharge most unsecured debts (e.g., credit cards, many personal loans), but typically does not discharge student loans and does not eliminate secured debts like a mortgage or car loan unless the collateral is surrendered. Therefore they could file Chapter 7 and discharge most (but not all) of their debt.