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.


Please select the best answer from the choices provided.

A
B
C
D

Answer 1

B

Their reduced monthly income is $7,601.25 − $3,200 = $4,401.25 → annualized ≈ $52,815, which is below Virginia’s 3‑person median ($74,151), so they would qualify under the Chapter 7 means test. Chapter 7 can discharge most unsecured debts (credit cards, many loans), but student loans are generally not dischargeable and secured debts (mortgage, car) are treated differently if they keep the collateral. Hence “discharge most of their debt” is the best choice.