Bankruptcy and Insurance Case Studies

Decent Essays

Scenario 1 Chapter 7 bankruptcy is available to Celia for her credit card debt and in some circumstances for including her student loans (Forgiveness, Cancellation, and Discharge) (Twomey & Jennings, 2014, p. 747). The discharge of student loans in bankruptcy is rare (Forgiveness, Cancellation, and Discharge). Direct loans, Federal Family Education Loan (FFEL) Program, and Perkins Loans can be discharged if all of the three following circumstances are met (Forgiveness, Cancellation, and Discharge).
1. Celia will be unable to maintainable a minimum standard of living if forced to pay the student loans (Forgiveness, Cancellation, and Discharge).
2. It is evident that the loan repayment hardship will continue throughout the life of the loan (Forgiveness, Cancellation, and Discharge).
3. Celia made an effort in good faith to repay the loans for a minimum of five years before declaring bankruptcy (Forgiveness, Cancellation, and Discharge).
As Celia only made payment for two years and not the required five years as required by good faith she will not be eligible for the student loans to be discharges just her unsecured credit card debt (Forgiveness, Cancellation, and Discharge). Assuming Celia had attempted to pay her student loans the bankruptcy court must decide if these circumstances have been met through the means test (Twomey & Jennings, 2014, p. 749). Under the means test disposable income is determine by the formula as follows: debtor’s current monthly income

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