Question 17 • [PERFIN] Personal Finance, Sem 2 (26-27)
Use the following table to help answer the question below.StateSingle-Earner2-Person3-Person4-PersonFlorida$41,226$52,259$58,574$69,009Georgia$40,691$55,258$61,104$68,502Missouri$39,645$51,568$60,371$71,059Texas$38,940$55,859$59,222$66,381Virginia$48,362$65,122$74,151$85,939A 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?
Answer
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.
Explanation
A couple with one child is a three-person household. In Virginia, the table’s three-person income figure is $74,151. After the monthly income reduction, their annual income would be $91,215 − ($3,200 × 12) = $52,815, which is below that figure, so they could qualify for Chapter 7. Chapter 7 can discharge many debts, such as credit card debt, but generally does not discharge student loans, so “discharge most of their debt” is the true statement.
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