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

A couple has two children. They live in Missouri and have a combined annual income of \[tex]$96,730. The couple has a mortgage, a car loan, student loans, and credit card debt. When one of them loses employment, their monthly income is reduced by \$[/tex]2,100. 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 :

GinnyAnswer
To determine which type of bankruptcy the couple could file for based on their income and the median family income limits for Missouri, we need to analyze their financial situation step-by-step.

1. Given Data:
- Combined annual income: \[tex]$96,730 - Monthly income reduction due to job loss: \$[/tex]2,100
- State: Missouri
- Family size: 4 (couple plus two children)

2. Compute the Monthly Income Before Reduction:
- Annual income before reduction: \[tex]$96,730 - Monthly income before reduction: \( \frac{96,730}{12} \) - Calculation: \[ \frac{96,730}{12} \approx 8,060.83 \] 3. Compute the Monthly Income After Reduction: - Monthly income before reduction: \$[/tex]8,060.83
- Monthly income reduction: \[tex]$2,100 - Monthly income after reduction: \[ 8,060.83 - 2,100 = 5,960.83 \] 4. Annual Income After Reduction: - Monthly income after reduction: \$[/tex]5,960.83
- Annual income after reduction:
[tex]\[ 5,960.83 \times 12 = 71,530 \][/tex]

5. Compare Annual Income After Reduction to Median Income Limits:
- For Missouri, the median income limit for a 4-person family is \[tex]$71,059. - The couple’s annual income after the reduction ( \$[/tex]71,530 ) is compared against this median:
[tex]\[ 71,530 > 71,059 \][/tex]

6. Determine Bankruptcy Qualification:
- Since the couple's current annual income (\[tex]$71,530) after one of them loses employment is slightly above the median income limit for Missouri (\$[/tex]71,059), they do not qualify for Chapter 7 bankruptcy.
- Therefore, they would need to file for Chapter 13 bankruptcy, which involves repaying some portion of their debt over time.

Based on this analysis, the correct statement is:

d. They could file for Chapter 13 bankruptcy and discharge some of their debt.

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