Albert recently graduated from college with a degree in business administration, but has been unable to find a job. He has decided to file a Chapter 7 petition with the Bankruptcy Court. He has the following assets: a. a $250 ring. b. $5,000 in equity
in a condominium secured by a mortgage. c. $100 a week in unemployment benefits after being laid off from his previous job. d. $750 in business administration books, including a barely-used copy of Business Law. e. a $1,000 retainer for his teeth prescribed by his orthodontist. f. $1,200 in equity in a new car which he purchased with a loan from the bank. His debts are as follows: a. $10,000 in student loans. b. $20,000 to the bank for his car. The loan is secured by the car. c. $5,000 in unsecured credit card debts. What can he keep? What will each of the creditors receive? Explain.
Assets-Albert can keep up to $23,675 in equity in property used as a residence. Thus, Albert can keep the equity in the condominium. The $100 per week in unemployment benefits is exempt. If the books are classified as professional books or tools of Albert's trade, he can keep all of them. If they are not so classified, he should still be able to keep them under the general classification allowing up to $600 for any particular item, not to exceed $12,625 in aggregate. The retainer for his teeth is exempt as a professionally prescribed health aid. The $1,200 in equity in his car is exempt. He can keep the ring, since the value of it falls within the $1,600 limit on jewelry.
?
Debts-The student loans are nondischargeable unless the court finds that they would impose an undue hardship on Albert. Because his car secures that debt, the bank will be entitled to the return of the vehicle. The debt will be discharged, but the bank will get at least part of the money owed to it by reselling the car, which served as collateral for the loan. The credit card company is a general creditor. The $5,000 in unsecured credit card debt will be discharged.
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