Creditor-Debtor Relations and Bankruptcy
Three months ago, Janet Hart’s husband of twenty years died of cancer. Although he had medical insurance, he left
Janet with outstanding medical bills of more than $50,000. Janet has two teenage daughters to support. She has worked
at the local library for the past ten years, earning $1,500 per month. Since her husband’s death, she has also received
$1,500 in Social Security benefits and $1,100 in life insurance proceeds every month, for a total monthly income of
$4,100. After making the mortgage payment of $1,500 and paying the amounts due on other debts, Janet has barely
enough left to buy groceries for her family. She decides to file for Chapter 7 bankruptcy, hoping for a fresh start. Using
the information presented in the chapter, answer the following questions.
1. What must Janet do before filing a petition for relief under Chapter 7?
2. How much time does Janet have after filing the bankruptcy petition to submit the required schedules? What hap–
pens if Janet does not meet the deadline?
3. Assume that Janet files a petition under Chapter 7. Further assume that the median family income in the geographic area in which Janet lives is $49,300. What steps would a court take to determine whether Janet’s petition
is presumed to be “substantial abuse” using the means test?
4. Suppose that the court determines that no presumption of substantial abuse applies in Janet’s case. Nevertheless, the
court finds that Janet does have the ability to pay at least a portion of the medical bills out of her disposable income.
What would the court likely order in that situation?
