Darin is experiencing personal financial problems. The amount of income he recei

Question

Darin is experiencing personal financial problems. The amount of income he receives from his corporation is barely sufficient to cover his liv-ing expenses, the payments due on his mortgage, various credit-card debts, and some loans that he took out to pay for his son’s college tuition. He would like to file for Chapter 7 liquidation just to be rid of the debts entirely, but he knows that he could probably pay them off over a four-year period if he really budgeted and used every cent available to pay his creditors. Darin decides to file for bankruptcy relief under Chapter 7. Are all of Darin’s debts dischargeable under Chapter 7, including the debts incurred for his son’s education? Given the fact that Darin could foreseeably pay off his debts over a four-year period, will the court allow Darin to obtain relief under Chapter 7? Why or why not?

Explanation / Answer

Ans:As per chapter 7 of liquidation, an individual who have regular income may seek an adjustment of debt under chapter 13 of Bankrupty Cade. Further if the court find that the granting of relief would be abuse to chapeter 7 then a court may dismiss the petition of individual if his debt are of preimary consumer rather then his business debt. Further it is nt relevent under chapeter 7 that whether a debtor is solvent or insolvent.One of the primary purposes of bankruptcy is to discharge certain debts to give an honest individual debtor a "fresh start." The debtor has no liability for discharged debts.

Before giving relief under chapter 7,the bankrupty code required application of a means test to determine that whather it will be beificial to give relief under chapter 7 or not. Therefore if the debtor's monthly income over 5 years, net of certain statutorily allowed expenses, is more than (i) $12,475, or (ii) 25% of the debtor's nonpriority unsecured debt, as long as that amount is at least $7,025. (2) The debtor may rebut a presumption of abuse only by a showing of special circumstances that justify additional expenses or adjustments of current monthly income. Unless the debtor overcomes the presumption of abuse, the case will generally be converted to chapter 13 (with the debtor's consent) or will be dismissed.

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