Bob and Sue Brown are a young couple with two small children. Within the past three years they stretched themselves financially in the course of acquiring and furnishing their first home and starting their family. Recently, Bob was laid off from his job managing computer technology operations for a telecom company. Then, Sue was injured in an automobile accident and has been unable to continue substitute teaching. Bob's unemployment benefits are insufficient to provide for the ordinary family expenses, much less meet the heavy financial obligations the family has taken on. The bank has filed a notice of intent to foreclose the mortgage on their home, and other creditors have sent letters threatening to repossess their car and furnishings. A friend has suggested that Bob and Sue consult with an attorney who specializes in bankruptcy matters who may be able to get them some relief from their creditors and gain a new start financially.
This situation raises a number of questions that will be addressed in this chapter. They include:
If the Browns file a petition in bankruptcy, what assets would they be able to retain as exempt from the claims of their creditors?
Which of their debts could be discharged in a bankruptcy proceeding?
What advantages and disadvantages would the Browns have if they filed under Chapter 7 (liquidations) as opposed to filing under Chapter 13 (consumer debt adjustments)?
Under the 2005 amendments to the Bankruptcy Code, are they eligible to file for Chapter 7 liquidation or must they file under Chapter 13 which will require them to continue to make payments on their debts?