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Bankruptcy, student loans and sole proprietorships

Answer the questions in Scenario 1 and then select ONE of the other two Scenarios. It is not necessary to copy the case study into the paper. Label the beginning of each case study with the number you selected (e.g. Scenario 1). Cite your sources in APA format on a separate page

Scenario 1: Bankruptcy
Celia graduated from a prestigious law school two years ago. Celia's parents did not have the resources to help her pay for college. For the past seven years, Celia accumulated almost $150,000 in debt for student loans for her undergraduate and law degrees.

After graduation, Celia opened her own jury consulting business as a sole proprietor. Her new business was not doing well. Celia earned approximately $35,000 after her business expenses were paid. Remembering her class in bankruptcy from law school, Celia believed that if she filed a voluntary Chapter 7 petition that all of her debts would be discharged and she could start over.
- Is Celia entitled to file for Chapter 7 bankruptcy? Why or why not?
- Assume Celia is eligible to file Chapter 7. Will the credit card debt and student loans be discharged? Why or why not?

On May 1, Celia filed for Chapter 7 bankruptcy. At that time and for at least four months prior to that time, she was unable to pay all of her current obligations. On March 15, Celia paid the following expenses: her monthly personal credit card payment, her home mortgage, the rent for her consulting office, and the electric bill for both her business and her home.
- The trustee in bankruptcy claimed that some of these payments were voidable preferences. Is the trustee correct? If so, which payment(s) is a voidable preference and why?

Scenario 2: Property
Frankie Smith age 12, lived with his mother, Vanessa Smith, in a rental house next to a farm owned by Daphne and Brandon Brown. On the back of the farm property was a small creek that had good fishing, but there were deadly piranha in the waters. Frankie would often sneak onto the farm property to fish. One day, while fishing on the farm, he was bitten by a piranha and severely injured. While running to help her son on the farm property, Vanessa tripped on a wire and broke her leg. The Smiths sued the Browns for their injuries.
- Explain whether the Browns owe a duty of care to Frankie and Vanessa.

Scenario 3: Insurance
When Beth Simpson applied for a $250,000 life insurance policy with Meridian Insurance Co., she stated on the application that she had not seen a physician within the last three years. She, in fact, had seen a physician regularly. In fact, one month prior to the application Beth had seen her physician, who diagnosed her with fibromyalgia. Her response to the drug use question was that she was not a user of drugs, but, in fact, she regularly smoked marijuana because it eased the symptom of fibromyalgia. Beth died within the two-year contestability period and Meridian refused to pay. The beneficiary to the policy, Philip Simpson, contends all premiums were paid in full and any misstatements were unintentional. Meridian contends that if the deceased had given the facts, the policy would not have been issued.
- Based upon a discussion of your understanding of insurance law principles, should Philip Simpson recover on this policy? Why or why not?

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Scenario 1: Bankruptcy
Celia has fallen into the trap that many students fall into, accumulating large amounts of debt that are hard to repay. Student loans can really add up, and the interest can be merciless, none the less as Celia contemplates chapter 7 bankruptcy as a sole proprietor, she needs to know a couple of things. First, she needs to understand that she can file bankruptcy on both her personal debts and her business debts as a sole proprietor of her own company. Second, she needs to understand that not all her debts are considered business debts.
Credit card debt can be totally wiped ...

Solution Summary

Bankruptcy, student loans and sole proprietorships are discussed.