Bankruptcy: Emily and the Enormous Amount of Student Loans
Emily graduated from a very prestigious college and was in her second year of medical school. Emily's parents did not have the resources to help her pay for college. For the past six years, Emily survived using student loans and credit cards. Emily's latest student loan statement read that she owed over $350,000 in student loan debt. Emily attended a bankruptcy seminar. She decided to file a voluntary Chapter 7 petition. Emily's attorney said that her credit card debt would be discharged. The attorney was not sure about Emily's student loan debt. Emily received several deferments and forbearances on the loans but ultimately defaulted before making any payments. Under the federal bankruptcy laws, is Emily entitled to a discharge on her student loans?
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Student loans can only be discharged in a bankruptcy if you can prove that the student loan payments create an undue hardship, as defined by law, for you, your family, or your dependents. Student loans are very difficult to have discharged in a bankruptcy because if it ...
This solution discusses the issues, facts, and laws involved with Emily and the Enormous Amount of Student Loans scenario. All relevant facts and correct conclusions are presented in the solution.
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?