In this module, you have learned about the different types of bankruptcies, which creditors have priority and how the assets will be distributed. In this assignment, you will have an opportunity to analyze a situation, examining how each of these concepts applies. First, read the following scenario: Suppose a friend of yours is insolvent and asks for your assistance in choosing between filing for a straight bankruptcy under Chapter 7 and filing under Chapter 13. Your friend has multiple debts including a mortgage to Chase Bank, student loan debt, unpaid taxes, child support payments, a loan from GMAC for her car, a $8,000 loan she incurred for a bike that she bought last month, and credit card debt.
Based on the scenario, answer each of the following questions as completely as possible:
1. Describe to your friend the major differences between the two types of proceedings.
2. Explain why Chapter 11 is not applicable in this case.
3. If your friend does file bankruptcy, what property would be exempt?
4. Again, considering your friend, what types of debts would not be dischargeable in bankruptcy?
5. Assume your friend decides to file Chapter 7 bankruptcy, but does not have enough assets to satisfy all of her debts. Which creditors would have priority?