MaryBeth has credit card debt of about $80,000. She also has unpaid me

QUESTION

MaryBeth has credit card debt of about $80,000. She also has unpaid medical bills totalling nearly $60,000 and has not been working because of illness.

Her house is worth about $275,000, but she has nearly $230,000 left to pay on the mortgage. Her household furnishings are worth about $60,000. If MaryBeth’s creditors took her to court, what would most likely happen?
What will be an ideal response?

ANSWER

Answer: Most likely, MaryBeth would be forced into involuntary bankruptcy and forced to file Chapter 7—liquidation. Chapter 11 is primarily for businesses that continue to function while paying off creditors, and Chapter 13, wage earner’s reorganization, does not apply to MaryBeth because she is not currently working. MaryBeth would be forced to sell her house and her furnishings and would have to pay her creditors as much as the sale of those things would allow. Any leftover debt beyond that would be forgiven.
Explanation: Most likely, MaryBeth would be forced into involuntary bankruptcy, when creditors ask a court to order debtors to repay. She would probably file Chapter 7—liquidation—or convert assets into cash. A Chapter 7 bankruptcy forces debtors to turn over their assets to a court-appointed trustee, who divides them among the creditors. The debtor is then no longer required to pay off the rest of the debts. Chapter 11 is primarily for businesses that continue to function while paying off creditors, and Chapter 13, wage earner’s reorganization, does not apply to MaryBeth because she is not currently working.