Question

9. The Osbornes have an annual income of $66,000 and monthly expenses of $5300, and they
are trying to determine whether or not they qualify for Chapter 7 bankruptcy. Their annual
income is greater than that of the median annual income of their state, but they still may be
eligible according to the means test. Help the Osbornes through the steps of the means test to
see if they qualify.
Part I: What is the Osbornes' monthly income?
I
Part II: What is the Osbornes' monthly income minus monthly expenses?
Part III: What is 60 times the answer to Part II?
Part IV: Is the answer to Part III greater than or less than $10,000?
Part V: Are the Osbornes eligible for Chapter 7 bankruptcy according to the means test?

Answer 1

A family qualifies for bankruptcy if the difference between their monthly income and expenditure, multiplied by 60 is greater than $10,000. So, The Osbornes qualify for chapter 7 bankruptcy.

We have the following parameters:

$Annual\ Income = \ 66000$

$Monthly\ Expenses = \ 5300$

To calculate the monthly income, we simply divide the annual income by 12 (12 is the number of months in a year)

So, we have:

$Monthly\ Income = \ 66000 \div 12$

$Monthly\ Income = \ 5500$

The difference between the monthly income and the expenses is:

$Difference = Monthly\ Income - Monthly\ Expenses$

$Difference = \ 5500 - \ 5300$

$Difference = \ 200$

The above result multiplied by 60 is:

$Product = Difference \times 60$

$Product = \ 200 \times 60$

$Product = \ 12000$

$12000 is greater than $10000

Since $12000 is greater than $10000, then they are eligible for chapter 7 bankruptcy.

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