When Charmaine Richie filed for Chapter 7 bankruptcy, she had been making a living through odd jobs over the past year yielding an income of $22,608. The median income is $37,873 for her home state of Wisconsin. Just prior to her bankruptcy petition filing, Richie completed a master’s degree in outdoor therapeutic recreation administration, which qualified her to work as a therapist for the handicapped in a camp or outdoor clinical setting. A job in this field would likely have brought Richie well above the median income and disqualified her for protection under Chapter 7 bankruptcy. Additionally, Richie had been looking for jobs in her field but only in the Racine-Kenosha area of Wisconsin, where there were very few opportunities. She was qualified to work at many other jobs that would have brought her above the median, but she wanted employment only in her chosen field and in her home geographic area.

After her petition was filed, the bankruptcy trustee requested that the court reject the Chapter 7 petition and convert the case to a Chapter 13 petition, whereby Richie would have to pay all or much of her debt. The trustee alleged that Richie was abusing the Chapter 7 bankruptcy means test because she was capable of earning more money but did not. Moreover, Richie filed bankruptcy immediately after graduate school, when her future earning potential was relatively high.

Richie argued that moving elsewhere to work would be a burden and having a different full-time job would hurt her future prospects for getting a job in her chosen field.

CASE QUESTIONS

1. Should Richie be forced to relocate or work in another field in order to use bankruptcy laws?

2. Richie lacked the ability to pay because she had not engaged in a broad employment search, did not wish to work outside her chosen field, and did not wish to work within her chosen field outside her geographic area. Should her creditors bear the burden of her choices?