Johnny Bigbucks is 58 years old and lives in rural Mississippi. He has been very successful in several business ventures, but with the downturn in the economy he finds his business interests quickly on the demise. The businesses are all separate legal entities, but as many small business owners, Johnny guaranteed many of the business debts. With the businesses all but shut down and without funds to meet their obligations, creditors of the businesses are now turning to Johnny on the guarantees they have. Several creditors, SmallBiz Bank and Littleguy Bank, have sued Johnny and obtained default judgments for the obligations and are about to attempt to collect those debts from Johnny.

Fortunately for Johnny, he has accumulated substantial wealth ($1.5 million) in creditor protected retirement accounts. All of his other valuable assets, including his $600,000 home, custom pontoon boat, luxury car and other items are titled his wife, Betsy. Johnny is judgment proof in terms of any recovery from his assets, other than possible garnishment of his future wages/earnings.

Johnny got lucky and found a job consulting and he nets over $7,000.00 per a month. Johnny uses these funds to contribute to his household, as his wife has recently retired and earns a small state pension. When Johnny pays the large mortgage payment on his house and other personal obligations of the household, including keeping custom pontoon in tip top shape, as well as paying for his adult daughter Suzi's convertible and condo at college, he has very little to repay his creditors.

Johnny has sought the advice of the most prominent bankruptcy firm in the state. Two partners met with Johnny. The partners advised Johnny, that even with the new bankruptcy laws; he can file Chapter 7 protection and walk away from his guarantee obligations. In fact, under bankruptcy law he will be able to maintain his lifestyle and receive a fresh start. The partners advised Johnny that legally bankruptcy would work, but that if he did some belt tightening, he could easily pay at least 50% of his creditors back outside of bankruptcy.

Johnny does not know what to do. He likes the idea of getting forgiveness of his debts, but he questions whether he should use the bankruptcy process when he could actually work out a way to pay back a great deal of his debts. His decision impacts not only him, but also Betsy, Suzi, and his creditors.

Consider the underlying policy bases for bankruptcy law.Assuming that Johnny legally can file bankruptcy, is this outcome consistent with the policy bases for bankruptcy law?