Exercises: Bankruptcy, Insurance, and Charitable Giving

Describe the main difference between Chapter 7 and Chapter 13 personal bankruptcy. Say which one involves a repayment plan and which one may involve selling certain assets.

Define these three insurance terms: premium, deductible, and copay. Give one short example of each for health insurance.

What is charitable giving? Name two ways a person can give besides donating money. Explain in one or two sentences how a tax deduction for donations works for people who itemize deductions.

A health plan has a monthly premium of $\$300$, a deductible of $\$2{,}000$, $20\%$ coinsurance after the deductible, and an out-of-pocket maximum of $\$5{,}000$. Noah has a surgery with a bill of $\$10{,}000$ and has no other medical costs that year. Find what he pays out of pocket for the surgery. Then find his total yearly cost including premiums.

Liam's car is worth $\$9{,}000$. His collision coverage costs $\$480$ per year and has a $\$500$ deductible. He has an accident, and the repair bill is $\$3{,}200$. Find how much the insurance company pays and how much Liam pays for the repair. Then find his net cost for the year, including the premium. Explain why he might still say the insurance was worth buying.

Chloe donates $\$50$ per month to a food bank for 12 months and also volunteers 40 hours there during the year. Find her total money donation. If her part-time job pays $\$14$ per hour, find the value of the wages she could have earned in 40 hours. Discuss the costs and the benefits of her giving, including benefits that cannot be measured in dollars.

Daniel owes $\$45{,}000$ in unsecured debt (credit cards and medical bills). He earns $\$38{,}000$ per year and owns assets worth $\$6{,}000$. He is considering Chapter 7 bankruptcy, Chapter 13 bankruptcy, or a nonprofit debt management plan. Compare the costs and benefits of the three options, including effects on his credit report, assets, and monthly budget. Recommend one option and defend your choice.

Sofia rents an apartment. Her belongings are worth $\$15{,}000$. Renters insurance costs $\$15$ per month with a $\$500$ deductible. Suppose there is a $1\%$ chance each year of a fire that destroys $\$9{,}000$ of her belongings. Find the expected annual loss without insurance and the annual premium. Then find what Sofia would pay out of pocket in a fire with insurance. Explain why buying insurance can still be a good decision even when the premium is larger than the expected loss.