© 2008. Oklahoma State Department of Education. All rights reserved.1 Personal Bankruptcy Standard...

Personal Bankruptcy

Standard 13.1 Bankruptcy

Standard 13: The student will evaluate the consequences of bankruptcy.

Teacher Presentation Series 13

1.1. Assess the costs and benefits of bankruptcy to individuals, families, and society. 1.2. Examine ways to prevent bankruptcy and identify alternatives to bankruptcy (e.g., budget management, debt management, refinancing, and financial counseling).1.3. Explain the importance of re-establishing a positive credit history and steps to improve a credit score after bankruptcy.

Down Payment

Montana and Carolina could not wait to graduate from high school and get married.

They were shocked to learn how much the other person owed.

Montana had:◦ A new truck◦Borrowed money on his credit card for

the down payment, tag, and title◦Booked their honeymoon to Mexico on

Down Payment

Carolina:• Drove an old car that constantly cost

her money on repairs • Charged those repairs on her credit

card, along with her clothes, shoes, dinners with friends, and everything else she wanted or needed• Her charges totaled $8,000.

Is this a good start to a marriage? What do

you recommend Montana and Carolina do

to get control over their debt?

No Way to PayYourYourBuy

Vocabulary

A person or company with * assets to cover their debt* to pay your bills when they are due

Vocabulary

BankruptcyA state of being * released from the obligation to repay * or * debt in exchange for the * loss of certain assetsA court’s determination of personal bankruptcy remains in a consumer’s credit record for * years

Top Reasons for Bankruptcy

D*IllnessG*UnemploymentFailing to pay *Excessive * bills

Why would these contribute to bankruptcy?

Bankruptcy

A * process where you request help from the courts to help * your debt.Bankruptcy petition

Chapter * – Straight bankruptcyChapter * – Reorganization of debt

Financial counseling *

Bankruptcy

* RecordsCreditors may be * at your hearingMust provide * personal informationCopies of * returns

BankruptcyChapter 7• Bankruptcy

trustee * your assets, converts them to *, and uses the money to * your creditors.

• Exempt and Non-exempt property• Most people who file * have exempt property.

• Cannot re-file for * years• No exceptions

Bankruptcy Chapter 7* release you

from all debtSometimes call

* bankruptcy

• Exempt items – excluded from the bankruptcy process and * be taken by the trustee

Bankruptcy

Chapter *• * adjustment•Allows you to *your property. • * plan - •You must have a * where you can make regular * payments to file.•Lasts about * to * years.

Bankruptcy

No matter which type of bankruptcy the law will * you to attend debt * classesIf you do * attend, your bankruptcy petition can be *.

When to File?

When you have * other choice:• Financial or credit counseling?• Call creditors?• New payment plans?

It is a * action, so be sure!Contact an * for pre-screening.

Costs and Benefits of Bankruptcy

What are some of the “costs” of filing bankruptcy?What are some of the “benefits” of filing bankruptcy?

Life After Bankruptcy?

Remains on credit history for * years* credit score* interest rates* riskNot * debt eliminatedFees• Attorneys• Counseling• Others

Life After Bankruptcy?

No more debt * callingReduces ** startLessons *

Bankruptcy Fraud

Making *statements or failing to accurately report all information is a *.

Bankruptcy Cost to Society

* dollars on bankruptcy courtsCreditors must hire attorneys – * cost of business* pays higher interest rates to offset the cost when someone cannot pay

Vocabulary

Consumer Credit Counseling* offered by organizations that help consumers find a way to * debts through careful * and management of funds

Credit Counseling

Restructure your *Set up a new * plan* your progressSome are not *

Web Site for Credit Counselinghttp://www.cccsok.orghttp://cccsofok.orgHttp://welcome.bbb.org

◦To make sure they are a reputable company

Vocabulary

CreditorA person or company to whom money is *Have the *to collect the money you owe

Call and * moneySend * demanding moneyTake you to * for paymentTake part of your wages as a *Repossession

Vocabulary

Debt * LoanA * loan that replaces the debt owed by multiple loans, often with a * monthly payments and a * repayment period

Managing DebtRefinancing debt• Debt consolidation loan• Combines all payments into one• Tends to have high interest rate•Must * your * or you will only have more debt!

Vocabulary

Financial CounselingGenerally the same as * credit counseling

Vocabulary

Home * LoanA loan secured by a primary residence or second home at the amount where the fair market value * the over the * owed on the property

Home Equity Loan

* money on your * to pay your monthly bills.If you miss one or more payments, you can * your home.

Home Equity Loan

High * LoanLender can * your house to get the money back you owe

Vocabulary

GarnishmentA legal * concerning the attachment of property to satisfy a debtTake * of your paycheck * you receive it

Vocabulary

RepossessionTo * possession of property in which the owner is * in payments

Repairing Credit

Pay bills on *.Establish *.* credit repair services!

Continue these good habits, and your score will increase! 34

Earnings

Good * management skills * the potential of filing bankruptcy or having * debt.High levels of debt is *. High levels of debt lead to * and * problems.Know your * to make the best choices when dealing with debt.

Balance Sheet

What are the options to bankruptcy?Who files bankruptcy?Why do people file bankruptcy?What are the costs and benefits of bankruptcy?How can you avoid bankruptcy? 36

Paid in Full

So, what do you think Montana and Carolina should do? If you said they need financial counseling, then you are correct. Managing debt is very stressful and is frequently a source of marital problems, suicide, and health-related issues.

Handout 13.1.1 – You Be the Judge

You have successfully filed bankruptcy and your debts have been forgiven. Does that ensure that you will have a successful financial future?

© 2008. Oklahoma State Department of Education. All rights reserved.1 Personal Bankruptcy Standard...

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