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© 2008. Oklahoma State Department of Education. All rights reserved. 1
Personal Bankruptcy
Standard 13.1 Bankruptcy
Standard 13: The student will evaluate the consequences of bankruptcy.
© 2008. Oklahoma State Department of Education. All rights reserved. 2
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.
3© 2008. Oklahoma State Department of Education. All rights reserved.
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
his credit card for $5,000. 4© 2008. Oklahoma State Department of Education. All rights reserved.
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?
5© 2008. Oklahoma State Department of Education. All rights reserved.
No Way to PayYourYourBuy
© 2008. Oklahoma State Department of Education. All rights reserved. 6
Vocabulary
A person or company with * assets to cover their debt* to pay your bills when they are due
7© 2008. Oklahoma State Department of Education. All rights reserved.
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
8© 2008. Oklahoma State Department of Education. All rights reserved.
Top Reasons for Bankruptcy
D*IllnessG*UnemploymentFailing to pay *Excessive * bills
9© 2008. Oklahoma State Department of Education. All rights reserved.
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 *
10© 2008. Oklahoma State Department of Education. All rights reserved.
Bankruptcy
* RecordsCreditors may be * at your hearingMust provide * personal informationCopies of * returns
11© 2008. Oklahoma State Department of Education. All rights reserved.
BankruptcyChapter 7• Bankruptcy
trustee * your assets, converts them to *, and uses the money to * your creditors.
12© 2008. Oklahoma State Department of Education. All rights reserved.
• 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
13© 2008. Oklahoma State Department of Education. All rights reserved.
• 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.
14© 2008. Oklahoma State Department of Education. All rights reserved.
Bankruptcy
No matter which type of bankruptcy the law will * you to attend debt * classesIf you do * attend, your bankruptcy petition can be *.
15© 2008. Oklahoma State Department of Education. All rights reserved.
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.
16© 2008. Oklahoma State Department of Education. All rights reserved.
Costs and Benefits of Bankruptcy
What are some of the “costs” of filing bankruptcy?What are some of the “benefits” of filing bankruptcy?
17© 2008. Oklahoma State Department of Education. All rights reserved.
Life After Bankruptcy?
Remains on credit history for * years* credit score* interest rates* riskNot * debt eliminatedFees• Attorneys• Counseling• Others
18© 2008. Oklahoma State Department of Education. All rights reserved.
Life After Bankruptcy?
No more debt * callingReduces ** startLessons *
19© 2008. Oklahoma State Department of Education. All rights reserved.
Bankruptcy Fraud
Making *statements or failing to accurately report all information is a *.
20© 2008. Oklahoma State Department of Education. All rights reserved.
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
21© 2008. Oklahoma State Department of Education. All rights reserved.
Vocabulary
Consumer Credit Counseling* offered by organizations that help consumers find a way to * debts through careful * and management of funds
22© 2008. Oklahoma State Department of Education. All rights reserved.
Credit Counseling
Restructure your *Set up a new * plan* your progressSome are not *
23© 2008. Oklahoma State Department of Education. All rights reserved.
Web Site for Credit Counselinghttp://www.cccsok.orghttp://cccsofok.orgHttp://welcome.bbb.org
◦To make sure they are a reputable company
© 2008. Oklahoma State Department of Education. All rights reserved. 24
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
25© 2008. Oklahoma State Department of Education. All rights reserved.
Vocabulary
Debt * LoanA * loan that replaces the debt owed by multiple loans, often with a * monthly payments and a * repayment period
26© 2008. Oklahoma State Department of Education. All rights reserved.
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!
27© 2008. Oklahoma State Department of Education. All rights reserved.
Vocabulary
Financial CounselingGenerally the same as * credit counseling
28© 2008. Oklahoma State Department of Education. All rights reserved.
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
29© 2008. Oklahoma State Department of Education. All rights reserved.
Home Equity Loan
* money on your * to pay your monthly bills.If you miss one or more payments, you can * your home.
30© 2008. Oklahoma State Department of Education. All rights reserved.
Home Equity Loan
High * LoanLender can * your house to get the money back you owe
31© 2008. Oklahoma State Department of Education. All rights reserved.
Vocabulary
GarnishmentA legal * concerning the attachment of property to satisfy a debtTake * of your paycheck * you receive it
32© 2008. Oklahoma State Department of Education. All rights reserved.
Vocabulary
RepossessionTo * possession of property in which the owner is * in payments
33© 2008. Oklahoma State Department of Education. All rights reserved.
Repairing Credit
Pay bills on *.Establish *.* credit repair services!
Continue these good habits, and your score will increase! 34
© 2008. Oklahoma State Department of Education. All rights reserved.
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.
35© 2008. Oklahoma State Department of Education. All rights reserved.
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
© 2008. Oklahoma State Department of Education. All rights reserved.
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.
37© 2008. Oklahoma State Department of Education. All rights reserved.
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. 38