Slide 2 Why You Dont Want to Go into Bankruptcy CARE PROGRAM
Slide 3 Overview Bankruptcy History Chapter 7 or Chapter 13?
Exemptions Why there is no privacy in bankruptcy Non-dischargeable
debts Bankruptcy hits your family and friends Slide 4 Bankruptcy in
history Before bankruptcy, there was debtors prison: Charles
Dickens Bankruptcy laws started in early 1840s Modern bankruptcy
law started in 1898, revised since then Credit card companies
successfully lobbied for bankruptcy law changes in 2005 to make
bankruptcy tougher for consumers Slide 5 What do the following
people have in common? Slide 6 Kim Basinger Slide 7 Francis Ford
Coppola Slide 8 Tia Carrere and Mike Tyson Slide 9 Larry King Slide
10 Michael Vick and Mick Fleetwood Slide 11 What do these people
have in common? They are all bankrupt. Kim Basinger paid $7,000 for
pet care and $9,000 for alimony - each month. Michael Vick had 2
boats and a $900,000 trust account for his dogs. Mike Tyson paid
$18,680 for clothing and $2,778 for food each month. How do we know
these things? Slide 12 No secrets in bankruptcy Bankruptcy laws
require the consumer to disclose everything the consumer owns,
everything the consumer owes, and all sorts of payments for the
years before bankruptcy Slide 13 Two main types of consumer
bankruptcy Chapter 7 and chapter 13 Things that chapter 7 and
chapter 13 have in common: You have to go through the court
process. You have to appear before a judge and report to a
bankruptcy trustee For all practical purposes, you have to hire a
lawyer. That costs thousands of dollars. You have to go through
approved credit counseling before filing. Its a black mark on your
credit report: 10 years Slide 14 Chapter 7 You turn over all your
assets except exempt assets to a bankruptcy trustee. Bankruptcy
trustee sells all your assets to pay creditors. You get a fresh
start Slide 15 Chapter 7 You can discharge many kinds of debts--but
there are some debts you dont discharge Discharge means you are
legally excused from paying those debts--but credit reporting
agencies can still report this information After 2005 Bankruptcy
Code changes, not available for everyone. If your discretionary
income is too high, you are not allowed to file chapter 7. Slide 16
Look at the forms you have to complete to show income calculation
Slide 17 Slide 18 Chapter 13 You retain control of your assets. You
must write a plan to repay your debts over 3 to 5 years. The plan
must channel all your income other than necessary living expenses
to debt repayment. You get a broader discharge than in chapter 7,
but only if you complete your plan. Slide 19 Exemptions: in
Illinois they are limited Technically, creditors and the trustee
cannot collect on exempt assets. But they can sell assets whose
value exceeds the exempt amount and give you just the cash amount
of the exemption. Slide 20 Home: $15,000 Illinois Exemptions 1
motor vehicle: $2400 Life insurance, 401(k), social security,
certain other retiree benefits School books, family pictures,
Bible, clothes Professional books and tools of the trade: $1500
Catch-all: $4,000 Not much else Slide 21 Why There is No Privacy in
Bankruptcy Bankruptcy debtors have to reveal vast amounts of
detailed, intimate, sometimes embarrassing information You sign
under penalty of perjury Its all public record Slide 22 Look at
this example of the schedules that someone filed Slide 23 Slide 24
Slide 25 Slide 26 Slide 27 Slide 28 Slide 29 Slide 30 Slide 31
Slide 32 Slide 33 Slide 34 Slide 35 Slide 36 Slide 37 Slide 38
Slide 39 Slide 40 Slide 41 Slide 42 Slide 43 Trustee makes the
debtor answer questions in front of creditors Trustees can take
away jewelry, car keys on the spot Creditors can make you answer
questions about your life for the last several years Slide 44 You
cannot discharge out of some debts For example: Student loans
Luxury consumer debts over $500 within 90 days of bankruptcy Cash
advances over $750 within 70 days of bankruptcy Debts as a result
of fraud Slide 45 Student Loans Not dischargeable unless UNDUE
HARDSHIP Undue hardship is the present and future inability to
repay the debt and maintain a minimal standard of living Only one
percent of student loan debt gets discharged based upon a showing
of undue hardship Slide 46 And remember... A private employer is
legally entitled to turn you down for a job simply because you
filed for bankruptcy! Slide 47 It can drag in your family and
friends The bankruptcy trustee can sue these people to give the
trustee money Gifts within 2 years of bankruptcy, e.g., to parents,
friends, perhaps your church Paying off family debts within 1 year
of bankruptcy. Slide 48 Conclusion Bankruptcy takes away your
privacy Bankruptcy touches your family, friends, and job Bankruptcy
doesnt protect you from all your creditors Bankruptcy is expensive
financially and emotionally Bankruptcy destroys your credit Slide
49 Presentation of Chicago CARE Program Graphic Design: Bonnie
McDuffie
