VOCAB Bankrupt a person or company with insufficient assets to cover their debt Bankruptcy a state of being legally released from the obligation to repay some or all debt in exchange for the forced loss of certain assets A courts determination of personal bankruptcy remains in ID: 151721
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Slide1
BANKRUPTCY Slide2
VOCAB
Bankrupt
– a person or company with insufficient assets to cover their debt
Bankruptcy
– a state of being legally released from the obligation to repay some or all debt in exchange for the forced loss of certain assets. A court’s determination of personal bankruptcy remains in a consumer’s credit record for 10 years.Slide3
Consumer credit counseling
– services offered by organizations that help consumers find a way to repay debts through careful budgeting and management of funds
Creditor
– a person or company to whom money is owed
Debt consolidation loan
– a single loan that replaces the debt owed by multiple loans, often with a lower monthly payment and a longer repayment periodSlide4
Financial counseling
– generally the same as consumer credit counseling
Garnishment
– a legal warning concerning the attachment of property to satisfy a debtSlide5
Home equity loan
– a loan secured by a primary residence or second home at the amount where the fair market value exceeds the debt owed on the property
Repossession
– to take possession of property in which the owner is behind in paymentsSlide6
Going Broke? Slide7
Poor money management and overspending habits will quickly lead to high levels of debt but there are other reasons people face mountains of
bills:
Divorce
prolonged illness
personal issues
rapid
inflation
These
can
all wreck your budget. Slide8
Some solutions to these problems may
include:
filing personal
bankruptcy
getting debt
counseling
refinancing personal debt.
All
of these options have costs and benefitsSlide9
Managing High Levels of DebtSlide10
Imagine not being able to pay your bills, make your house payment, or feed your family. While that may seem like “someone else’s problem”, there are many families dealing with this scenario every month.Slide11
What can you do to manage high levels of debt? How can you overcome financial problems and build a better quality of life?Slide12
1. Go for credit counseling or financial
counseling
Credit
counseling is guidance on how to budget money and come up with a plan to pay as much debt as possible.
An
organization will help you restructure your debt
so
you can pay it off.
As
part of their service, you get help in knowing how to better manage your money and they will help you set up a plan and monitor your progress in paying off your debt. Slide13
BE CAREFUL!
There are many organizations that make promises they cannot keep and charge you for their help which will only leave you with more bills!!
Consumer Credit Counseling Services of Central Oklahoma (
http://www.cccsok.org
) or Consumer Credit Counseling of Oklahoma (
http://cccsofok.org
) Slide14
2. Refinance your
debt
Consider
a debt consolidation loan that will put all of your debt into one payment that is easier to manage.
You
will still need to manage your money better (change behavior)
3. Get a home equity loan
T
his
means that you borrow money on your house to pay your bills; it is similar to a debt consolidation loan except the loan is against your home.
This
, however, is a high risk option because, if you fail to make your payments, the lender may repossess your home.Slide15
4. File for personal
bankruptcy
Bankruptcy
is a legal process that allows you to either make reduced payments on your bills or erase them for your files
.
Bankruptcy
stays on your credit report for 10 years, will result on higher interest rates when you begin borrowing again, requires the loss of certain assets, and can be difficult to obtain.Slide16
Bankrupt? Bankruptcy? Slide17
Being Bankrupt
means
that you cannot pay your bills
Bankruptcy happens when
you
request legal action.
Creditors
(someone to whom you owe money) have a right to collect the money you owe.Slide18
If you fail to pay, creditors
may
call
and demand
payment
send letters demanding
payment
take you to court
take part of your paycheck
refuse to give you credit
or take back what you purchasedSlide19
Once
you file for
bankruptcy
*
creditors
must stop trying to collect payments from
you
with
bankruptcy
, you will repay the creditor a fraction of what you owe.Slide20
The process can take several months once you hire an attorney to file a bankruptcy petition on your behalf.
Bankruptcy
filings are public record – once you file, you must appear before the bankruptcy trustee.
Your
creditors are also part of the hearing and they are allowed to question your situation.
In
addition to providing all of your personal information, you must provide copies of your income tax return for them to review.Slide21
Types of Personal Bankruptcy
Chapter 7
Chapter 13Slide22
Chapter 7 –
The
purpose of Chapter 7 is to totally release you from all debt included in your bankruptcy petition
.
Chapter
7 (Straight Bankruptcy)
is
designed to provide an orderly process where a bankruptcy trustee collects your assets, turns them into cash, and distributes the money to the people you owe.Slide23
Some property (life insurance, alimony, retirement savings accounts, and pictures) is exempt; the remaining property is called non-exempt and will be seized by the bankruptcy trustee.Slide24
If you are approved to file Chapter 7, it means you have little (or no) non-exempt property.
Once you file, you cannot file for 8 years from the date you started the process –regardless of your debt level so take this decision seriously.Slide25
Chapter 13 – Chapter 13 (Debt Adjustment)
allows
you to file a repayment plan for your bills – allowing you to keep your personal possessions.
If
a plan is approved by a trustee, you have 3 to 5 years to make reduced payments on your debt.Slide26
It is only available if you have sufficient income and all payments are made directly to the bankruptcy trustee who monitors your plan.
You
may only be required to pay a percentage of what you owe to each creditor and creditors cannot take actions against you.
However
, failure to pay the payments can result in serious consequences. Slide27
When?
Bankruptcy is
NOT
a substitute for good money management. It is a last resort – consider all other options before filing
.
Calling
your creditors is often the first step in finding a solution; many creditors, especially banks, would rather work with you to set up a payment plan than see you file for bankruptcy.
It
is
YOUR
responsibility to contact them and explain your situation.Slide28
After Bankruptcy
Bankruptcy provides immediate relief from creditors who are calling you asking for
payments
can
reduce the stress of trying to handle everything by
yourself
allows
you to start fresh.Slide29
However, there are serious
costs
on
your credit report for 10
years
lower
credit
score
higher
interest
rates
negative
impact on perspective
jobs
some
debt (student loan, taxes) are still have to be
paid
must
pay a filing fee to the
court
attorney fees
required
to attend debt counseling classes, etc.Slide30
Bankruptcy Fraud
Making
false statements or failing to accurately report all information during the bankruptcy process is a crime! Slide31
Societal Costs
Tax
dollars spent on bankruptcy courts and the people who work there cannot be spent on other public goods and services.
Creditors
have to pay people to represent them in court – adding to their cost of doing business and raising prices.
Creditors
pass the costs off to customers.Slide32
Repairing Your
Credit
Beware
of Credit Repair advertisements! Most of these advertisements are scam! Spending money to have your credit repaired is money wasted!