Filing for Bankruptcy

Mr. Stasa – WE City Schools © 1

Questions you will be able to answer by the end of class today

What are the different types of bankruptcies and what do they do?

What are the pros and cons of bankruptcy?

Does bankruptcy erase all debt? Can you ever recover from bankruptcy? How can you avoid filing for

bankruptcy?

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What are the top 4 largestconsumer debts in the US?1. Home mortgages (15 trillion dollars)2. Student loans (865 billion dollars)3. Credit cards (694 billion dollars)4. Medical bills (are the cause of more

than 60% of bankruptcies filed in the US)

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What are the common types of bankruptcy?

Chapter 7Chapter 13

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What is Chapter 7 bankruptcy?

Allows you to erase most (but not all) of your debt without repayment

Unsecured loans will be discharged Secured loans must be paid or they

will be surrendered Property may be liquidated (sold

for cash) to repay creditors You must be currently employed or

have very low income to qualify Must undergo financial counseling Is much harder to file for than

Chapter 13

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Are there any benefits to Chapter 7 bankruptcy?

Chapter 7 bankruptcy provides a “fresh “start” by erasing most debts

Items cannot be reported as delinquent on credit report

Common debts that can be erased are: Credit cards Medical bills Utility bills Overdue rent Repossession debt

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What is Chapter 13 bankruptcy?

Chapter 13 bankruptcy allows you to repay most of your debt over an extended period of time with installments (for no more than 5 years)

Courts approve a repayment planMust attend financial education

courses

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True or false?

Filing for bankruptcy will erase all of my debts.FALS

E!

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Does bankruptcy erase all debts?

The following debts cannot be erased when filing for bankruptcy:Student loansChild supportAlimonyFines for crimes committed

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What are consequences of filing for bankruptcy?

Makes it harder to obtain / or may be denied a: Car loan House loan Student loans Personal loan

Harder to obtain a new credit card Employers may not hire Landlords may not rent Current credit cards may be closed Interest and fees WILL be higher Your credit score is severely lowered

(usually 200-300 points) Remains on credit report for 10 years

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How can I fix my credit after filing for bankruptcy?

Contact a debt counseling service Be extremely careful to only seek help

from an accredited counselor Some counselors are there to profit from

your debt and can hurt the situation more The National Foundation for Credit

Counseling www.nfcc.org The NFCC is a non-profit accredited

agency

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How does a credit counselor attempt to fix my debt?

They will sign you up for a debt repayment plan Only if your debt can be repaid in 5 years

The agency will negotiate with your creditors to lower your interest rates and have some debt forgiven

All debts will be gathered together You will make one single payment per month to

the agency Some may charge a monthly fee, but most are

free This fee should be less than $30

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How can I avoid bankruptcy? Don’t use a credit card unless you

have the cash to repay it Always try to pay credit cards in full

At least make the minimum payment Make a budget and stick to it Don’t buy a car or house if the

payments are more than you can afford

Avoid co-signing on loans for others who have questionable habits

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Always remember… Bankruptcy is never an easy way out

Bankruptcy is 100% avoidable Never spend more than you can afford

Always have at least 6 months of an emergency savings fund

Bankruptcy will make it harder to borrow money, get a job, and rent an apartment

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Red Ticket Time! What are the main differences between

chapter 7 and chapter 13 bankruptcies?

What debts can never be erased when bankruptcy is filed?

How many years does bankruptcy remain on your credit report?

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