personal finance: credit cards and bankruptcy © nperskine 2012

Personal Personal Finance: Finance:

Credit Cards and Credit Cards and BankruptcyBankruptcy

© nperskine 2012

- creditorcreditor: the lender or supplier of : the lender or supplier of money, goods, services, or securitiesmoney, goods, services, or securities

- debtordebtor: somebody who owes money, : somebody who owes money, goods, services, or securitiesgoods, services, or securities

-creditcredit: the borrowing capacity of an individual or company; a : the borrowing capacity of an individual or company; a transaction in which a borrower (or debtor) receives goods, transaction in which a borrower (or debtor) receives goods, services, or cash and agrees to repay the lender at a future services, or cash and agrees to repay the lender at a future date, normally with interestdate, normally with interest

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- annual percentage rate (APR)annual percentage rate (APR): a rate that shows : a rate that shows the total cost of credit annually; it includes a the total cost of credit annually; it includes a percentage of the principle as interest on a loan plus percentage of the principle as interest on a loan plus other costs (ex. points on a mortgage loan, service other costs (ex. points on a mortgage loan, service charges, etc.)charges, etc.)

- capitalcapital: the amount of monetary resources : the amount of monetary resources a potential buyer and/or loan applicant has a potential buyer and/or loan applicant has available; a measure of creditworthiness available; a measure of creditworthiness

- collateralcollateral: an asset such as an automobile or a : an asset such as an automobile or a piece of property that a person uses when taking out piece of property that a person uses when taking out a loan, promising to give the asset to the lender if a loan, promising to give the asset to the lender if loan payments cannot be metloan payments cannot be met

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--predatory lending:predatory lending: fraudulent, fraudulent, unethical, discriminatory, or unethical, discriminatory, or abusive lending practices abusive lending practices designed to exploit vulnerable designed to exploit vulnerable borrowers and lead to their borrowers and lead to their increased indebtedness (ex. increased indebtedness (ex. excessive and disguised fees for excessive and disguised fees for home mortgages)home mortgages)

-principalprincipal: the original sum : the original sum

invested or loanedinvested or loaned

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Credit Cards (2012)Credit Cards (2012) About 70% of Americans have at About 70% of Americans have at

least one credit card. least one credit card. U.S. credit card debt= $858 billionU.S. credit card debt= $858 billion Average credit card debt per Average credit card debt per

person= $7,194person= $7,194

College students graduate with College students graduate with average of $4,138 credit card average of $4,138 credit card debt! (2008)debt! (2008)

© nperskine 2012© nperskine 2012

Credit Reports and Scores 3 credit bureaus check/compile everyone’s

credit score: Trans Union, Equifax, and Experian.

FICO scores show a person’s past payment history. Banks, credit card companies, landlords, and even employers use people’s credit scores to determine how likely individuals are to default on payments.

Credit scores= range between 300-850

© nperskine 2012

How do I establish good How do I establish good credit?credit?

Open savings or checking account, and Open savings or checking account, and don’t don’t overdraft!overdraft!

Pay off credit card on time and pay more Pay off credit card on time and pay more than minimum payment (avoids interest)than minimum payment (avoids interest)

Pay bills on time (i.e. cell, utilities, etc.)Pay bills on time (i.e. cell, utilities, etc.)Pay rent on time (apt., mortgage, etc.)Pay rent on time (apt., mortgage, etc.)Don’t spend more than 30% of credit Don’t spend more than 30% of credit

limit, and don’t open up multiple lines of limit, and don’t open up multiple lines of credit. credit.

Age quicker! Age quicker!


Building a solid credit score can lead to you being granted an apt., car loan, TV, or anything else that would require routine payments.

*Also, the better the credit score, the lower the interest rates you will receive! (meaning you will pay less over the long-term)

-Negative credit info can stay on your credit report for 7 years.

© nperskine 2012

- liquidation- liquidation: to sell all of a company’s assets, pay : to sell all of a company’s assets, pay outstanding debts, and distribute the remainder to outstanding debts, and distribute the remainder to shareholders, then go out of businessshareholders, then go out of business

- Chapter 7Chapter 7: the part of the U.S. Bankruptcy Code : the part of the U.S. Bankruptcy Code allowing the liquidation of all of a debtor’s nonexempt allowing the liquidation of all of a debtor’s nonexempt assets to pay creditors (ex. sale of property)assets to pay creditors (ex. sale of property)

Bankruptcy Bankruptcy

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- Chapter 11Chapter 11: the U.S. Bankruptcy Code allowing : the U.S. Bankruptcy Code allowing companies (or high-earning individuals) to companies (or high-earning individuals) to reorganize their debt or rehabilitate and reorganize their debt or rehabilitate and reorganize their financial structure; the goal is to reorganize their financial structure; the goal is to propose a propose a planplan that is accepted by a vote of the that is accepted by a vote of the creditors. creditors.

- Chapter 13Chapter 13: allows an : allows an individualindividual to begin debt to begin debt repayment without forfeiting property: Chapter 13 repayment without forfeiting property: Chapter 13 requires that the debtor maintain a source of requires that the debtor maintain a source of income and adhere to a payment schedule set income and adhere to a payment schedule set forth by the court. forth by the court.

*Bankruptcies stay on your credit report for up to *Bankruptcies stay on your credit report for up to 10 10 years. years.

© nperskine 2012

Famous Individual Famous Individual BankruptciesBankruptcies Kim BassingerKim Bassinger

PT BarnumPT Barnum Samuel L. ClemonsSamuel L. Clemons Gary ColemanGary Coleman Walt DisneyWalt Disney Henry FordHenry Ford Marvin GayeMarvin Gaye Ulysses S. GrantUlysses S. Grant Johannes GutenbergJohannes Gutenberg Tony Gwynn Tony Gwynn Corey HaimCorey Haim MC HammerMC Hammer Larry KingLarry King Suge KnightSuge Knight

Stan Lee (creator of Spider Stan Lee (creator of Spider Man, Incredible Hulk, The Man, Incredible Hulk, The X-Men) X-Men)

Abe Lincoln Abe Lincoln Meatloaf Meatloaf Willie Nelson Willie Nelson Wayne NewtonWayne Newton Rembrandt (painter) Rembrandt (painter) Burt Reynolds Burt Reynolds Run DMC Run DMC Lawrence Taylor Lawrence Taylor Donald Trump Donald Trump Mike Tyson Mike Tyson Johnny Unitas Johnny Unitas Michael VickMichael Vick


Famous Corporate Famous Corporate Bankruptcies Bankruptcies

ChryslerChrysler Circuit CityCircuit City Continental AirlinesContinental Airlines ConverseConverse Delta AirlinesDelta Airlines EnronEnron General MotorsGeneral Motors KmartKmart Mervyn’s Mervyn’s

Northwest airlinesNorthwest airlines Planet HollywoodPlanet Hollywood Sizzler restaurantSizzler restaurant Six FlagsSix Flags US airwaysUS airways Western Union bankWestern Union bank Zenith electronicsZenith electronics


Funny Video Clips!

http://www.youtube.com/watch?v=X3VlSwUoIO0 (Mr. Bean)

http://www.youtube.com/watch?v=MtKn8YpOauA (SNL- Phil Hartman and Rosanne)

https://https://www.youtube.com/www.youtube.com/watch?v=hiCilTzhXrA watch?v=hiCilTzhXrA (The Office) (The Office)


personal finance: credit cards and bankruptcy © nperskine 2012

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