© Oklahoma State Department of Education. All rights reserved.1 Personal Bankruptcy Standard 13.1 Bankruptcy

© 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 Examine ways to prevent bankruptcy and identify alternatives to bankruptcy (e.g., budget management, debt management, refinancing, and financial counseling) Explain the importance of re- establishing a positive credit history and steps to improve a credit score after bankruptcy. 3 © Oklahoma State Department of Education. All rights reserved.

Down Payment 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, © Oklahoma State Department of Education. All rights reserved.

Down Payment 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 © Oklahoma State Department of Education. All rights reserved.

No Way to Pay Your Buy © Oklahoma State Department of Education. All rights reserved.6

Vocabulary Vocabulary A person or company with * assets to cover their debt * to pay your bills when they are due 7 © Oklahoma State Department of Education. All rights reserved.

Vocabulary Vocabulary Bankruptcy A state of being * released from the obligation to repay * or * debt in exchange for the * loss of certain assets A court’s determination of personal bankruptcy remains in a consumer’s credit record for * years 8 © Oklahoma State Department of Education. All rights reserved.

Top Reasons for Bankruptcy D* Illness G* Unemployment Failing to pay * Excessive * bills 9 © 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 bankruptcy Chapter * – Reorganization of debt Financial counseling * 10 © Oklahoma State Department of Education. All rights reserved.

Bankruptcy * Records Creditors may be * at your hearing Must provide * personal information Copies of * returns 11 © Oklahoma State Department of Education. All rights reserved.

Bankruptcy Chapter 7 Bankruptcy trustee * your assets, converts them to *, and uses the money to * your creditors. 12 © 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 debt Sometimes call * bankruptcy 13 © 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 © Oklahoma State Department of Education. All rights reserved.

Bankruptcy No matter which type of bankruptcy the law will * you to attend debt * classes If you do * attend, your bankruptcy petition can be *. 15 © 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 © 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 © Oklahoma State Department of Education. All rights reserved.

Life After Bankruptcy? Remains on credit history for * years * credit score * interest rates * risk Not * debt eliminated Fees Attorneys Counseling Others 18 © Oklahoma State Department of Education. All rights reserved.

Life After Bankruptcy? No more debt * calling Reduces * * start Lessons * 19 © Oklahoma State Department of Education. All rights reserved.

Bankruptcy Fraud Making *statements or failing to accurately report all information is a *. 20 © Oklahoma State Department of Education. All rights reserved.

Bankruptcy Cost to Society * dollars on bankruptcy courts Creditors must hire attorneys – * cost of business * pays higher interest rates to offset the cost when someone cannot pay 21 © Oklahoma State Department of Education. All rights reserved.

Vocabulary Vocabulary Consumer Credit Counseling * offered by organizations that help consumers find a way to * debts through careful * and management of funds 22 © Oklahoma State Department of Education. All rights reserved.

Credit Counseling Restructure your * Set up a new * plan * your progress Some are not * 23 © Oklahoma State Department of Education. All rights reserved.

Web Site for Credit Counseling ◦ To make sure they are a reputable company © Oklahoma State Department of Education. All rights reserved.24

Vocabulary Vocabulary Creditor A person or company to whom money is * Have the *to collect the money you owe Call and * money Send * demanding money Take you to * for payment Take part of your wages as a * Repossession 25 © Oklahoma State Department of Education. All rights reserved.

Vocabulary Vocabulary Debt * Loan A * loan that replaces the debt owed by multiple loans, often with a * monthly payments and a * repayment period 26 © Oklahoma State Department of Education. All rights reserved.

Managing Debt Refinancing 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 © Oklahoma State Department of Education. All rights reserved.

Vocabulary Vocabulary Financial Counseling Generally the same as * credit counseling 28 © Oklahoma State Department of Education. All rights reserved.

Vocabulary Vocabulary Home * Loan A 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 © 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 © Oklahoma State Department of Education. All rights reserved.

Home Equity Loan High * Loan Lender can * your house to get the money back you owe 31 © Oklahoma State Department of Education. All rights reserved.

Vocabulary Vocabulary Garnishment A legal * concerning the attachment of property to satisfy a debt Take * of your paycheck * you receive it 32 © Oklahoma State Department of Education. All rights reserved.

Vocabulary Vocabulary Repossession To * possession of property in which the owner is * in payments 33 © 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 © Oklahoma State Department of Education. All rights reserved.

Earnings 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 © Oklahoma State Department of Education. All rights reserved.

Balance Sheet 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 © Oklahoma State Department of Education. All rights reserved.

Paid in Full 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 © Oklahoma State Department of Education. All rights reserved.

Handout – 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? © Oklahoma State Department of Education. All rights reserved.38