1. BANKRUPTCY

2. 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.

3. ▫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 period

4. ▫Financial counseling – generally the same as consumer credit counseling ▫Garnishment – a legal warning concerning the attachment of property to satisfy a debt

5. ▫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 payments

6. Going Broke?

7. 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.

8. Some solutions to these problems may include: filing personal bankruptcy getting debt counseling refinancing personal debt. All of these options have costs and benefits

9. Managing High Levels of Debt

10. 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.

11. What can you do to manage high levels of debt? How can you overcome financial problems and build a better quality of life?

12. 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.

13. ▫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)http://www.cccsok.orghttp://cccsofok.org

14. 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 ▫This 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.

15. 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.

16. Bankrupt? Bankruptcy?

17. 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.

18. 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 purchased

19. 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.

20. 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.

21. Types of Personal Bankruptcy Chapter 7 Chapter 13

22. 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.

23. 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.

24. ▫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.

25. 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.

26. 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.

27. 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.

28. 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.

29. 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.

30. Bankruptcy Fraud ▫Making false statements or failing to accurately report all information during the bankruptcy process is a crime!

31. 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.

32. Repairing Your Credit ▫Beware of Credit Repair advertisements! Most of these advertisements are scam! Spending money to have your credit repaired is money wasted!