1. Chapter 19
Problems with Credit

2. Solving Credit Problems
Credit problems usually arise after months and years of poor planning.
Easier to start off using credit wisely than to get out of trouble later.
Exercise good credit management –

3. 20/10 Rule A guideline to credit planning.
20/10 Rule – total borrowing should not exceed _____ of ______ take-home pay, and _______ payments should not be more than _____ of your monthly take-home pay.
Does not apply to mortgages.

4. Danger Signs You pay for everything with credit
You often pay late or skip payments
You shift credit card balances from one card to another
You worry about how you will pay bills
You don’t have funds for emergencies
Your credit cards are near their limits
Your credit score is falling

5. Steps to Get Help
Credit Counseling
Debt Adjustment

6. Steps to Get Help
Credit Repair
Legal Recourse
debtor -
bankruptcy –

7. Bankruptcy Laws 2 Goals of Bankruptcy Laws 1) 2)
Bankruptcy Act of 1898
Bankruptcy Reform Act of 1994 – tightened rules but allowed insolvent debtors to keep more of their assets
Bankruptcy Abuse and Prevention Consumer Act of 2005 – Made the declaration of bankruptcy more difficult for individuals – mandatory counseling, courses, etc.

8. Classes of Debt
Secured loans –
Unsecured debt –

9. Bankruptcy Vocab
Involuntary bankruptcy –
Voluntary bankruptcy –

10. Credit Vocab
Discharged debt –
Liquidation –
Reorganization –

11. Bankruptcy Vocab
Chapter 11 –
Chapter 7 –
Chapter 13 –

12. Bankruptcy Vocab Exempted property $21,625 equity in a home
$3,450 interest in motor vehicles
Items worth up to $500 for a single item for household goods and furnishings, appliances, clothing, personal items, for up to $11,525

13. Debts that cannot be discharged

14. Reaffirmation of Debts
May choose reaffirmation if you had a __________.
May choose if you don’t want to lose _________.

15. Causes of Bankruptcy

16. Advantages of Bankruptcy
(social security, veteran’s pay, unemployment comp., alimony, child support, disability, pensions)

17. Disadvantages of Bankruptcy