Bankruptcy

Bankruptcy

Multiple Choice

Which famous business person utilized bankruptcy laws?

• President Trump

• George Foreman

• All of the above

• Walt Disney

Multiple Choice

What is bankruptcy?

• Bankruptcy is a legal process where an individual or business declares that they are unable to pay their debts and seeks relief from their creditors.

• Bankruptcy is a process where an individual or business is punished for not paying their debts.

• Bankruptcy is a process where an individual or business is exempted from paying their debts.

• Bankruptcy is a process where an individual or business is rewarded for paying off their debts.

Bankruptcy

○ A legal process to get out of debt when

you can no longer make all your required
payment.

Multiple Choice

A financial "fresh start" for an individual might be found through which of the following?

• Filing Chapter 1

• Filing Chapter 7

• Filing Chapter 17

• Filing Chapter 21

Multiple Choice

The person who owes money to someone else is the

• debtor

• creditor

• lender

• bank

Multiple Choice

You have not been able to pay the bank the payments you owe on your truck. Eventually, the bank will

• Make you file bankruptcy

• Call your mom

• Garnish your truck

• Repossess your truck

Multiple Choice

If you are employed by someone else and the court says you own money, part of your paycheck may be withheld to pay your debt. This is called ___.

• Garnishment of wages

• Repossession of money owed

• Partial bankruptcy

• Very embarrassing to you

Multiple Choice

If you make a major purchase such as a car or boat, the item purchased will likely be held as ____ to protect the bank's loan to you.

• Ransom

• Collateral

• Collision insurance

• Prisoner

Multiple Choice

How does filing for bankruptcy affect an individual's credit score?

• It significantly improves the credit score immediately.

• It has no effect on the credit score.

• It may significantly lower the credit score for several years.

• It only affects the credit score if debts are not discharged.

Multiple Choice

What are the consequences of filing for bankruptcy?

• Retainment of assets

• Easy access to loans

• The consequences of filing for bankruptcy include a lower credit score, difficulty securing loans, loss of assets, and potential damage to reputation.

• Increased credit score

Multiple Choice

Amount charged if your payment is received after the billing date

• late payment fee
• overdue fee
• withdrawal fee
• loser fee

Multiple Choice

A social consequence to filing for bankruptcy

• Not receiving a job offer

• Not qualifing for a loan

• Not qualifing for insurance

• Having an unfavorable reputition in the community

Multiple Choice

Which agency is responsible for ensuring there is a healthy econmy in the United States

• Federal Reserve Board

• The Supreme Court

• U.S. Dept of Treasury

• United States Banking Commission

Multiple Choice

Which type of bankruptcy involves a repayment plan?

• Chapter 13

• Chapter 9

• Chapter 11

• Chapter 7

Multiple Choice

Which type of bankruptcy involves liquidation of assets?

• Chapter 7

• Chapter 9

• Chapter 11

• Chapter 13

Multiple Choice

What should be the top priorities in a monthly budget?

• Rent or mortgage, utilities, and food

• Entertainment, transportation, and education

• Snacks, movies, and other small purchases

• Credit card payments and new purchases

Multiple Choice

What are some warning signs of serious credit trouble?

• Feeling overwhelmed by bills and paying bills late

• Reaching credit card limits and applying for new credit cards

• Using one credit card to pay off another

• All of the above

Multiple Choice

Which of the following best describes the difference between secured and unsecured debt?

• Secured debt comes from a bank, which is FDIC insured; unsecured debt comes from elsewhere.

• Secured debt is covered by the owner's insurance policies; unsecured debt is totally uninsured.

• Secured debt must be repaid; unsecured debt should be repaid but doesn't have to be if you can't afford payments.

• Secured debt is guaranteed by a physical object, such as your car or house; unsecured debt has no item that could be repossessed for nonpayment.

Multiple Choice

Lenders will offer you help if you need it.

• True
• False

Multiple Choice

If you are in trouble and can not make your home or property payments you should do this first.

• Contact your lender
• Cancel your credit cards
• Just ignore it
• Sell your car

Multiple Choice

You should avoid all calls and mail from your lender.

• True
• False

Multiple Choice

What is the role of a bankruptcy trustee in the bankruptcy process?

• To oversee the bankruptcy process, liquidate assets, and distribute the proceeds to creditors.

• To help the bankrupt individual find a new job

• To provide financial assistance to the bankrupt individual

• To negotiate with creditors to increase the debt amount

Reasons for Bankruptcy

○ Medical Expenses

○ Job Loss

○ Business Losses

○ Natural Disaster

○ Divorce

○ Credit Card Debt

Best defense is a good
offense

1.
Have $1,000 emergency fund

2.
Have 3-6+ months expenses

P.S. Home-based business can provide

spending income and tax advantages that

further prevent bad debt.

Debt

○ The entire amount of money a person

owes to lenders.

Payday Lending

○ “Loan” based on equity of an owned

asset

○ Car worth $1000 after the loan (if any) is

paid

○ Many states do NOT limit the amount of

interest charged.

Bankruptcy Basics

1.
Chapter 7

○ LIQUIDATION

○ wipes out all allowable debts and allows

certain personal property exemptions.

2.
Chapter 13

○ REORGANIZATION

○ is a court-approved repayment plan.

Consequences of Bankruptcy

○ Influences financial freedom

○ Limits choices

○ Pay more for credit

○ Other people absorb your debt

Bankruptcy Laws

○ Requires those filing to get counseling

before they are allowed to file.

○ Bars filers with above-average income

from filing Chapter 7 (liquidation).

○ New debt may not be discharged.

○ Quicker collections process

Alternatives to Bankruptcy

○ Out of court settlement

○ Reduction of payments

○ Obtaining help from consumer credit

counseling

○ Payment of debts by selling or borrowing

on property.

Things to Consider BEFORE
Filing

• A bankruptcy filing could determine

whether or not you get a job.

• Your insurance rates could rise.
• You may find it difficult to rent an

apartment or qualify for a home loan.

• Bankruptcies stay on your credit report for

7-10 years.

• Bankruptcy will lower your credit score.

Things to Do BEFORE Filing:

• Reduce your spending
• Talk with your creditors.
• Talk with a nonprofit counseling agency.
• Talk with an attorney and understand the

consequences of declaring bankruptcy.

• Consider consolidation carefully.

TIPS TO REMEMBER

• Keep track of your daily expenses.
• Save money on a regular basis.
• Make changes right away if you see

yourself starting to get into financial
trouble.

• Pay attention to your household finances,

especially if you are married.

Snowball and Avalanche
Methods

○ ABL_to_Pay_off_Debt video

○ Snowball: pay debts in order of amount of

money owed, starting with the smallest.

○ Avalanche: pay debts in order of interest

rate, starting with the highest.

○ How the snowball method adds up…