PFL #13 Bankruptcy

Which of the following statements about bankruptcy is TRUE?

• People who file bankruptcy pay lower interest rates because they have no debts.
• Bankruptcy stays on your credit report for 10 years and decreases your credit score.
• Bankruptcy stays on your credit report for 7 years and decreases your credit score.
• Bankruptcy stays on your credit report for 10 years, but has little, if any, impact on your credit score.

Bankruptcy is BEST defined as

• being unable to repay your bills because of overspending and irresponsible behavior.
• being legally released from the obligation to repay some or all debt in exchange for giving up some of your assets.
• being in a situation where your monthly payments are greater than your monthly income.
• filing a request with the courts to dismiss your bills due to the inability to make payments as required.

Bankruptcy should be considered when

• your insurance company will not pay all of your medical bills.
• you lose part of your income due to a divorce or death of a partner.
• you have no other options.
• it become difficult to make your monthly payments.

Which of the following is NOT considered a good option to bankruptcy?

• consumer credit counseling
• debt consolidation loan
• home equity loan
• stopping payment on all bills

The type of bankruptcy that reorganizes your personal debt with a payment plan is called

• Chapter 7
• Chapter 9
• Chapter 11
• Chapter 13

Suppose your friend has overspent on his credit cards and is having trouble paying his bills. What would you recommend he do?

• Get a debt consolidation loan.
• Get credit counseling to help resolve the problem and keep it from happening again.
• Contact an attorney about filing bankruptcy.
• Call the credit card companies and tell them he will make payments when he can.

One of the advantages of filing bankruptcy is that

• you do not have to pay any of your bills.
• creditors can only call you at work after your bankruptcy is accepted.
• creditors will close the overdue accounts and open new ones for you.
• creditors are required to stop calling you about late payments.

People who file bankruptcy

• are often victims of crime and need a fresh start.
• can still get credit but will pay higher interest rates until they rebuild their credit history.
• should be penalized for the rest of their lives for their lack of responsibility.
• are irresponsible individuals who should never be able to get credit again.

In order to rebuild your credit history after bankruptcy, you should

• start borrowing money at any interest rate to prove you can handle payments.
• hire a credit repair company to remove the bankruptcy from your credit files.
• use credit cautiously and pay your bills on time.
• wait until the bankruptcy information is removed from your files to borrow money.

All of the following are major reasons for filing bankruptcy EXCEPT

• gambling.
• divorce.
• student loans.
• failing to pay personal income tax.