Managing Credit Bell Ringer 5

Quinn started receiving notices that they have overdue payments and they are feeling overwhelmed by their debt. They ask you for advice. Of the following strategies, which would be the best strategy for Quinn to try first?

• Ignore the notices to avoid overpaying, as the debt will be discharged after 180 days

• Meet with a credit counselor to set up a debt management plan

• File for bankruptcy to eliminate their debts

• Pay a debt settlement company to solve the problem for them

What does a debt consolidation loan do?

• Negotiate with your creditors to lower your debt amount

• Combine your existing debts into one loan with one payment

• Create a loan repayment schedule as part of Chapter 13 bankruptcy

• Charge a high one-time fee to forgive all your existing debts

Which of the following statements is TRUE about Chapter 7 bankruptcy?

• Chapter 7 bankruptcy requires you to complete a 3-5 year repayment plan on your debts

• Chapter 7 bankruptcy is restricted to higher income levels than Chapter 13 bankruptcy

• Chapter 7 bankruptcy leaves your credit report after 3 years

• Chapter 7 bankruptcy results in you losing assets, like your home or car

Which of the following statements about bankruptcy is TRUE?

• It is the recommended first step if your debts exceed 30% of your income

• It stays on your credit report forever

• It eliminates all of your debts for free

• It decreases your credit score significantly

What does a credit counselor do?

• Decides whether or not the bank should issue a loan to someone

• Provides low-cost financial advice and creates debt management plans

• Collects debts that are owed to creditors and over 180 days late

• Co-signs loans to minimize financial risk for a borrower

What is the difference between Chapter 7 and Chapter 13 bankruptcy?

• Chapter 7 bankruptcy is for individuals; Chapter 13 bankruptcy is for corporations

• Chapter 7 bankruptcy sells your assets; Chapter 13 bankruptcy allows you to keep assets if you follow a repayment plan

• Chapter 7 bankruptcy only eliminates student loan debt; Chapter 13 bankruptcy eliminates all your debts

• There is no meaningful difference; both Chapter 7 and Chapter 13 bankruptcy clear your debts by selling off your assets and stay on your credit report for 10 years

Theo has significant debt and is considering filing for Chapter 7 bankruptcy. He should try all of the following strategies before filing for bankruptcy, EXCEPT…

• Meeting with a credit counselor

• Paying a debt settlement company

• Using a debt repayment strategy, like the Snowball or High Rate Method

• Setting up a debt management plan