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A Personal BANKRUPTCY Welcome to MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP YOUR financial fresh start © 2011.

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Presentation on theme: "A Personal BANKRUPTCY Welcome to MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP YOUR financial fresh start © 2011."— Presentation transcript:

1 a Personal BANKRUPTCY Welcome to MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP YOUR financial fresh start © 2011

2 Personal Bankruptcy MoneyWI$E A joint financial education project of Consumer Action and Capital One. MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

3 Welcome Why we are here To learn about personal bankruptcy. Bankruptcy is allowed under the law to give people a financial fresh start. MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

4 Key points Bankruptcy is an important tool for people facing severe financial problems. Bankruptcy laws can help you get a fresh financial start. Bankruptcy can affect your credit, insurance coverage, job prospects and your ability to get rental housing. MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

5 Topics we will cover: It is the legal right of all U.S. residents to file bankruptcy. The differences between Chapter 7 and Chapter 13 bankruptcy. Actions you can take to try to avoid bankruptcy. Bankruptcy’s effect on your life. What possessions the law allows you to keep during a bankruptcy. MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

6 Topics (continued): How to get and check your credit report. What credit counseling is and how to find a reputable credit counseling agency. Avoiding high-cost of debt consolidation loans and services. Rebuilding your credit after bankruptcy. MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

7 About Personal Bankruptcy Bankruptcy is a court proceeding. Bankruptcy remains on your credit report for 10 years. Each debt that was discharged under the bankruptcy petition (such as credit card accounts) may remain on your report for seven years. You should hire an attorney to file bankruptcy. MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

8 By Federal Law Article One, Section Eight of the U.S. Constitution authorizes Congress to enact bankruptcy laws. MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

9 Two Kinds of Bankruptcy Chapter 7 Chapter 13 MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

10 Chapter 7 Bankruptcy removes your responsibility for paying most of your debts not secured by collateral. Collateral is property that guarantees a loan.  Mortgage loans are guaranteed by real estate and car loans by the cars. You are allowed to keep exempt assets.  This is the property you are allowed to keep when you file bankruptcy. MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

11 Means Test All bankruptcy filers are subject to a “means test” to determine if they are eligible for Chapter 7 or if they must file a Chapter 13. Your income is compared to the median income in the state you live in, in addition to your financial ability to repay your debts. You still might be able to file Chapter 7 if your income is not sufficient to pay your current living expenses and to meet the repayment requirements of Chapter 13. To find the current median income in your state, go to the U.S. Trustee website at MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

12 Credit Counseling Pre-bankruptcy credit counseling and pre-discharge debtor education are bankruptcy requirements. People applying for bankruptcy must complete a federally approved credit counseling program within 6 months prior to filing. A debtor education course must be completed after filing to have debts discharged. Fees are normally charged for counseling and debtor education. If you cannot afford to pay, there is no charge A list of U.S. Trustee-certified agencies are listed at MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

13 To file bankruptcy you must also provide: a copy of your latest tax return for a Chapter 7. past 4 years’ tax returns for a Chapter 13. a certificate of credit counseling. evidence of earnings in the past 60 days. monthly net income and any anticipated increase in income. a photo ID. MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

14 The Court appoints a trustee The trustee arranges for the sale of your non-exempt property and is responsible for paying as many of your debts as possible with the proceeds. Not all debts can be erased by bankruptcy. MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

15 Chapter 13 Repayment bankruptcy is an option if you have income but can’t pay your debts. Allows you to pay your debts in installments over a three-to-five-year period. In general, you may keep all your property as long as you continue to make your Chapter 13 payments on time. Alimony and child support payments and long-term secured obligations such as your mortgage cannot be discharged. MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

16 Key points You can only file bankruptcy under one category at a time. Chapter 7 offers a financial fresh start and is a quicker process compared to a Chapter 13. A means test will determine if you are eligible to file Chapter 7 or repay part of your debt under a Chapter 13. Pre-bankruptcy credit counseling and pre-discharge debtor education are bankruptcy requirements. Chapter 7 can be filed only once every eight years. You cannot file Chapter 13 if you obtained a bankruptcy discharge in the past 2-4 years. MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

17 Let’s take a break Please be back in 15 minutes. MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

18 Repercussions of Bankruptcy When you file Chapter 7 bankruptcy, all your property except exempt assets will be sold to pay your creditors. An exempt asset is property you are allowed to keep during bankruptcy. If you file a Chapter 13 repayment plan, it will take three to five years to repay your debts and receive your discharge from the court. MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

19 Bankruptcy will not remove: Child support and alimony Debts for personal injury or death that you caused while under the influence of alcohol or illegal drugs Student loans Fines and penalties for law violations, such as traffic tickets, court-ordered payments or recent property tax assessments. Income taxes from the past three years and other tax debts Credit purchases of $1,150 or more for luxury items within 60 days of filing (continued) MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

20 Bankruptcy will not remove: (continued) Loans or cash advances of $1,150 or more taken within 60 days of filing Debts owed to a single creditor of more than $500 for luxury goods purchased within 90 days of filing Cash advances of $750 made within 70 days of filing Debts or judgments based on fraud or other illegal activities Criminal restitution resulting from illegal activities Debts you owe from a divorce decree or settlement Any debts you forgot to list in your bankruptcy filing MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

21 Key Points Bankruptcy remains on your credit report for up to 10 years This can make it difficult to get new credit, find a place to rent, get insurance or qualify for some jobs Unless you change your financial habits after you file bankruptcy, you might fall into debt again MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

22 To Declare, or Not to Declare? Bankruptcy is not a way to avoid debts you can afford to pay but just don’t want to pay. Bankruptcy will not allow you to keep your house and cars if you have a mortgage or car loan unless you pay your creditors. Bankruptcy will immediately stop most collection efforts against you. Creditors can’t take further action against you unless they obtain permission from the bankruptcy court. MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

23 Question Should I call my creditors to let them know I am having trouble making payments? MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

24 Talking to your creditors may help to resolve your problems if you have just a few debts and believe you can get back on your feet if given a little time. Explain that you are willing to pay off your debts. Ask to arrange a payment plan or negotiate a reduced settlement amount. MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

25 Classroom Activity Are Julee and Jimmy in Trouble? The trainer will distribute this worksheet. Read the financial information about Julee and Jimmy. Decide if you think they are in danger of financial trouble. MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

26 Take Home Worksheets The trainer will give you some worksheets: One will help you decide if you have too much debt. One is a questionnaire to help you assess your own risk of financial trouble or bankruptcy. These are for you to take home and fill out privately. MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

27 Preview of Next Session During the second MoneyWI$E session on Personal Bankruptcy we will learn about: Credit and credit reports Credit counseling Hiring an attorney Re-establishing credit MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

28 See You Next Time Thank you for your attention and participation. MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

29 Personal Bankruptcy Session Two MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

30 Credit Reports A credit report is a record of your payment history for all credit accounts, such as credit cards, unsecured loans, car loans and mortgages. Credit bureaus make credit reports available to companies that grant credit based upon payment histories. Most lenders get credit reports from one of three national credit reporting bureaus: Equifax, Experian and TransUnion MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

31 Credit History Not everyone has credit. If you have never had a credit card or a loan, you probably don’t have a credit history. People with no credit history do not have a credit report. MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

32 Your Free Credit Report The Fair Credit Reporting Act (FCRA) requires each of the three nationwide credit reporting agencies to provide you with a free copy of your credit report, at your request, once every 12 months. Your credit report gives you a breakdown of your debts.  Reviewing your report allows you to make sure the information listed on the report is accurate. MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

33 Obtain a copy of your free credit report: Online: By Phone: By mail : Annual Credit Report P.O. Box Atlanta, GA MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

34 Credit Counseling If you are in financial trouble, you can seek the help of a credit counselor. Credit counseling services are organizations that assist individuals with personal financial matters. Credit counselors provide advice, budgeting services, financial guidance, credit counseling anddebt management programs. MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

35 Debt Management Programs Credit counseling organizations work with lenders and creditors to offer debt management programs. If you enroll in a debt management program, the credit counseling agency will negotiate with creditors on your behalf and help you consolidate your bills into one monthly payment. You make one payment to the credit counselors and they then disburse it to your creditors. MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

36 For-Profit Credit Counselors Some credit counseling companies try to profit off of people in debt. These companies claim to be not-for-profit but they are really profit-making enterprises hiding behind non-profit status. You might get deeper in debt if you deal with the wrong company. Seek out non-profit counselors affiliated with the National Foundation for Credit Counseling MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

37 Resource Find a reputable non-profit credit counselor affiliated with the National Foundation for Credit Counseling: Web site is Call MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

38 The True Cost of Credit: A Guessing Game Classroom activity The activity is designed to see what you know about the cost of buying things on credit. Check the box that you think gives the true cost of buying these goods on credit. MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

39 Questions About the Activity Did your responses agree with the answers? What surprised you most? Can you suggest ways to keep finance charges at a minimum? MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

40 Hiring an Attorney It is important to retain an attorney when you file bankruptcy. Hiring an attorney protects your rights in bankruptcy court. Make sure the attorney you retain is an expert in bankruptcy. (continued) MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

41 Hiring an Attorney The cheapest attorney is not necessarily the best one. Don’t just pick up the Yellow Pages to look for an attorney. Ask people you know if they have a lawyer to recommend. Call your state bankruptcy bar association for recommendations. MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

42 Find a Lawyer Online Go to the National Association of Consumer Bankruptcy Attorneys (www.nacba.org), click on “Find a Bankruptcy Attorney near you”.www.nacba.org Visit the Legal Services Corporation web site at and go to “Find Legal Services”.www.lsc.gov Your public library probably has Internet access that you can use. MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

43 Let’s take a break Please be back in 15 minutes. MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

44 After Bankruptcy Filing bankruptcy may change your life in a positive way. It can remove your worries about your debts and gives you a financial fresh start. Some negative things might happen after you file bankruptcy. It may be hard to get a new credit card or to rent a place to live if the landlord checks applicants’ credit reports. If you apply for a new job, the employer might want to check your credit report. MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

45 Credit Cards Will I be able to get a new credit card? You might have trouble getting a regular credit card, but you will probably qualify for a secured credit card if you put money in a savings account to guarantee the card. MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

46 Banking Can I open a bank account? Unless you have abandoned a bank account while owing money, bounced checks you never paid back or had a bank account closed on suspicion of fraud, you should have no trouble opening a new bank account subsequent to filing bankruptcy. MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

47 Current Employment Will bankruptcy affect my job? The Bankruptcy Code specifically prohibits employers from discriminating against current employees who file bankruptcy. The law applies to private and government employers. MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

48 Looking for work If you look for a new job while the bankruptcy is still listed on your credit report, potential employers may choose to reject you. There is no law to prevent this from happening. MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

49 Re-establishing Credit A Chapter 7 bankruptcy will stay on your credit report for 10 years. Home and auto loan and credit card applications may ask if you’ve declared bankruptcy, and your answer may be a factor in the lender’s decision. You may be able to qualify for a mortgage or car loan at a higher-than-average interest rate. You should be able to qualify for a secured credit card if you deposit money in a bank account to guarantee the card. MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

50 Secured Credit Cards Even people with damaged credit or a bankruptcy may be able to get a secured credit card. Your line of credit on a secured card usually is the same as the amount of money you deposit. Some banks require as little as $300 for the deposit on a secured credit card. Generally, after six months to one year of on- time payments and careful use of your secured credit card, you may begin to get offers from unsecured credit card issuers. MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

51 Find a Secured Credit Card Ask local banks and credit unions if they offer secured credit cards. Visit Bankrate.com on the Internet and search for secured credit cards. This web site has listings of national companies that offer secured cards. Shop carefully and compare the terms on at least three cards — more if possible — before applying for one. MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

52 Questions & Answers Now’s your chance to ask questions about personal bankruptcy. MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

53 For More Information Consumer Action created the MoneyWI$E trainings. (415) MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

54 Class Evaluation Please fill out the MoneyWI$E evaluation form and leave it on your way out. MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

55 Congratulations! You’ve completed the MoneyWI$E training on Personal Bankruptcy. MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

56 MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP Visit money-wise.org for additional information and to access free financial education materials


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