1. Problems With Credit
Chapter 19

2. Goals for Chapter 19.1
List and explain different methods for solving credit problems.
Outline bankruptcy laws, including exempted items, types of income excluded, and bankruptcy options

3. Solving Credit Problems
Credit counselors often suggest use of the 20/10 rule to people beginning to use credit.
Your total borrowing should not exceed 20 percent of your yearly take-home pay, and you should not take on payments that total more than 10 percent of your monthly take-home pay.

4. Credit Counseling Debt Adjustment Credit Repair Legal Recourse
A debtor is a person who owes money to others.
Bankruptcy is a legal process that relieves debtors of the responsibility of paying their debts or protects them while they try to repay.

5. Types of Bankruptcy
Involuntary bankruptcy occurs when creditors file a petition with the court, asking the court to declare you bankrupt.
Voluntary bankruptcy, the most common kind, occurs when you file a petition with the court asking to be declared bankrupt.

6. Paying off Debts
Usually the value of all the bankrupt debtor’s assets is not enough to pay off all the debts.
The court sells the assets and gives each creditor a proportional share.
Discharged debts are debts erased by the court during bankruptcy proceedings.
Debts such as taxes, child support and alimony cannot be discharged.

7. Chapter 11 Bankruptcy
Chapter 11 bankruptcy is a reorganization form of bankruptcy for businesses that allow them to continue operating under court supervision as they repay their restructured debt.

8. Chapter 7 Bankruptcy
Chapter 7 bankruptcy is a liquidation form of bankruptcy for individuals that wipes out most debts in exchange for giving up most assets.
Exempted property (pg. 537) is the possessions that the bankrupt debtor is allowed to keep because they are considered necessary for survival.

9. Chapter 13 Bankruptcy
Chapter 13 bankruptcy is a reorganization form of bankruptcy for individuals that allows debtors to keep their property and use their income to pay a portion of their debts over three to five years.

10. Goals for Chapter 19.2 Discuss the major causes of bankruptcy.
Describe the advantages and disadvantages of declaring bankruptcy.

11. Causes of Bankruptcy Business Failure Emotional Spending
Failure to Budget and Plan
Catastrophic Injury or Illness

12. Advantages of Bankruptcy
Debts are erased
Exempted assets are retained
Certain incomes are unaffected
The cost is small

13. Disadvantages of Bankruptcy
Credit is damaged
Property is lost
Some obligations remain
Some debts can be reaffirmed
Co-signers must pay