Lesson 19.1 Getting Unstuck

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Presentation transcript:

Lesson 19.1 Getting Unstuck Explain methods for solving credit problems. Outline bankruptcy laws and choices. © South-Western Educational Publishing

Standard BCS-FL-6 Students will analyze factors that affect the choice of credit, cost of credit, legal aspect of using credit. © South-Western Educational Publishing

Solving Credit Problems The 20/10 rule Credit counseling Debt adjustment Credit repair Credit scams © South-Western Educational Publishing

The 20/10 Rule Your borrowing power should NOT exceed 20% of your yearly take-home pay. You should not take on monthly payments total more than 10 % of your monthly take home pay (net pay). Does not apply to mortgage loans Does apply to all other types of credit. Close and open.

20/10 rule example Yearly take home pay is $21000 Monthly take home is 21000/12= $1750 Your total borrowing power should not exceed $4200 (20%) Your monthly credit payment should not exceed $175 (10%) Following the 20/10 rule can help you keep your debt within your means to repay!!!!!!

Bankruptcy Bankruptcy laws and their purpose Types of bankruptcy Legal advice Reaffirmation of debts © South-Western Educational Publishing

Types of Bankruptcy Involuntary bankruptcy Voluntary bankruptcy MYPF CHAPTER 19 13-SEPT-2001 Types of Bankruptcy Involuntary bankruptcy Voluntary bankruptcy Chapter 11 bankruptcy Chapter 7 bankruptcy Chapter 13 bankruptcy Chapter 11 bank… is a type © South-Western Educational Publishing

Lesson 19.2 Reconsidering Bankruptcy Discuss the major causes of bankruptcy. Describe the advantages and disadvantages of declaring bankruptcy. © South-Western Educational Publishing

Major Causes of Bankruptcy Job loss Emotional spending Failure to budget and plan Catastrophic injury or illness © South-Western Educational Publishing

Advantages and Disadvantages of Bankruptcy Debts are erased. Exempted assets are retained. Certain incomes are unaffected. The cost is small. Disadvantages Credit is damaged. Property is lost. Some obligations remain. Some debts can be reaffirmed. Co-signers must pay. © South-Western Educational Publishing