© South-Western Educational Publishing Chapter 19 Problems with Credit Getting Unstuck Reconsidering Bankruptcy.

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© South-Western Educational Publishing Chapter 19 Problems with Credit Getting Unstuck Reconsidering Bankruptcy

GOALS © South-Western Educational Publishing Lesson 19.1 Getting Unstuck List and explain different methods for solving credit problems. Outline bankruptcy laws, including exempted items, types of income excluded, and bankruptcy options.

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

© South-Western Educational Publishing Bankruptcy Laws and Their Purpose Types of bankruptcy Legal advice Reaffirmation of debts

© South-Western Educational Publishing Types of Bankruptcy Involuntary bankruptcy Voluntary bankruptcy Chapter 7 bankruptcy Chapter 11 bankruptcy Chapter 13 bankruptcy

© South-Western Educational Publishing The 20 Rule Never borrow more than 20% of your yearly take-home pay. Example: Your-take home pay is $20,000 per year, then.20 x $20,000 = $4000. This means that your loans (credit cards, car payment, store charge cards, etc.) should never total more than $4,000. Do not include your mortgage or rent when calculating.

© South-Western Educational Publishing The 10 Rule Monthly payments should not exceed 10% of your monthly take-home pay. Example: Your monthly take-home pay is $500, then 10% x $500 = $50. This means that your monthly payments for loans (credit cards, car payment, store charge cards, etc.) should not be more than $50.

GOALS © 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 Business failure Emotional spending Failure to budget and plan Catastrophic injury or illness

© South-Western Educational Publishing Advantages and Disadvantages of Bankruptcy Advantages 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.