1. Managing Your Debts Section 22.3

2. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit What You’ll Learn How to recognize warning signs of debt problems (p. 496) How to identify financial counseling services (p. 496)

3. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit What You’ll Learn How to distinguish among the chapters of the federal bankruptcy law (p. 496)

4. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit Why It’s Important Most people have financial problems of some kind. Recognizing them and knowing what to do will improve your life.

5. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit Legal Terms bankruptcy (p. 496) family farmer (p. 497) homestead exemption (p. 499)

6. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit Warning Signs of Debt Problems Financial Counseling Services Consumer Credit Counseling Service Section Outline Declaring Bankruptcy

7. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit Pre-Learning Question What do you think are some warning signs of debt problems?

8. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit 1.You make only the minimum monthly payment on credit cards. 2.You have trouble paying the minimum amount. 3.The total balance on your credit cards increases every month. Warning Signs of Debt Problems

9. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit 4.You miss loan payments or often pay late. 5.You use savings to pay for necessities such as food and utilities. 6.You receive second or third payment due notices from creditors. Warning Signs of Debt Problems

10. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit 7.You borrow money to pay off old debts. 8.You exceed the credit limits on your credit cards. 9.You’ve been denied credit because of a bad credit report. Warning Signs of Debt Problems

11. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit Pre-Learning Question What does a financial counseling service do?

12. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit Financial Counseling Services If you’re having trouble paying your bills and need help, you can contact your creditors to work out an adjusted repayment plan a nonprofit financial counseling program

13. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit Consumer Credit Counseling Service The Consumer Credit Counseling Service is a nonprofit organization affiliated with the National Foundation for Consumer Credit.

14. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit Consumer Credit Counseling Service Local branches of the CCCS provide debt-counseling services and can be located through: white pages of telephone directory the Internet 1-800-388-2227

15. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit Who is the Consumer Credit Counseling Service?

16. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit ANSWER A nonprofit organization that provides debt-counseling services.

17. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit Do you have to be bankrupt to access this service?

18. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit ANSWER No.

19. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit How can you locate this service?

20. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit ANSWER In the phone directory, on the Internet, or by calling their toll-free telephone number.

21. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit Pre-Learning Question What is bankruptcy?

22. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit Declaring Bankruptcy Bankruptcy is the legal process by which a debtor can make a fresh start through the sale of assets to pay off creditors.

23. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit Declaring Bankruptcy Bankruptcy laws are named after the chapters where they may be found in the federal bankruptcy code.

24. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit 22.3 Types of Bankruptcy Procedures Ordinary Bankruptcy ReorganizationFamily Farmer Debt Adjustment Chapter 7Chapter 11Chapter 12Chapter 13 Individual Debt Adjustment

25. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit Chapter 7 used when the debtor wants to discharge most debts and begin with a clean slate may be brought either voluntarily by the debtor or involuntarily by creditors

26. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit Chapter 7 three creditors must file the petition for bankruptcy if the debtor has 12 or more creditors the combined debt owed to the three must exceed $10,000

27. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit Chapter 11 offers businesses a way to reorganize their financial affairs and still remain in business requires a petition for reorganization and a reorganization plan

28. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit Chapter 11 plan must be approved by a certain number of creditors and the court if the plan is successful, the business will continue

29. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit Chapter 12 Helps family farmers create a plan for debt repayment that allows them to keep their farms running.

30. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit Chapter 12 A family farmer is defined as one who receives more than one-half of his or her total income from the farm.

31. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit Chapter 12 To file for Chapter 12 bankruptcy, 80 percent of the debt must result from farm expenses.

32. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit Chapter 13 permits an individual debtor to develop a repayment plan during the period of repayment, creditors may not continue collection activities

33. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit Chapter 13 used when an individual debtor with a steady income voluntarily decides to adopt a debt adjustment plan for individuals only—no corporations or partnerships

34. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit Exemptions Some assets can be kept by the debtor. These are called exemptions and can be doubled for married couples filing jointly.

35. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit Exemptions Debtors can keep a maximum of $16,150 in equity in a personal residence. This is called the homestead exemption.

36. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit Exceptions to Discharge Some debts cannot be discharged. debts caused by the debtor’s fraud back taxes student loans that do not impose a hardship on debtor

37. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit Reviewing What You Learned 1. 1.What are the nine warning signs that you might be in financial trouble? Section 22.3 Assessment

38. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit Reviewing What You Learned Make only minimum payments; have trouble making the minimums; total balance on credit cards increases each month; miss loan payments or pay late; use savings to pay for necessities; Section 22.3 Assessment Answer

39. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit Reviewing What You Learned Receive second or third payment due notices; borrow money to pay off old debts; exceed the credit limits; denied credit because of a bad credit report. Section 22.3 Assessment Answer

40. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit Reviewing What You Learned 2. 2.What service is provided by the Consumer Credit Counseling Service? Section 22.3 Assessment

41. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit Reviewing What You Learned Debt-counseling services. Section 22.3 Assessment Answer

42. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit Reviewing What You Learned 3. 3.Discuss the differences between declaring Chapter 7 and Chapter 13 bankruptcy. Section 22.3 Assessment

43. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit Reviewing What You Learned Chapter 7: may be brought either voluntarily (by the debtor) or involuntarily (by creditors). Three creditors must file the petition for bankruptcy, if the debtor has 12 or more creditors. Section 22.3 Assessment Answer

44. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit Reviewing What You Learned The combined debt owed the three must exceed $10,000. Chapter 13: permits an individual debtor to develop a repayment plan. Section 22.3 Assessment Answer

45. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit Section 22.3 Assessment Critical Thinking Activity Debt Problems Do you recognize any of the warning signs of debt problems? Do they apply to you or to someone you know?

46. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit Section 22.3 Assessment Critical Thinking Activity Debt Problems How might you correct debt problems or advise someone else to do so? Why is it important to address debt problems as soon as possible?

47. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit Section 22.3 Assessment Critical Thinking Activity Answer Debt Problems Answers may vary but should recognize that taking care of financial problems will improve the quality of a person’s life.

48. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit Section 22.3 Assessment Legal Skills in Action Credit Counseling Unfortunately, many people realize they are in financial trouble when it is too late to correct the problem.

49. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit Section 22.3 Assessment Legal Skills in Action Credit Counseling Create a skit between a young adult who has too much debt and a credit counselor. Have the credit counselor offer advice. Next, act out the skit with a partner.

50. Understanding Business and Personal Law Managing Your Debts Section 22.3 Borrowing Money and Buying on Credit Section 22.3 Assessment Legal Skills in Action Answer Credit Counseling Skits will vary but could include a discussion of the different types of bankruptcy.

51. Managing Your Debts End of Section 22.3