Transcript Ch. 12 - Easton Area School District

Ch. 12
Credit Protection
and
Bankruptcy
What happens if you can’t
pay your bills
Repossession
• Creditor taking back property that they
have a lien on.
• Keep them - to pay off the debt
• if debtor paid back more than 60%, items
must be sold (debtor gets extra money)
Garnishment of Wages
• Legal procedure that withholds your
earnings to pay off a debt
• Can’t exceed 25% of weekly take home
pay
• Exceptions:
• Support Payments
• Taxes
Laws Protecting Debtors
• Usury - maximum amount creditors
can charge in interest
• Consumer Credit Protection Act must disclose finance charge and APR
• Fair Credit Reporting Act - people
have a right to know what is in their
credit report
Laws Protecting Debtors
• Equal Credit Opportunity Act banks/businesses can’t discriminate
against credit applicants
• Can deny for 3 reasons:
• Low income
• Large current debts
• Bad record of making payments
Laws Protecting Debtors
• Fair Debt Collection Practices Act prohibits certain practices by debt
collectors
• Can’t threaten with violence
• Can’t use obscene language
• Can’t call at inconvenient times
Laws Protecting Debtors
• Fair Credit Billing Act - creditors
must correct billing errors that are
brought to their attention
• Must notify within 60 days
• Creditor must acknowledge letter within 30
days
• Creditor must explain the charge or fix it
within 90 days
Bankruptcy
• Legal process to sell assets to pay off debt.
• Voluntary - debtor files
• Involuntary - creditors begin proceedings
• 3 creditors must file petition if there are more than 12
creditors
• Amount owed must be more than
$11,625
• Or 1 creditor with amount owed more than
$11,625
Types of Bankruptcy
• Chapter 7 - Liquidation - individuals
discharge debts and get fresh start
• Debtors sell property to pay off debts
• Chapter 11 - Reorganization businesses reorganize their financial
affairs while staying in business
• Chapter 13 - Repayment Plan individuals reorganize their debts
and develop repayment plans
Exceptions
• Not all debts get discharged:
• Taxes
• Student loans
• Alimony/support
Exemptions
1. $7500 equity in a personal residence.
2. $1200 in one car.
3. $200 of each item of personal apparel and
household furnishings up to $4000.
4. $500 in jewelry.
5. $750 in professional books or tools of
trade.
How to avoid bankruptcy?
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Stop using a credit card
Switch to a debit card
Try to get an adjusted repayment plan
Consolidate your loans -lower pymts
What to do after
bankruptcy?
• Stays on credit report for 7-10 years
• Bad effect on your credit
• Educate yourself on:
• Budgeting
• Managing money
• Used credit/debit cards wisely