Transcript Chapter 19 Problems with Credit

Lesson 19.1
Getting Unstuck
GOALS
 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
Chapter 11 bankruptcy
Chapter 7 bankruptcy
Chapter 13 bankruptcy
© South-Western Educational Publishing
Lesson 19.2
Reconsidering
Bankruptcy
GOALS
 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
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.
© South-Western Educational Publishing