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Managing Your Debts Section 22.3
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Managing Your Debts Managing Your Debts Section 22.3Section 22.3
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 22.3
Borrowing Money and Buying on Credit
What You’ll Learn
How to recognize warning signs of debt How to recognize warning signs of debt problems (p. 496)problems (p. 496)
How to identify financial counseling How to identify financial counseling services (p. 496)services (p. 496)
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 22.3
Borrowing Money and Buying on Credit
What You’ll Learn
How to distinguish among the chapters of How to distinguish among the chapters of the federal bankruptcy law (p. 496) the federal bankruptcy law (p. 496)
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 22.3
Borrowing Money and Buying on Credit
Why It’s Important
Most people have financial problems of Most people have financial problems of some kind. Recognizing them and knowing some kind. Recognizing them and knowing what to do will improve your life.what to do will improve your life.
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 22.3
Borrowing Money and Buying on Credit
Legal Terms
bankruptcy (p. 496)bankruptcy (p. 496)family farmer (p. 497)family farmer (p. 497)homestead exemption (p. 499)homestead exemption (p. 499)
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 22.3
Borrowing Money and Buying on Credit
Warning Signs of Debt Problems Financial Counseling Services
Consumer Credit Counseling Service
Section OutlineSection Outline
Declaring Bankruptcy
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 22.3
Borrowing Money and Buying on Credit
Pre-Learning Question Pre-Learning Question
What do you think are some warning signs of debt problems?
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 22.3
Borrowing Money and Buying on Credit
1.1. You make only the minimum You make only the minimum monthly payment on credit cards. monthly payment on credit cards.
2.2. You have trouble paying the You have trouble paying the minimum amount. minimum amount.
3.3. The total balance on your credit The total balance on your credit cards increases every month.cards increases every month.
Warning Signs of Debt Problems Warning Signs of Debt Problems
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 22.3
Borrowing Money and Buying on Credit
4.4. You miss loan payments or often You miss loan payments or often pay late.pay late.
5.5. You use savings to pay for You use savings to pay for necessities such as food and necessities such as food and utilities.utilities.
6.6. You receive second or third You receive second or third payment due notices from creditors.payment due notices from creditors.
Warning Signs of Debt Problems Warning Signs of Debt Problems
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 22.3
Borrowing Money and Buying on Credit
7.7. You borrow money to pay off old You borrow money to pay off old debts.debts.
8.8. You exceed the credit limits on your You exceed the credit limits on your credit cards.credit cards.
9.9. You’ve been denied credit because You’ve been denied credit because of a bad credit report.of a bad credit report.
Warning Signs of Debt Problems Warning Signs of Debt Problems
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 22.3
Borrowing Money and Buying on Credit
Pre-Learning Question Pre-Learning Question
What does a financial counseling service do?
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 22.3
Borrowing Money and Buying on Credit
Financial Counseling Services Financial Counseling Services
If you’re having trouble paying your If you’re having trouble paying your bills and need help, you can contact bills and need help, you can contact
your creditors to work out an your creditors to work out an adjusted repayment planadjusted repayment plana nonprofit financial counseling a nonprofit financial counseling program program
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 22.3
Borrowing Money and Buying on Credit
Consumer Credit Consumer Credit Counseling Service Counseling Service
The Consumer Credit Counseling The Consumer Credit Counseling Service is a nonprofit organization Service is a nonprofit organization affiliated with the National Foundation affiliated with the National Foundation for Consumer Credit. for Consumer Credit.
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 22.3
Borrowing Money and Buying on Credit
Consumer Credit Consumer Credit Counseling Service Counseling Service
Local branches of the CCCS provide Local branches of the CCCS provide debt-counseling services and can be debt-counseling services and can be located through:located through:
white pages of telephone directorywhite pages of telephone directorythe Internetthe Internet1-800-388-22271-800-388-2227
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 22.3
Borrowing Money and Buying on Credit
Who is the Consumer Credit Counseling Service?
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 22.3
Borrowing Money and Buying on Credit
ANSWERANSWER
A nonprofit organization that provides debt-counseling services.
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 22.3
Borrowing Money and Buying on Credit
Do you have to be bankrupt to access this service?
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 22.3
Borrowing Money and Buying on Credit
ANSWERANSWER
No.
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 22.3
Borrowing Money and Buying on Credit
How can you locate this service?
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 22.3
Borrowing Money and Buying on Credit
ANSWERANSWER
In the phone directory, on the Internet, or by calling their toll-free telephone number.
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 22.3
Borrowing Money and Buying on Credit
Pre-Learning Question Pre-Learning Question
What is bankruptcy?
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 22.3
Borrowing Money and Buying on Credit
Declaring Bankruptcy Declaring Bankruptcy
BankruptcyBankruptcy is the legal process by is the legal process by which a debtor can make a fresh start which a debtor can make a fresh start through the sale of assets to pay off through the sale of assets to pay off creditors.creditors.
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 22.3
Borrowing Money and Buying on Credit
Declaring Bankruptcy Declaring Bankruptcy
Bankruptcy laws are named after the Bankruptcy laws are named after the chapters where they may be found in chapters where they may be found in the federal bankruptcy code.the federal bankruptcy code.
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 22.3
Borrowing Money and Buying on Credit
22.322.3
Types of Bankruptcy ProceduresTypes of Bankruptcy Procedures
Ordinary
Bankruptcy
Reorganization Family Farmer Debt
Adjustment
Chapter 7 Chapter 11 Chapter 12 Chapter 13
Individual Debt
Adjustment
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 22.3
Borrowing Money and Buying on Credit
Chapter 7Chapter 7
used when the debtor wants to used when the debtor wants to discharge most debts and begin discharge most debts and begin with a clean slate with a clean slate may be brought either voluntarily by may be brought either voluntarily by the debtor or involuntarily by the debtor or involuntarily by creditors creditors
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 22.3
Borrowing Money and Buying on Credit
Chapter 7Chapter 7
three creditors must file the petition three creditors must file the petition for bankruptcy if the debtor has 12 for bankruptcy if the debtor has 12 or more creditors or more creditors the combined debt owed to the the combined debt owed to the three must exceed $10,000 three must exceed $10,000
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 22.3
Borrowing Money and Buying on Credit
Chapter 11 Chapter 11
offers businesses a way to offers businesses a way to reorganize their financial affairs and reorganize their financial affairs and still remain in businessstill remain in businessrequires a petition for reorganization requires a petition for reorganization and a reorganization plan and a reorganization plan
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 22.3
Borrowing Money and Buying on Credit
Chapter 11 Chapter 11
plan must be approved by a certain plan must be approved by a certain number of creditors and the courtnumber of creditors and the courtif the plan is successful, the if the plan is successful, the business will continuebusiness will continue
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 22.3
Borrowing Money and Buying on Credit
Chapter 12 Chapter 12
Helps family farmers create a plan for Helps family farmers create a plan for debt repayment that allows them to debt repayment that allows them to keep their farms running.keep their farms running.
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 22.3
Borrowing Money and Buying on Credit
Chapter 12 Chapter 12
A A family farmerfamily farmer is defined as one is defined as one who receives more than one-half of who receives more than one-half of his or her total income from the farm.his or her total income from the farm.
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 22.3
Borrowing Money and Buying on Credit
Chapter 12 Chapter 12
To file for Chapter 12 bankruptcy, 80 To file for Chapter 12 bankruptcy, 80 percent of the debt must result from percent of the debt must result from farm expenses.farm expenses.
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 22.3
Borrowing Money and Buying on Credit
Chapter 13 Chapter 13
permits an individual debtor to permits an individual debtor to develop a repayment plandevelop a repayment planduring the period of repayment, during the period of repayment, creditors may not continue creditors may not continue collection activities collection activities
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 22.3
Borrowing Money and Buying on Credit
Chapter 13 Chapter 13
used when an individual debtor with used when an individual debtor with a steady income voluntarily decides a steady income voluntarily decides to adopt a debt adjustment planto adopt a debt adjustment planfor individuals only—no for individuals only—no corporations or partnershipscorporations or partnerships
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 22.3
Borrowing Money and Buying on Credit
Exemptions Exemptions
Some assets can be kept by the Some assets can be kept by the debtor. debtor.
These are called exemptions and can These are called exemptions and can be doubled for married couples filing be doubled for married couples filing jointly.jointly.
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 22.3
Borrowing Money and Buying on Credit
Exemptions Exemptions
Debtors can keep a maximum of Debtors can keep a maximum of $16,150 in equity in a personal $16,150 in equity in a personal residence. residence.
This is called the This is called the homestead homestead exemptionexemption. .
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 22.3
Borrowing Money and Buying on Credit
Exceptions to Discharge Exceptions to Discharge
Some debts cannot be discharged.Some debts cannot be discharged.
debts caused by the debtor’s frauddebts caused by the debtor’s fraudback taxesback taxesstudent loans that do not impose a student loans that do not impose a hardship on debtor hardship on debtor
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 22.3
Borrowing Money and Buying on Credit
Reviewing What You Learned
1. What are the nine warning signs that you might be in financial trouble?
Section 22.3 Assessment
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 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
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 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
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 22.3
Borrowing Money and Buying on Credit
Reviewing What You Learned
2. What service is provided by the Consumer Credit Counseling Service?
Section 22.3 Assessment
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 22.3
Borrowing Money and Buying on Credit
Reviewing What You Learned
Debt-counseling services.
Section 22.3 Assessment
Answer
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 22.3
Borrowing Money and Buying on Credit
Reviewing What You Learned
3. Discuss the differences between declaring Chapter 7 and Chapter 13 bankruptcy.
Section 22.3 Assessment
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 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
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 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
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 22.3
Borrowing Money and Buying on Credit
Section 22.3 Assessment
Critical Thinking ActivityDebt Problems Do you recognize any of the warning signs of debt problems? Do they apply to you or to someone you know?
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 22.3
Borrowing Money and Buying on Credit
Section 22.3 Assessment
Critical Thinking ActivityDebt 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?
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 22.3
Borrowing Money and Buying on Credit
Section 22.3 Assessment
Critical Thinking Activity AnswerDebt Problems Answers may vary but should recognize that taking care of financial problems will improve the quality of a person’s life.
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 22.3
Borrowing Money and Buying on Credit
Section 22.3 Assessment
Legal Skills in ActionCredit Counseling Unfortunately, many people realize they are in financial trouble when it is too late to correct the problem.
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 22.3
Borrowing Money and Buying on Credit
Section 22.3 Assessment
Legal Skills in ActionCredit 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.
Understanding Business and Personal Law
Managing Your Debts Managing Your Debts Section 22.3Section 22.3
Borrowing Money and Buying on Credit
Section 22.3 Assessment
Legal Skills in Action AnswerCredit Counseling Skits will vary but could include a discussion of the different types of bankruptcy.
Managing Your Debts Managing Your Debts End of Section 22.3End of Section 22.3
