Personal Bankruptcy
MoneyWi$e
A joint financial education project of
Consumer Action and Capital One
MoneyWi$e: Personal Bankruptcy Seminar
Welcome

Why we are here
– To learn about personal bankruptcy.
– Bankruptcy is allowed under the law to
give people a financial fresh start.
MoneyWi$e: Personal Bankruptcy Seminar
Key points

Bankruptcy is an important tool for
people facing severe financial problems.

Bankruptcy laws can help you get a fresh
financial start.

Bankruptcy can affect your credit,
insurance coverage, job prospects and
your ability to get rental housing.
MoneyWi$e: Personal Bankruptcy Seminar
Topics we will cover:

It is the legal right of all U.S. residents
to file bankruptcy.

The differences between Chapter 7 and
Chapter 13 bankruptcy.

Actions you can take to try to avoid
bankruptcy.

Bankruptcy’s effect on your life.

What possessions the law allows you
to keep during a bankruptcy.
(continued)
MoneyWi$e: Personal Bankruptcy Seminar
Topics (continued):

How to get and check your credit report.

What credit counseling is and how to find
a reputable credit counseling agency.

Avoiding high-cost of debt consolidation
loans and services.

Rebuilding your credit after bankruptcy.
MoneyWi$e: Personal Bankruptcy Seminar
About Personal Bankruptcy

Bankruptcy is a court proceeding.

Bankruptcy remains on your credit
report for 10 years.

Each debt that was discharged under
the bankruptcy petition (such as credit
card accounts) may remain on your
report for seven years.

You should hire an attorney to file
bankruptcy.
MoneyWi$e: Personal Bankruptcy Seminar
By Federal Law

Article One, Section Eight of the U.S.
Constitution authorizes Congress to
enact bankruptcy laws.
MoneyWi$e: Personal Bankruptcy Seminar
Two Kinds of Bankruptcy

Chapter 7

Chapter 13
MoneyWi$e: Personal Bankruptcy Seminar
Chapter 7

Bankruptcy removes your
responsibility for paying most of
your debts not secured by collateral.
– Collateral is property that guarantees
a loan.

Mortgage loans are guaranteed by real
estate and car loans by the cars.
– You are allowed to keep exempt assets.

This is the property you are allowed to
keep when you file bankruptcy.
MoneyWi$e: Personal Bankruptcy Seminar
Means Test

All bankruptcy filers are subject to a “means
test” to determine if they are eligible for
Chapter 7 or if they must file a Chapter 13.
– Your income is compared to the median
income in the state you live in, in addition to
your financial ability to repay your debts.
– Debtors who can pay at least $6000 within a
five year period ($100 per month), will be
required to file a Chapter 13.

To find the current median income in your
state, go to the U.S. Trustee website at
www.usdoj.gov/ust.
MoneyWi$e: Personal Bankruptcy Seminar
Credit Counseling

Pre-bankruptcy credit counseling and predischarge debtor education are bankruptcy
requirements.
– People applying for bankruptcy must complete a
federally approved credit counseling program within
6 months prior to filing.
– A debtor education course must be completed after
filing to have debts discharged.
– Fees are normally charged for counseling and debtor
education. If you cannot afford to pay, there is no
charge

A list of U.S. Trustee-certified agencies are
listed at www.usdoj.gov/ust.
MoneyWi$e: Personal Bankruptcy Seminar
To file bankruptcy you must also
provide:

a copy of your latest tax return for a Chapter 7.

past 4 years’ tax returns for a Chapter 13.

a certificate of credit counseling.

evidence of earnings in the past 60 days.

monthly net income and any anticipated
increase in income.

A photo ID.
MoneyWi$e: Personal Bankruptcy Seminar
The Court appoints a trustee

The trustee arranges for the sale of
your non-exempt property and is
responsible for paying as many of
your debts as possible with the
proceeds.
– Not all debts can be erased by
bankruptcy.
MoneyWi$e: Personal Bankruptcy Seminar
Chapter 13

Repayment bankruptcy is an option
if you have income but can’t pay
your debts.

Allows you to pay your debts in
installments over a three-to-five-year
period.

In general, you may keep all your
property as long as you continue to
make your Chapter 13 payments on time.

Alimony and child support payments
and long-term secured obligations such
as your mortgage cannot be discharged.
MoneyWi$e: Personal Bankruptcy Seminar
Key points

You can only file bankruptcy under one category at a time.

Chapter 7 offers a financial fresh start and is a quicker
process compared to a Chapter 13.

A means test will determine if you are eligible to file
Chapter 7 or repay part of your debt under a Chapter 13.

Pre-bankruptcy credit counseling and pre-discharge debtor
education are bankruptcy requirements.

Chapter 7 can be filed only once every eight years.

You cannot file Chapter 13 if you obtained a bankruptcy
discharge in the past 2-4 years.
MoneyWi$e: Personal Bankruptcy Seminar
Let’s take a break

Please be back in 15 minutes.
MoneyWi$e: Personal Bankruptcy Seminar
Repercussions of Bankruptcy

When you file bankruptcy, all your
property except exempt assets will
be sold to pay your creditors.
– An exempt asset is property you are
allowed to keep during bankruptcy.

If you file a Chapter 13 repayment
plan, it will take three to five years
to repay your debts and receive
your discharge from the court.
MoneyWi$e: Personal Bankruptcy Seminar
Bankruptcy will not remove:

Child support and alimony

Debts for personal injury or death that you
caused while under the influence of alcohol or
illegal drugs

Student loans

Fines and penalties for law violations, such as
traffic tickets, court-ordered payments or
recent property tax assessments.

Income taxes from the past three years and
other tax debts

Credit purchases of $1,150 or more for luxury
items within 60 days of filing
(continued)
MoneyWi$e: Personal Bankruptcy Seminar
Bankruptcy will not remove:
(continued)

Loans or cash advances of $1,150 or more taken
within 60 days of filing

Debts owed to a single creditor of more than $500
for luxury goods purchased within 90 days of filing

Cash advances of $750 made within 70 days of filing

Debts or judgments based on fraud or other illegal
activities

Criminal restitution resulting from illegal activities

Debts you owe from a divorce decree or settlement

Any debts you forgot to list in your bankruptcy filing
MoneyWi$e: Personal Bankruptcy Seminar
Key Points

Bankruptcy remains on your credit
report for up to 10 years
– This can make it difficult to get new credit,
find a place to rent, get insurance or
qualify for some jobs

Unless you change your financial
habits after you file bankruptcy, you
might fall into debt again
MoneyWi$e: Personal Bankruptcy Seminar
To Declare, or Not to Declare?
– Bankruptcy is not a way to avoid debts you
can afford to pay but just don’t want to pay.
– Bankruptcy will not allow you to keep your
house and cars if you have a mortgage or car
loan unless you pay your creditors.
– Bankruptcy will immediately stop most
collection efforts against you.
– Creditors can’t take further action against
you unless they obtain permission from the
bankruptcy court.
MoneyWi$e: Personal Bankruptcy Seminar
Question

Should I call my creditors to let
them know I am having trouble
making payments?
MoneyWi$e: Personal Bankruptcy Seminar

Talking to your creditors may help to
resolve your problems if you have just
a few debts and believe you can get
back on your feet if given a little time.

Explain that you are willing to pay off
your debts.

Ask to arrange a payment plan or
negotiate a reduced settlement
amount.
MoneyWi$e: Personal Bankruptcy Seminar
Classroom Activity

Are Julee and Jimmy in Trouble?

The trainer will distribute this
worksheet.
– Read the financial information about
Julee and Jimmy.
– Decide if you think they are in danger
of financial trouble.
MoneyWi$e: Personal Bankruptcy Seminar
Take Home Worksheets

The trainer will give you some
worksheets:
– One will help you decide if you have too
much debt.
– One is a questionnaire to help you assess
your own risk of financial trouble or
bankruptcy.

These are for you to take home and
fill out privately.
MoneyWi$e: Personal Bankruptcy Seminar
Preview of Next Session

During the second MoneyWi$e
session on Personal Bankruptcy we
will learn about:
– Credit and credit reports
– Credit counseling
– Hiring an attorney
– Re-establishing credit
MoneyWi$e: Personal Bankruptcy Seminar
See You Next Time

Thank you for your attention and
participation.
MoneyWi$e: Personal Bankruptcy Seminar
Personal Bankruptcy
A MoneyWi$e
Seminar
Session Two
Credit Reports
– A credit report is a record of your payment
history for all credit accounts, such as
credit cards, unsecured loans, car loans
and mortgages.

Credit bureaus make credit reports available
to companies that grant credit based upon
payment histories.
– Most lenders get credit reports from one of
three national credit reporting bureaus:

Equifax, Experian and TransUnion
MoneyWi$e: Personal Bankruptcy Seminar
Credit History

Not everyone has credit. If you have
never had a credit card or a loan, you
probably don’t have a credit history.

People with no credit history do not
have a credit report.
MoneyWi$e: Personal Bankruptcy Seminar
Your Free Credit Report

The Fair Credit Reporting Act (FCRA)
requires each of the three nationwide
credit reporting agencies to provide
you with a free copy of your credit
report, at your request, once every 12
months.
– Your credit report gives you a
breakdown of your debts.

Reviewing your report allows you to
make sure the information listed on the
report is accurate.
MoneyWi$e: Personal Bankruptcy Seminar
Obtain a copy of your
free credit report:
Online:
www.annualcreditreport.com
By Phone:
1-877-322-8228
By mail:
Annual Credit Report
P.O. Box 105281
Atlanta, GA 30348-5281
MoneyWi$e: Personal Bankruptcy Seminar
Credit Counseling

If you are in financial trouble, you can
seek the help of a credit counselor.
– Credit counseling services are
organizations that assist individuals with
personal financial matters.

Credit counselors provide advice,
budgeting services, financial
guidance, credit counseling and
debt management programs.
MoneyWi$e: Personal Bankruptcy Seminar
Debt Management Programs

Credit counseling organizations work
with lenders and creditors to offer
debt management programs.
– If you enroll in a debt management
program, the credit counseling agency will
negotiate with creditors on your behalf and
help you consolidate your bills into one
monthly payment.
– You make one payment to the credit
counselors and they then disburse it to
your creditors.
MoneyWi$e: Personal Bankruptcy Seminar
For-Profit Credit Counselors

Some credit counseling companies try to
profit off of people in debt.
– These companies claim to be not-for-profit but
they are really profit-making enterprises hiding
behind non-profit status.

You might get deeper in debt if you deal with
the wrong company.

Seek out non-profit counselors affiliated with
the National Foundation for Credit Counseling.
MoneyWi$e: Personal Bankruptcy Seminar
Resource

Find a reputable non-profit credit
counselor affiliated with the National
Foundation for Credit Counseling:
– Web site is www.nfcc.org
– Call 800-388-2227
MoneyWi$e: Personal Bankruptcy Seminar
The True Cost of Credit:
A Guessing Game

Classroom activity
– The activity is designed to see what you
know about the cost of buying things on
credit.
– Check the box that you think gives the true
cost of buying these goods on credit.
MoneyWi$e: Personal Bankruptcy Seminar
Questions About the Activity

Did your responses agree with the
answers?

What surprised you most?

Can you suggest ways to keep finance
charges at a minimum?
MoneyWi$e: Personal Bankruptcy Seminar
Hiring an Attorney

It is important to retain an attorney when
you file bankruptcy.

Hiring an attorney protects your rights in
bankruptcy court.

Make sure the attorney you retain is an
expert in bankruptcy.

The cheapest attorney is not necessarily
the best one.
(continued)
MoneyWi$e: Personal Bankruptcy Seminar
Hiring an Attorney

Don’t just pick up the Yellow Pages to
look for an attorney.
– Ask people you know if they have a lawyer
to recommend.

Call your state bankruptcy bar
association for recommendations.
MoneyWi$e: Personal Bankruptcy Seminar
Find a Lawyer Online

Go to the National Association of
Consumer Bankruptcy Attorneys
(www.nacba.org), click on “Find a
Bankruptcy Attorney near you”.

Visit the Legal Services Corporation
web site at www.lsc.gov and go to
“Find Legal Services” .

Your public library probably has
Internet access that you can use.
MoneyWi$e: Personal Bankruptcy Seminar
Let’s take a break

Please be back in 15 minutes.
MoneyWi$e: Personal Bankruptcy Seminar
After Bankruptcy

Filing bankruptcy may change your
life in a positive way.
– It can remove your worries about your
debts and gives you a financial fresh start.

Some negative things might
happen after you file bankruptcy.
– It may be hard to get a new credit card or
to rent a place to live if the landlord checks
applicants’ credit reports.
– If you apply for a new job, the employer
might want to check your credit report.
MoneyWi$e: Personal Bankruptcy Seminar
Credit Cards

Will I be able to get a new credit
card?
– You might have trouble getting a
regular credit card, but you will
probably qualify for a secured credit
card if you put money in a savings
account to guarantee the card.
MoneyWi$e: Personal Bankruptcy Seminar
Banking

Can I open a bank account?
– Unless you have abandoned a bank
account while owing money, bounced
checks you never paid back or had a bank
account closed on suspicion of fraud, you
should have no trouble opening a new
bank account subsequent to filing
bankruptcy.
MoneyWi$e: Personal Bankruptcy Seminar
Current Employment

Will bankruptcy affect my job?
– The Bankruptcy Code specifically prohibits
employers from discriminating against
current employees who file bankruptcy.
– The law applies to private and government
employers.
MoneyWi$e: Personal Bankruptcy Seminar
Looking for work

If you look for a new job while the
bankruptcy is still listed on your credit
report, potential employers may
choose to reject you.

There is no law to prevent this from
happening.
MoneyWi$e: Personal Bankruptcy Seminar
Re-establishing Credit
– A Chapter 7 bankruptcy will stay on your
credit report for 10 years.

Home and auto loan and credit card
applications may ask if you’ve declared
bankruptcy, and your answer may be a factor in
the lender’s decision.

You may be able to qualify for a mortgage or
car loan at a higher-than-average interest rate.
– You should be able to qualify for a secured
credit card if you deposit money in a bank
account to guarantee the card.
MoneyWi$e: Personal Bankruptcy Seminar
Secured Credit Cards

Even people with damaged credit or a bankruptcy
may be able to get a secured credit card.

Your line of credit on a secured card usually is the
same as the amount of money you deposit.

Some banks require as little as $300 for the deposit
on a secured credit card.

Generally, after six months to one year of on-time
payments and careful use of your secured credit
card, you may begin to get offers from unsecured
credit card issuers.
MoneyWi$e: Personal Bankruptcy Seminar
Find a Secured Credit Card

Ask local banks and credit unions if they
offer secured credit cards.

Visit Bankrate.com on the Internet and
search for secured credit cards.


This web site has listings of national
companies that offer secured cards.
Shop carefully and compare the terms on
at least three cards — more if possible —
before applying for one.
MoneyWi$e: Personal Bankruptcy Seminar
Questions & Answers

Now’s your chance to ask questions
about personal bankruptcy.
MoneyWi$e: Personal Bankruptcy Seminar
For More Information

Consumer Action created the
MoneyWi$e trainings.
– www.consumer-action.org
– (415) 777-9635
– Info@consumer-action.org
MoneyWi$e: Personal Bankruptcy Seminar
Class Evaluation

Please fill out the MoneyWi$e
evaluation form and leave it on
your way out.
MoneyWi$e: Personal Bankruptcy Seminar
Congratulations!

You’ve completed the MoneyWi$e
training on Personal Bankruptcy.
MoneyWi$e: Personal Bankruptcy Seminar