HDFS 357 1st Edition Lecture 10 Outline of Last Lecture I II Applying for Credit Credit Report Score Outline of Current Lecture I II III Reasons for Unmanageable Debt Consumer Credit Counseling Services Personal Bankruptcy Current Lecture LECTURE 10 3 2 15 Chapter 7 Choosing a Source of Credit The Cost of Credit Alternatives Reasons for Unmanageable Debt Overspending o The expectation of instant comfort and gratification o Keeping up with the Joneses o Overindulgence of children Loss of income o Unemployment o Divorce or Death Increased expenses o Medical issues Consumer Credit Counseling Services Non profit services supported by multiple sources o Provides education about credit and budgeting o Provides help with spending plan o Provides debt counseling services for those with serious financial problems o Ex The Village Financial Resource Center o 42 of people filling for bankruptcy are people with medical expenses Personal Bankruptcy Legal process for dealing with severe financial debts Three Types of Bankruptcy o 1 Chapter 7 Many but not all debts are discharged Non exempt assets are sold to pay creditors exempt limited value in home car trade tools books etc Stays on credit report for 10 years After Chapter 7 people may no longer owe Credit card charges Unpaid hospital or physician bills After Chapter 7 Bankruptcy still may owe Taxes and fines Child support and alimony Educational Loans o 2 Chapter 13 Voluntary plan proposed to the bankruptcy court for those who want to pay a portion of their debt over a period up to five years Must have a regular income Get to keep assets as long as you are making payment Stays on credit report for 7 years Less severe than Chapter 7 still a bad thing Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 o Bankruptcy was designed as a last resort but had become and acceptable tool of credit management o Added a requirement that debtors complete and approved instructional course in personal financial management