Bankruptcy

1. Bankruptcy Jon Bell Kevin Coombs Jeremy Petrus MBA 620 Fall 2002

2. What is Bankruptcy? • Bankruptcy is a legal proceeding in federal court in which a person with debts (the debtor) can be freed or "discharged" of most of their debts. • In exchange, unless protected by law, the debtor's property may be sold by a trustee with the approval of the court. • The money from the sale of the property is then divided among the people or companies to whom the debtor owes money (the creditors). MBA 620

3. Should I Consider Bankruptcy? • The purpose of bankruptcy is to give someone a fresh financial start. • Bankruptcy works best for people with an income adequate to support them and pay their bills after bankruptcy. • Questions to ask yourself when considering filing for bankruptcy: • Can your financial problems be solved through personal efforts? • Are your financial problems going to reappear in the near future? • What will your expenses be after you file for bankruptcy? MBA 620

4. Facts • Over 1.5 million bankruptcy filings a year • 70% are Chapter 7 • 11.5% of filers have filed bankruptcy previously • Utah is #1 in bankruptcies per capita • Example: Girl on KSL • Women • Fastest growing group filing for bankruptcy • Over 500,000 women will file by themselves • Half of these women will be trying to get child support and alimony MBA 620

5. Options • Refinance home • Negotiate with lenders • File for Bankruptcy MBA 620

6. The Types of Bankruptcy • Chapter 11 • Rare • Big businesses • Chapter 12 • Rare • Family farmers • Chapter 13 • 2nd most common • Partial repayment plan • You retain your property while paying off as much debt as the courts think possible • Upon repaying the agreed amount, you receive a Chapter 13 discharge • Chapter 7 • Most Common • Liquidation of debts • You lose all or most of your non-exempt property • This loss of property releases you from liability of most of your debts and you receive a Chapter 7 discharge • Recent back taxes, back child support, student loans, or debts associated with DUIs or other criminal matters are usually not dischargeable in a Chapter 7 MBA 620

7. Your Estate Not Exempt Exempt Equity! Equity the Law Lets You keep Equity the Creditors Can Get Release Debt Keep Property, at Lower, Negotiated Amounts Liquidates Debts Keep Property and Debts at same Terms Redeem You must list every asset and every debt! Reaffirm MBA 620

8. The Debt Portion Student Loans Your Estate Not Exempt Exempt Equity! Equity the Creditors Can Get Equity the Law Lets You keep Release Keep Property, at Lower, Negotiated Amounts Liquidates Debts Debt Redeem Keep Property and Debts at same Terms You must list every asset and every debt! Reaffirm MBA 620

9. Timeline MBA 620

10. Your Credit Score Who would you rather lend to? After Before $0 $X0,000 ? 7 Years • On Credit Report for 10 Years • Always list on requesting forms • Bankruptcy may automatically lower FICO score below 600 MBA 620

11. Rebuilding Credit after Bankruptcy • Never be late on a payment after bankruptcy • Get a secured credit card ASAP • Don’t get credit with disreputable lenders • Avoid credit inquiries • Use large down payments to get a loan • Limit spending and don’t get close to limit MBA 620

12. Tips before Filing • Make sure you have all your creditors • Don’t transfer property out of your name before you file • Don’t obtain large debts or cash advances right before you file • If you have a loan with where you bank, you will need to reaffirm the loan or change where you bank MBA 620

13. Tips after Filing • List all your creditors • Attend 341 meeting with creditors • Comply with trustee’s requirements • Continue paying on reaffirmed debts • Don’t transfer property during bankruptcy • Stop all post-dated and bounced checks MBA 620

14. Questions? MBA 620