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Creditors, Debtors, & Bankruptcy Chapter 33
Credit Whole or partial payment is delayed • Pawn • Collateral • Secured/Unsecured Loan • Garnishment • Finance Charges • Credit Rating
Involuntary Liens • Lien – a legal right in another’s property as security for the performance of an obligation • Mechanic’s Lien - a lien against realty available to one who has supplied labor or materials to improve it • Artisan’s Lien - a lien for unpaid services assessed against personal property that has been improved
Credit and Third Parties • Surety – third party agrees to be primarily liable if the payments are late • Guarantor – third party agrees to be secondarily liable if the payments are late
Credit System Abuses - Laws • Federal Equal Credit Opportunity Act • Federal Fair Debt Collection Practices Act • Federal Fair Credit Billing Act • Federal Fair Credit Reporting Act • Federal Credit Repair Organizations Act Pages 611-612
Bankruptcy • A legal process to get out of debt when you can no longer make all your required payments. Source: NEFE
Bankruptcy Basics • Chapter 7 • LIQUIDATION or “Straight Bankruptcy” • Wipes out most of your debt in exchange for liquidating your assets • Chapter 13 • REORGANIZATON OF DEBTS • Keep Assets and make payments over 3-5 years • Chapter 11 (Businesses) REORGANIZATION OF THE COMPANY
Bankruptcy Procedures • Non-dischargeable Debtssee page 619 • Exempt Propertysee page 619-620
National Bankruptcy #s The number of personal bankruptcy filings in the fiscal year ending September 30, 2003, rose 7.8% from the same period in 2002, reaching 1,625,813, according to the American Bankruptcy Institute (ABI). That’s twice the number of people filing for personal bankruptcy protection in 1993.
Consequences of Bankruptcy • Influences financial freedom • Limits choices • Pay more for credit • Other people absorb your debt Even though it is legal is it unethical????? Yes, No, Depends?