2. <ul><li>American Consumer Credit Counseling is a national leading provider of consumer financial education and debt management services. </li></ul>Throughout the year our company provides many educational workshops within the community that covers a wide range of financial topics. It is our mission to provide individuals with the necessary information so they can make better financial decisions in the future.
3. This educational study course on Bankruptcy has been developed specifically to educate individuals within the community on: <ul><li>What to Know About Bankruptcy </li></ul><ul><li>The Types of Bankruptcies </li></ul><ul><li>How Bankruptcy Affects You </li></ul><ul><li>Your Options in Bankruptcy </li></ul><ul><li>Consequences of Unpaid Debts </li></ul>
4. Bankruptcy is a method of eliminating unsecured, secured and other debts through the legal system, therefore giving a consumer a fresh start in life. Bankruptcy, in many cases, means that you walk away from the current debt you owe your creditors. What is Bankruptcy? Generally, there are two different types of personal bankruptcy that an individual may use. They are: <ul><li>Chapter 7 bankruptcy </li></ul><ul><li>Chapter 13 bankruptcy </li></ul>
5. What is Chapter 7 Bankruptcy? Chapter 7 is the full liquidation of debts more commonly known as “ straight ” Bankruptcy. This is the most common bankruptcy form that an individual will file. Chapter 7 is only for individuals, not businesses or partnerships. Under Chapter 7, a trustee is appointed from the court to collect and sell, if economically feasible, all property you own that is not otherwise exempt, from liquidation. Most individuals file Chapter 7 to completely eliminate large credit card debt, personal loans and other unsecured debts.
6. Who qualifies for Chapter 7 Bankruptcy? 1) You must reside, or have a domicile, or a place of business, or real property in the United States. Within the last 6 years you could have not been granted a discharge through Chapter 7. 2) Within the last 6 years you could not have completed a Chapter 13 bankruptcy plan. 3) Within the last 180 days you couldn’t have had a Chapter 7 or Chapter 13 dismissed for cause by the courts. 4) If an individual has disposable income after paying monthly living expenses, the courts will usually not grant a Chapter 7 discharge.
7. What should I do if my Chapter 7 is not granted? Our best advice to you is to immediately seek the help of a non-profit consumer credit counseling agency. A non-profit consumer credit counseling agency in most cases, can help you re-establish payment plans with those creditors that you tried to file bankruptcy against.
8. What type of debts can be discharged in a Chapter 7 bankruptcy? In a Chapter 7 bankruptcy you can discharge almost any consumer debt such as: <ul><li>All credit card debt </li></ul><ul><li>Personal loans (banks or credit unions) </li></ul><ul><li>Finance companies </li></ul><ul><li>Automobiles (purchased or leased) </li></ul><ul><li>Mortgage debt </li></ul><ul><li>Other motor vehicles </li></ul><ul><li>Some student loans may qualify </li></ul><ul><li>Some past-due taxes may qualify </li></ul><ul><li>Creditor lawsuits </li></ul><ul><li>Auto Repossession </li></ul><ul><li>Charge-off accounts </li></ul><ul><li>Collection accounts </li></ul><ul><li>Eviction (rent) debt </li></ul><ul><li>Old utility bills </li></ul><ul><li>Medical bills </li></ul><ul><li>Dental bills </li></ul><ul><li>Attorney bills </li></ul><ul><li>CPA bills </li></ul>
9. What is a discharge? The filing of a chapter 7 bankruptcy petition is designed to result in a discharge of most, if not all, of the debts you listed on your bankruptcy schedules. Certain debts such as a mortgage or car loan will continue to be paid by you if you elect to retain the asset. A discharge is a court order that says you do not have to repay your debts. Creditors cannot ask you to repay any debts which have been discharged in bankruptcy. You can only receive a chapter 7 bankruptcy discharge once every six (6) years.
10. Are there debts that I cannot discharge? Yes. You should first understand that not all debts are dischargeable in a bankruptcy case. Examples of debts that are not able to be discharged are: <ul><li>Most state and federal taxes </li></ul><ul><li>Child support </li></ul><ul><li>Alimony support </li></ul><ul><li>Most student loans </li></ul><ul><li>Criminal fines, restitution or penalties </li></ul><ul><li>Debts obtained through fraud or deception </li></ul><ul><li>Personal injury debts </li></ul><ul><li>Credit card charges made within 40 days of filing </li></ul>
11. What are the potential effects of a discharge? The fact that you filed bankruptcy will appear on your credit report for as long as 10 years. Thus, filing a bankruptcy petition may affect your ability to obtain credit in the future. Generally speaking you may not be excused from repaying any debts that were not listed on your bankruptcy schedules or that you incurred after you filed bankruptcy.
12. In a bankruptcy do I have to give up all my personal property? No. Federal and state laws provide exemptions for your property. Exempted property is property such as household goods, furniture, clothes, and personal belongings, which you may keep even if you file bankruptcy.
13. What are the effects of reaffirming a debt? After you file your bankruptcy petition to the courts, a creditor (that you owe) may ask you to voluntary reaffirm a certain debt or you may seek to do so, on your own. Reaffirming a debt means that you will sign and file a legally enforceable document with the court, which states that you promise to repay all or a portion of the debt that may otherwise have been discharged in your bankruptcy case. Once reaffirmed, the debt becomes a renewed obligation, which survives bankruptcy.
14. What is Chapter 13 Bankruptcy? Chapter 13 generally permits individuals to keep their property by repaying creditors out of their future income. Each chapter 13 debtor (you) submits a plan of repayment for 3 to 5 years, which must be approved by the bankruptcy court. Chapter 13 is only available to individuals with regular income whose debts do not exceed $1,077,000 ($269,250 in unsecured debts and $807,750 in secured debts).
15. How do I determine if a Chapter 13 is best for me? Chapter 13 is best for people who have too much disposable income and also have the kind of consumer debt (like student loans, taxes, etc.) that cannot be discharged in a Chapter 7. People that are behind in their mortgage payments and want to avoid foreclosure on their property may also file a Chapter 13. Chapter 13 allows a person to make up past due payments over a specific time period, therefore reinstating the creditors original agreement.
16. Will a bankruptcy filing, stop any collection or legal action against me? Yes. A bankruptcy filing under federal law imposes an automatic stay, which stops your creditors from collecting on the debts and/or obtaining a court judgment while your bankruptcy is pending and awaiting approval of a discharge. For example: If one of your creditors serves you with a lawsuit the bankruptcy filing will stop the lawsuit.
17. Will bankruptcy stop wage garnishments or repossession from creditors? Yes. Creditors must stop any wage garnishments or repossession efforts under a bankruptcy filing. A creditor can only proceed against you once your bankruptcy is over and that specific debt was not discharged in your bankruptcy.
18. When do my creditors get notified of my bankruptcy filing? Once your bankruptcy petition has been filed with the courts, the bankruptcy court clerk will mail a notice within 10 to 14 days of your bankruptcy filing on your behalf to all your creditors, which will impose an automatic stay. Therefore, your creditors must stop all collection efforts on the debt. If a creditor does not stop collection efforts the courts can impose sanctions against them.
19. How long does a bankruptcy take to be completed? A Chapter 7 bankruptcy can take anywhere from 3 to 5 months to be fully discharged. A Chapter 13 bankruptcy can take anywhere from 3 to 5 years to be fully completed. A Chapter 13 takes longer because you are setting up re-payments plans with your creditors.
20. Once I file a bankruptcy petition do I continue paying my creditors? No. If you plan to reaffirm your auto loan and mortgage loan and keep it out of your bankruptcy you need to continue making those monthly payments on time. You also need to continue making your monthly payments on your daily living expenses; rent, utilities, telephone, gasoline, insurance, etc. If you plan to include all your credit card debt in your bankruptcy to be discharged, you can stop making those payments.
21. Should I hire a bankruptcy attorney or a paralegal to prepare my bankruptcy? Everyone’s situation is different. As a rule of thumb, you should hire a bankruptcy attorney if you: <ul><li>Own a home </li></ul><ul><li>Are self employed </li></ul><ul><li>Have substantial amount of assets </li></ul><ul><li>Receiving a settlement from a lawsuit </li></ul><ul><li>Have over $15,000 of cash in savings, </li></ul><ul><li>stocks, bonds, mutual funds, etc. </li></ul><ul><li>Receiving an inheritance </li></ul>
22. Will I lose my car or home when I file bankruptcy? If you do not include these debts into your bankruptcy for discharge, you must reaffirm these debts and keep them out of your bankruptcy. If you plan to keep them out, you must continue to make monthly payments on time to the creditors.
23. Do I have to include all my credit cards in my bankruptcy? No. You can reaffirm a credit card debt if you have a balance on it. In most cases the credit card issuer will agree to keep it open for you as long as you continue to make the agreed minimum monthly payment as required on the monthly statement. If you have a credit card with a zero balance on it you will not include that credit card in your bankruptcy filing.
24. Can I charge on my credit cards before I file bankruptcy? No. If you charge or take cash advances within 90 days on credit cards that you plan to include in your bankruptcy, you may be liable for those charges and cash advances and the courts may not discharge those credit cards. In addition, the courts may fine you under the basis of fraud. You should seek legal advice from a bankruptcy attorney if you have recently incurred large amounts of debt on credit cards you plan to bankruptcy.
25. Who will know about my bankruptcy filing? All bankruptcy filings are public record. Your close friends, your family members, your boss, your co-workers, etc. will not find out about your bankruptcy filing unless you tell them. Bankruptcy filings are not usually published in the newspaper. The only people who will know about your filing are the courts and your creditors.
26. Will I lose my job if I file bankruptcy? No. Your employer cannot fire you for filing bankruptcy. It is against federal law for an employer to discriminate against an employee for filing personal bankruptcy. Your bankruptcy filing is none of your employer’s business.
27. Will a bankruptcy filing destroy my credit? If bankruptcy is your only option, your credit is already damaged due to late or non payments to your creditors. A bankruptcy can stay on your credit report for up to 10 years. This does not mean that your life is over. Once your bankruptcy has been discharged, you will receive credit card offers in the mail that will help you reestablish your credit. Most people can rebuild their credit within 2 years from the time their bankruptcy is discharged.
28. Once I file my bankruptcy petition, what happens next? Within 30 to 45 days you will be required to attend a hearing of creditors in front of a court-appointed trustee. At this hearing, the creditors will have an opportunity to ask you questions about merchandise that you purchased on credit with them. In most cases if you do not have assets, creditors will not appear at this hearing. When you appear for this hearing usually there will be a lot of other people in the room, all there for the same reason as you. Therefore, there is no need to be embarrassed.
29. In most cases, if your petition was filled out correctly by your attorney or paralegal the trustee should have few questions. If your petition passes the trustee’s questioning, your bankruptcy will be normally discharged within 3 to 4 months from the time you filed. Once I file my bankruptcy petition, what happens next? Continued…
30. How does bankruptcy affect a co-signer on a debt? If the debt qualifies by the courts to be discharged, then the co-signer on the debt will become primarily responsible to pay the debt. The person filing the bankruptcy should list the co-signer as a creditor in their bankruptcy petition. For example: A husband and wife separate and divorce. The wife decides to file bankruptcy on several credit cards that are joint accounts with both their names on it. If the husband does not participate in the bankruptcy filing then he will become solely responsible for those joint accounts once the wife’s bankruptcy has been discharged.
31. Can I go to jail if I file bankruptcy? No. There is no such thing as a debtor’s prison in the United States. Every consumer has the right to file a bankruptcy petition every 6 years.
32. Can a bankruptcy remove a lien? Under some circumstances, your attorney can file a special motion to remove the lien. The bankruptcy court will have to issue a court order to remove the lien. This procedure is complicated and you need a bankruptcy attorney who understands this area of the law.
33. Will a bankruptcy filing stop a home foreclosure? Yes. You need to keep in mind that a home is an asset secured by a deed of trust. The mortgage company has the right to petition the court for relief from the “automatic stay” provision. In most cases, an individual may be able to prolong the foreclosure until they have received a discharge from the bankruptcy court.
34. OTHER BANKRUPTCY OPTIONS Besides chapter 7 and chapter 13 bankruptcy there are two additional choices within the Bankruptcy Code. They are: <ul><li>Chapter 11 bankruptcy </li></ul><ul><li>Chapter 12 bankruptcy </li></ul>
35. What is Chapter 11 Bankruptcy? Chapter 11 is the reorganization chapter most commonly used by businesses, but it is sometimes available to individuals. The debtor submits a plan of reorganization and creditors vote on whether to accept or reject a plan, which also must be approved by the court. While the debtor normally remains in control of the assets, the court can order the appointment of a trustee to take possession and control of the business.
36. What is Chapter 12 Bankruptcy? Chapter 12 offers bankruptcy relief to those who qualify as family farmers. Family farmers must propose a plan to repay their creditors over a three to five year period and the court must approve it. Plan payments are made through a chapter 12 trustee who also monitors the debtor’s farming operations during the course of completion.
37. What types of debts can be affected if unpaid? When financial problems arise, consumers need to understand the consequences of the different type of debts and how they can be affected if not paid. There are 7 different types of debts. They are: <ul><li>Secured debts </li></ul><ul><li>Unsecured debts </li></ul><ul><li>Foreclosure </li></ul><ul><li>Eviction </li></ul><ul><li>Auto repossession </li></ul><ul><li>Utility shut-offs </li></ul><ul><li>Lawsuits </li></ul>
38. What are the consequences of secured debts? Most secured debts are backed by collateral. Collateral is property that can be seized in the event of a debt payment delinquency. Examples: Secured credit cards. If you don’t pay on your secured credit card the card issuer who has control of your collateral (savings deposit) can seize your savings deposit and suspend your privileges to charge on that card.
39. Home mortgage. If you should fall behind on your mortgage payments, the mortgage lender can seize your home (foreclosure), leaving you with nothing. All current and future equity accumulated in the property would now belong to the mortgage lender. Automobile Loan. If you should fall behind on your car payments, the bank or financial institution has the right to legally repossess your car without your permission. If the car is repossessed, the car is now the property of the bank or financial institution that holds title. What are the consequences of secured debts? Continued…
40. What are the consequences of unsecured debts? Banks and other financial institutions that provide unsecured credit to consumers do not have the legal power that secured lenders have. Lenders that cannot collect on unsecured delinquent debt, must first file and obtain a court judgment before they can seize money or property. Unsecured credit cards are by far the hardest to collect on. Most collection agencies generally will make threats to sue for monies or garnish wages for monies owed, but in most cases these threats are not carried out, because litigation is a costly and timely process.
41. What are the consequences of a foreclosure? If you miss one or two payments on your mortgage, your lender will send you a letter and in most cases call you and ask you to send in the missed mortgage payments plus late fees. If you fall behind 60 to 90 days on your monthly mortgage payments, your lender will send you a written notice in the mail, which is referred to as the Notice of Default . This Notice of Default is the first step in the foreclosure process.
42. If you do not make up the missed mortgage payments and late fees, the lender will send another written notice in the mail. This is referred to as the Notice of Acceleration . The homeowner at this point must pay the full mortgage off to avoid a foreclosure sale by the lender. If the full mortgage amount is not paid in full, a court summons will be delivered to the property as well as a Notice of Sale . This Notice of Sale will outline the time and date that the property will be foreclosed on. What are the consequences of a foreclosure? Continued…
43. What are the consequences of an eviction? Being evicted from a rented apartment, condo or home can be disruptive and dangerous, knowing that you could be homeless should you have no where else to live. If you do not pay your rent, the first step that your landlord will take to start the eviction is to send you (the renter) a written Notice to Quit or Notice to Vacate . These written notices basically tell you to either pay the rent or vacate the premises within a specific time. If you do not pay the past-due rent within the Notice to Quit time frame, the landlord will seek and file a court order to evict you from the premises.
44. If you choose to not appear in court, the court will automatically enter a default judgment against you and you will be evicted from the premises, in most cases by a sheriff or another law enforcement person. When you are forced to move against your will, you are considered a refugee. Your belongings can be removed and put on the streets. In addition to being evicted, the landlord can file suit against you for all past-due rent, plus court fees and damages. What are the consequences of an eviction? Continued…
45. What are the consequences of an automobile repossession? If you miss one payment a lender must send you a Notice of Default letter giving you an opportunity to bring the loan current. If payments are not brought current, a lender can schedule your car for repossession as well as place a lien on your car and sell it in order to pay back the money you borrowed. Repossession means that a “ repo man ” can take your car at anytime without your consent, open your car and drive it away.
46. When your repossessed car is sold at auction, in most cases a Deficiency Balance will occur. At auction sales, auto dealers bid on repossessed cars at drastically reduced prices. For example: Your car may be valued at $10,000, but through an auction sale the lender sells it to an auto dealer for $6,000. Immediately, your repossessed car now has a $4,000 Deficiency Balance which you must pay to the lender. What are the consequences of an automobile repossession? Continued…
47. In addition to the $4,000 Deficiency Balance, you will owe the lender for repossession fees, storing and all auction cost for the sale of your repossessed car. What are the consequences of an automobile repossession? Continued…
48. What are the consequences of a utility shut-off? If you don’t pay your bill, utility companies don’t send you to collections, they simply shut off your service. By law a publicly owned utility company must send you a termination notice, stating that if you don’t pay the amount due your service will be turned-off. Privately owned utility companies do not have to send you a termination notice and they can turn off your service due to non-payment at anytime without warning.
49. Whether you’re dealing with a publicly or privately owned utility company, getting your utility service turned back on can be costly. You will have to pay the past due amount in full, plus late charges and a re-installment fee, and in some cases, a security deposit. Some utility companies may allow you to make monthly installment payments over time to make up past-due bills. What are the consequences of a utility shut-off? Continued…
50. What are the consequences of a lawsuit? If you are a consumer who had unsecured credit extended to you and you where unable to make the monthly payment obligations, the lender has a legal right to file suit in a court of law against you in order to collect on that unsecured debt. If a lender successfully files suit and wins, it can result in the following: <ul><li>Judgment Liens </li></ul><ul><li>Wage Garnishment and </li></ul>Bank Account Seizures
51. Judgment Liens: A judgment lien allows a lender to place a lien against your property (home, car, boat, etc.). This lien prohibits the owner of the property to sell or re-finance until the lien is cleared (debt is settled). Once a judgment lien has been won in court, the lender has the right to inspect and examine your property. The lender must further file a formal request in court to seize or sell the property. The law states that certain possessions, like household items are exempt from seizure. You should contact an attorney in your state for legal advice on judgment liens and what can be seized.
52. Wage Garnishment and Bank Account Seizures: If a lender successfully files suit and obtains a court order, that lender may garnish up to 25% of your take-home pay without your consent. A lender can take more of your take-home pay if it involves unpaid child support. A court order wage garnishment can be served directly to your employer or to your bank. Note: Not all states allow wage garnishment. Speak to an attorney in your state on wage garnishment and whether it’s enforceable in your state.
53. This concludes our educational study course on Bankruptcy and Unpaid Debts . Thank you for attending!
54. Corporate Address: American Consumer Credit Counseling, Inc. 130 Rumford Avenue, Suite 202 Newton, MA 02466 Contact Information: Toll Free: 1-800-769-3571 Main: 1-617-559-5700 Fax: 1-617-244-1116 Email: firstname.lastname@example.org Web Address: www.consumercredit.com