The purpose of the Discussion Board is to allow students to learn through sharing ideas and experiences as they relate to course content and the DB question. Because it is not possible to engage in two-way dialogue after a conversation has ended, no posts to the DB will be accepted after the end of each unit.
During the 1990s, business and personal bankruptcies soared. This happened in spite of the greatest economic boom in U.S. history. It was also a booming time for lawyers who specialize in the intricacies of bankruptcy law. In 1998, a record 1.4 million businesses and individuals filed for protection under the bankruptcy code, which was a 300 percent increase since 1980. 96% of the filings were personal bankruptcies. However, in 1999, that number dropped 8.5%.
Many analysts attribute the high number of bankruptcies to aggressive credit offers by banks and (to a lesser extent) department stores. These companies lure even the most credit-challenged (young people and those who have problems managing money) into accepting their credit cards by sometimes offering secured lines of credit, in which the cardholder places as little as $100 in a savings account and receives a line of credit that is five times that amount.
Another reason cited by analysts for the increase is that the old stigma associated with bankruptcy—if you filed for bankruptcy protection, you were somehow inferior—no longer exists in most areas of the country.
A third reason is a change in attitude regarding the credit cards issuers. Not long ago, if an individual filed for bankruptcy, that person was unable to obtain credit for years (a bankruptcy filing remains on your credit bureau file for 10 years). However, credit card companies operated on a different premise. If you had recently filed bankruptcy, you were no longer in debt. Therefore, you must have had sufficient cash flow to service new debt. Within a month of filing, your mailbox would have been flooded with credit card offers.
In the business arena, filing for bankruptcy (thus stopping creditors from taking legal action) has evolved into just another business strategy.
The three most common types of bankruptcy are as follows:
Chapter 7: The debtor's assets are sold to pay creditors, and creditors have no right to the debtor's future earnings.
Chapter 11: A business continues to operate, and creditors receive a portion of both current assets and future earnings. This form of bankruptcy is also available to wealthy individuals.
Chapter 13: For the typical consumer, creditors usually receive a portion of the individual's current assets and future earnings.
Although bankruptcy laws are sometimes abused—an individual may file personal bankruptcy every seven years and some individuals do exactly that—bankruptcy is designed as a safety net for individuals or businesses that experience financial difficulties for whatever reason.
Discussion Board Assignment Guidelines:
Research the three types of bankruptcy, and answer the following questions:
Who may file Chapter 7 bankruptcy?
What are some of the reasons that people file bankruptcy?
How does bankruptcy affect interest rates on loans? Credit cards?
Post a new topic to the Discussion Board that contains your answers to the three questions. Respond to two other students' posts on the Discussion Board and critique their answers.
Your submitted assignment (60 points) should include the following:
40 Points Your Discussion Board topic containing your responses to the questions
20 Points Your responses to two other students' Discussion Board posts that contain your assignment critiques
In your own words, please post a response to the Discussion Board and comment on other postings. You will be graded on the quality of your postings.
Classmmate Post to response:
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Unit 2
11.18.2014
Who may file for Chapter 7 bankruptcy?
You have to pass the Chapter 7 means test in order to file. The means test is a measurement of your debts, assets, income, and state exemptions. If your annual income is at or below the median for your state, then you are eligible to file for Chapter 7 bankruptcy. If you are left with very little income each month after you pay your billls then you are able to file. You also need to take a credit counseling course and debtor education course.
What are some reasons that people file bankruptcy?
If a person has very little money left each month after paying their bills or basic expenses than that is a reason to file. There is also medical bankruptcy for accumulated medical bills, credit card debt, personal and payday loans, and automobiles in bankruptcy.
How does bankruptcy affect interest rates on loans? Credit cards?
Bankruptcy is a very terrible thing to have on your credit report. Each time you take out a loan or apply for a credit card that business will run your report. After you are granted a bankruptcy, your credit score can drop as low as 130-240 points. A business can look at this number for a loan. You will probably be charged a much higher interest rate which changes the life of the loan. If you are applying for a credit card, the lower your credit score is the higher the interest rate will be. Typically it could take up to 2 years to see changes and improvements on your credit report, but there has to be effort and work put into it in order to do that. A bankruptcy could stay on your report for up to 10 years.
REFERENCES
Mitzsheva, M. (2014). Opposing Views. How Does Bankruptcy Affect Interest Rates on Loans & Credit Cards? Retrived from http://people.opposingviews.com/bankruptcy-affect-interest-rates-loans-credit-cards-1834.html.
Total Bankruptcy, LLC. (2014). TotalBankruptcy.com. Bankruptcy: How to file Chapter 7 & 13. Retrived from http://www.totalbankruptcy.com/.
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