1. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (Public Law 109-8) states that individuals shall "receive from an approved nonprofit budget and credit counseling agency described in section 111 (a) an individual or group briefing" and that this briefing shall occur within "180 days preceding the date of filing".
2. As a result of this briefing, each of you will receive a numbered certificate that you may use to take to your attorney should you elect to file for bankruptcy.
3. In addition to this briefing, additional counseling is available to you at no cost. This will be presented with more detail at the end of this briefing.
4. Now for an OVERVIEW of what you will learn today:
   • What is Bankruptcy?
   • How does Bankruptcy affect me?
   • Where are you at (gathering the facts)?
   • Bringing it all together (summary & review)
   • Choosing your Plan of Action!
   • Wrap it up & Questions answered.

You are contemplating bankruptcy and probably have a number of questions.

What are the types of bankruptcy?

Chapter 7 is also called a liquidation bankruptcy. In a Chapter 7 bankruptcy the assets that are not exempt from creditors are collected, sold, and the money is used to pay creditors. An eligible debtor may have his/her debts discharged with the exception of certain debts that are not eligible for discharge. Examples of debts that may not be dischargeable are child support, school loans and court ordered restitution.

Chapter 11: Reorganization bankruptcy is used primarily by businesses to reorganize their debts while continuing to operate.

Chapter 12: Family farm reorganization bankruptcy allows eligible family farmers to file for bankruptcy, reorganize the farm's business affairs, and continue to operate.

Chapter 13: A wage-earner's reorganization bankruptcy is used by individuals to reorganize their financial affairs in a plan. Individuals repay a portion of their debts in a period of time not to exceed five years.

What does my household income have to do with my filing bankruptcy?

How does bankruptcy affect my credit report and credit score?

The information on your credit report will not change. If you had delinquencies or collections on your credit report, they will stay on your credit report; they are no longer collectible once they are discharged through a bankruptcy. The bankruptcy will be listed on your credit report. A bankruptcy does not wipe your credit report clean.

Your credit score is based on how you repay your debts. Often times a credit score will decline when you file bankruptcy. Keep in mind your credit score may already be low since you have not been able to make your monthly payments as agreed.

Will I be able to get credit after filing bankruptcy?

Are all debts dischargeable in a bankruptcy?

What affect does bankruptcy have on my family and me?

• It is your total household income that will be used to determine which form of bankruptcy you can qualify for.
• The assets (recreational vehicles, antiques, entertainment devices, etc.) you and your family are allowed and are not allowed to keep are regulated by law.
• If a Chapter 13 bankruptcy is your option, the living expenses you and your family are allowed will be approved by the bankruptcy trustee.

Do I have to list all my assets in a bankruptcy?

What other options do I have?

• Do nothing.
• Develop your own repayment plan.
• Enroll in a Debt Management Program offered by a credit counseling agency.
• Pre-Bankruptcy Less than Full Balance
• File for bankruptcy.

What if I choose to do nothing?

Develop your own repayment program.

What is credit counseling?

What are the advantages and disadvantages of a debt management program?

Advantages:

• With a Debt Management Program the credit counseling agency works with your creditors to reduce your payments and to lower your interest rates and reduce your fees.
• You make one payment to the credit counseling agency for the debt listed on the debt management program. The credit counseling agency forwards your payments to your various creditors enrolled in the program.
• The assets that you have are not limited when you enroll in a debt management program (DMP) as they are if you file bankruptcy.
• A DMP will not stop you from filing for bankruptcy at a later date. If you file bankruptcy and it is dismissed, this may affect your ability to file bankruptcy in the future.
• Some creditors will re-age your account after you make three consecutive monthly payments. If you are past due, your credit report will show that you are past due. When the creditor re-ages your account, payments you make after that point will not show as past due.
• Your actual expenses for necessities such as housing, utilities, and transportation are budgeted in your plan. Depending on the type of bankruptcy you qualify for, your actual expenses may be over the amount allowed by law.

Disadvantages:

• You need to have money each month to pay your creditors. You do not get to determine this amount. A formula is used to determine what your monthly payment will be. Your repayment time will be 60 months or less.
• You cannot keep a credit card. You will have to agree not to use credit while on the program. In a Debt Management Program creditors are agreeing to accept reduced payments and make concessions on fees and interest. Creditors will do this provided you do not incur new debt.
• If you do not make your monthly payment you will be dropped from the debt management program. Your debts will still be owed to your creditors.
• There is no guarantee that a debt management program will stop a wage garnishment if you currently have your wages garnished. Cooperation by creditors in a debt management program is voluntary.

What is Pre-bankruptcy less than full balance?

Advantages:

• You do not pay the full amount of your debt owing.

Disadvantages:

• You will incur tax consequences for the amount of debt your creditors' write-off. As an example, if your creditors write-off or forgive $5,000 in debt, you will be required to claim that as income on your taxes even through you did not receive it as income.
• You need the ability to make on-time monthly payments on your accounts. By not making your monthly payments you further hurt or adversely affect your credit.
• A write-off is not viewed positively on your credit report and can negatively impact your credit score.
• Generally all of your creditors must agree to this program.

Determining the Cause

Reviewing Your Financial Situation

Since you are contemplating bankruptcy it is likely that your expenses exceed your income. Have you explored all of your options to bring your income and expenses into an equal position?

Can you cut some of your living expenses to come up with enough money to pay your debts?
Do you spend money on the following items that you could cut? Cable television, membership at a gym, cell phones, breakfast lunch or dinner out, hobbies, magazines, newspapers, gifts, etc.?

Can you refinance any of your current payments to reduce your payments or pay-off other debts? Perhaps you have a car that will be paid off in a couple months and is worth a few thousand dollars. Will your lender let you refinance your car and borrow against the car to pay off other debts? Do not take this as a suggestion to borrow against your car with a title loan company. Title loan companies are predatory lenders that charge high rates of interest and fees.

Do you have assets you can sell and use the money to pay-down or pay-off debts? Keep in mind the amount of assets you are allowed to keep through bankruptcy are limited. You may be forced to sell some assets before being able to file for bankruptcy. If you choose to file bankruptcy don't expect to keep items you own such as: a boat, snowmobile, 4-wheeler, motorcycle, or extra cars.

If you are buying your home, is it worth more than you owe on it? If you qualified for a home equity loan and used the money to pay-off some of your debts, would you then be able to handle your monthly expenses? This is something you need to consider carefully. It is most important that you still be able to make your house payment and your home equity payment. If you are unable to make these payments you risk losing your home even if you make your house payment. Not making a home equity payment puts your home in jeopardy.

Do you have a retirement account you can borrow against? If so, make sure you understand the repayment terms required for borrowing the money and whether or not you are subject to penalties, fees, and taxes.

Call your creditors and ask if they have any hardship program you could participate in that would reduce your monthly payment and the interest rate you are paying?

Can you or one of your family members get a part-time job?

If you are a young couple with expensive daycare, can you and your spouse work opposite shifts reducing the need for daycare?

If you have children, are they of working age where they can find a job to help cover some of their own expenses such as clothing, gasoline, car insurance, etc.?

Do you have other adults living in your household that are not contributing to the family budget? Now is the time to get them to help out.

Do you qualify for public assistance? Assistance for food, utilities, and housing may be available to you depending on your income and the programs offered by your state.

1. If there are two people filing bankruptcy, each person must submit their own Plan of Action.
2. We will call you to verify that we have received your information and discuss your program.
3. We will fax your certificate to your attorney and mail you a copy once we receive your payment.

You may receive counseling anytime by phone or in person. This additional counseling is at no cost to you. Bankruptcy can be a fresh start. We are here to help make that fresh start a positive one.