Chapter 9Credit Problems and Laws

Chapter 9 Objectives

1.Explain how to dispute errors on billing statements

2. Explain the purposes and types of bankruptcy and list strategies for avoiding bankruptcy

3. Recognize credit scams and ways to protect yourself.

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Credit Cards: Error and Fraud• Disputing a charge: the process of informing a credit

company of an error on your bill- pages 280-281o First: _____! Then, document all steps of your

dispute and send a letter to the credit company• Credit card fraud: when someone uses your credit

account to steal money or goodso Notify creditor as soon as possible Time limit: 60 days from receiving statement

Prevent Credit Card Fraud• Carry only the cards you need• Verify all purchases• Close inactive accounts• Keep a list of credit cards and phone #’s• Do not loan your credit card to others• Use only secure websites to buy online – https:• Monitor your credit activity online• Do not give your information over the phone or email

Credit Scams• Credit repair scams: when

someone offers to “fix” your credit rating

• Identity theft: when someone uses your personal information to commit fraud or other crimes.

Focus On . . .

Telemarketing Fraud• To protect yourself, know the danger signs

o Examples: upfront fees, pressure to act immediately, no written documentation

• Use a credit card in case you need to dispute the charge later

• Be cautious when dealing with unknown companies• Use caller ID to avoid unwanted calls

What Help Is Available?• Federal agencies

o Federal Trade Commission (FTC) Bureau of Consumer Protection

o U.S. government (www.usa.gov)o Consumer Action Handbooko Consumer Financial Protection Bureauo Federal Bureau of Investigation (FBI)

• State agencies• Consumer Advocacy Groups

o Better Business Bureau Consumers Uniono Consumer Action National Consumers Leagueo Consumer Federation of America Public Citizen

Consumer Protection Laws-pgs. 298-301

• Fair Credit Reporting Act

• Truth-in-Lending Act• Credit Card Act of 2009• Fair Credit Billing Act• Equal Credit Opportunity Act• Fair Debt Collection Practices Act

What Problems Arise from Debt?

• Credit delinquency• Collection agencies• *Judgment• *Garnishment• *Repossession and

foreclosure

Reflection Questions• What are some steps to disputing a charge on a credit

card? • What does a consumer advocacy group do?• What can you do to avoid bankruptcy or having your

accounts turned over to a collection agency?• Explain what a judgment and garnishing of wages is…• Think, Pair, Share: Discuss in small groups what you

might say to convince a creditor to work with you when you are delinquent in some way.

• Why should you avoid delinquencies, repossessions and foreclosures?

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Activity: Net ArticleVehicles are among the most frequently repossessed assets.

• Go to my website and click on Assignments: ‘Repossesion article and Questions’

• Read eHow article about reposession process and answer these questions:

1. Does a borrower have to be present when a vehicle is repossessed?

2. What happens to the personal belongings left inside a repossessed vehicle?

3. How can a borrower get the repossessed vehicle back?

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Chapter 9 Objectives

1.Explain how to dispute errors on billing statements

2. Explain the purposes and types of bankruptcy and list strategies for avoiding bankruptcy

3. Recognize credit scams and ways to protect yourself.

.

What is Bankruptcy?Bankruptcy: a legal procedure to relieve a person

of excessive debt (gives immediate protection)• It can be voluntary or involuntary• It gives debtors a fresh start• It helps ensure fair treatment for creditors• It should be a last resort because it damages

your credit rating….for 10 years!• What is Bankruptcy Fraud?

Avoiding BankruptcyCall and keep creditors informed, make agreements, follow through

• Credit counselingo Sets up a budget and arranges a payment plano Free service by financial institutions

• Debt managemento Creates a plan to pay off debto Debtor must turn over checking account and give

up credit cardso Most charge a fee (adds to your debt)

• Debt consolidationo Process of getting one loan to pay off all debtso Can reduce the monthly payments and interest paido *If you own a home, you can take out a home equity loan

Types of Bankruptcy• Chapter 7- for individuals

o Also called straight or liquidation bankruptcy (income must qualify)

o Involves the forfeiture of assets in exchange for discharge of debts

o Allows for exemptions, or property that a debtor does not have to forfeit, such as tools of trade –

oSee page 293 Figure 9-2.1

Types of Bankruptcy• Chapter 11 – for businesses

o Also called a reorganizationo It is the reorganization of debt as decided by the

court.o Allows a business to remain viable

• Chapter 13 – for individualso Also called individual debt adjustmento Involves a 3- to 5-year repayment plan for some

of the debt (Debt repayment plan)

Additional Info:

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• Automatic Stay: For all 3 types of bankruptcy. This provides immediate protection from any

further action by creditors(no new fees, etc.)• Some debts cannot be discharged

through bankruptcy proceedings:– taxes due the IRS– student loans– child support– government fines for criminal charges

Success SkillsDealing With Difficult People• Deal with the issues head-on.• Meet the person in a private setting.• Ask the person to explain his or her situation.• Listen to what the person is saying and repeat

concerns.• Ask for suggestions about how the problem can be

resolved. Make suggestions/solutions of your own.• Talk to others affected by the behavior.• Stay calm and rational.

Reflection Questions

• What are some ways to avoid bankruptcy?

• Credit counseling, debt management, debt consolidation

• What are the 3 types of bankruptcy and what makes them different?

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Exit Ticket: Question 4 of 4: Name the 3 types of Bankruptcy and whether they apply to an individual or business

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