Application 9H - 9J pg. 49 - 53 Flashcards
Describe debt management plan
> person agrees to pay the credit counseling service a specific amount of his debt each month for a specified length of time
credit counselor forwards the money to various creditors to which the person owes money
creditors often agree to reduce fees, interests, and penalties if credit counselor assures them that the person has a DMP (debt management plan)
Describe Chapter 7 bankruptcy
> if person files for Chapter 7 bankruptcy, most of his debts are forgiven; however, debts such as student loans, child support, and some other kinds of debt are not forgiven
person must prove to court that he will never be able to repay his debts and explain to judge how he came to this current financial state
designed for people with lower incomes who could not repay their debts based on their income
in exchange for forgiveness of a person’s debt, most of the person’s property is repossessed and sold, and the proceeds from sale are divided among creditors
individual allowed to keep basic living needs such as place to live and vehicle; however, he may be forced to give up particular house and vehicle that he is using for less expensive one depending on situation
for next 10 years, person’s credit report will show that he declared bankruptcy
Describe Chapter 13 bankruptcy
> if one files for Chapter 13 bankruptcy, debts are not forgiven as they are in Chapter 7 bankruptcy
person must work out with court a payment schedule to repay creditors
in exchange, court orders debt collectors to stop contacting person and charging additional fees, since court has worked out a plan for him to repay his debt
court will require person to use discretionary income to pay off debt
person keeps his possessions rather than court repossessing them to pay off his debts
designed for those who earn enough income that they can eventually repay their debts
Describe fixed-rate mortgages
> mortgage in which interest rate is locked in even if interest rates rise in the future
Describe adjustable-rate morgages (ARM)
> mortgages that vary interest rate annually
Describe closing costs
In addition to down payment on a house, there will also be closing costs that the buyer will pay which can add several thousand dollars to loan
>mortgage application fee, inspection fee, survey fee, title search fee, real estate commissions, home appraisal fee
Define escrow
escrow - fund where money is held by a third party to be paid on a person’s behalf
