Questions and Answers
A person who files bankruptcy ends up paying a 5% higher fixed interest rate on a 25-year home loan than a person who has not filed bankruptcy. If the loan amount is $160,000, how much more does the person who filed bankruptcy pay in total interest on the home loan than the person who has not filed bankruptcy?
Which of the following is not a true statement about filing bankruptcy?
Since they filed bankruptcy in the past, a couple ends up paying a 12% fixed rate for a 30-year mortgage. How much more per month will the couple be paying for their mortgage as a result of their bankruptcy?
A family of 2 that has a monthly income of $4,650 is thinking about filing bankruptcy. In which of the following states could the family be living to file for Chapter 7 bankruptcy?
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Tyrell has a bankruptcy on his credit report. How much does Tyrell pay in additional interest each month due to his bankruptcy?
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If a person who filed bankruptcy in the past could have received a lower interest rate on a $150,000 loan, how much money would have accumulated in interest if invested at a rate of 2.5%?
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If Byron had saved his additional charges due to bankruptcy and put it into a savings account earning 2% simple interest, how much money could he have in savings after another year?
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How much more in interest will Zoe end up paying for her loan because of her bankruptcy?
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If a couple has lost employment and feels the need to file for bankruptcy, which of the following statements is true?
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Which of the following phrases best summarizes Chapter 13 bankruptcy?
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Study Notes
Bankruptcy Interest Rates and Loans
- A bankruptcy filer pays a 5% higher interest rate on a 25-year home loan compared to a non-filer (7.5% vs 12.5%).
- For a $160,000 loan, the additional total interest paid due to bankruptcy filing is $168,654.22.
- A couple with a bankruptcy pays a fixed rate of 12% for a 30-year mortgage instead of a potential 8%. This results in an additional monthly payment of $412.79 on a loan amount of $140,000.
Chapter 7 and Chapter 13 Bankruptcy
- Families must meet specific income criteria to file for Chapter 7 bankruptcy.
- A family earning $4,650 monthly could file for Chapter 7 bankruptcy in Virginia or Texas.
- In Missouri, a couple can file for Chapter 13 bankruptcy and discharge some of their debt when facing financial difficulties.
Financial Implications of Bankruptcy
- Tyrell’s additional interest payments amount to $1,000 monthly, leading to a potential yearly gain of $300 if invested at 2.5% interest.
- A person with a prior bankruptcy accumulates $37,395.18 in interest savings by investing saved payments from a lower mortgage rate over 10 years.
- Byron, paying an average of $79.15 extra per month due to bankruptcy, could save $968.80 in a year with 2% simple interest.
Loan Comparisons and Costs
- Zoe, needing to borrow $15,200, pays $18,162.24 more due to a higher interest rate resulting from her bankruptcy history compared to lower rates possible with a better credit rating.
- Understanding the distinction between Chapter 13 and Chapter 7 bankruptcy is essential; Chapter 13 allows for debt reorganization while keeping property.
Key Findings on Bankruptcy Misconceptions
- Bankruptcy does not erase all debts; it can help in reorganizing or discharging certain debts.
- There are exemptions in bankruptcy that permit individuals to retain essential assets during the process.
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Description
Test your understanding of bankruptcy concepts and financial implications with these flashcards. Explore the differences in interest rates for individuals who have filed bankruptcy compared to those who have not. Perfect for students of finance and law.
