Questions and Answers
How much more per month will the couple be paying for their mortgage as a result of their bankruptcy?
How much money would have accumulated in interest if the person filed bankruptcy?
How much does Tyrell pay in additional interest each month?
Which of the following statements is true regarding the couple considering bankruptcy?
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Which of the following is not a true statement about filing bankruptcy?
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How much more does the person who filed bankruptcy pay in total interest on the home loan?
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In which of the following states could the family be living to file for Chapter 7 bankruptcy?
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How much money could Byron have in savings after another year?
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What phrase best summarizes Chapter 13 bankruptcy?
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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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Study Notes
Bankruptcy and Mortgage Rates
- A couple with a past bankruptcy pays a 12% fixed rate for a 30-year mortgage, while a better credit rating could secure an 8% rate.
- A $140,000 loan at 12% results in an additional monthly payment of $412.79 due to bankruptcy.
Interest Rate Comparisons
- A person with a bankruptcy incurs a 6% higher mortgage rate, paying 11% on a $150,000 loan.
- By saving the difference in payments for 10 years, invested at 2.5% simple interest, they accumulate $37,395.18.
Impact of Credit History on Interest
- Tyrell, facing higher loan interest due to bankruptcy, realizes he pays an extra $1,000 in yearly interest.
- This additional interest, at 2.5% for a year, could earn $300 in simple interest.
Bankruptcy Filing and Income Considerations
- A Missouri couple with an annual income of $96,730 can file for Chapter 13 bankruptcy to discharge some of their debt after a $2,100 monthly income loss.
Misconceptions about Bankruptcy
- Bankruptcy does not erase all debts; it may allow for credit rebuilding and provide exemptions for essential assets.
- It halts aggressive creditor actions while some obligations remain.
Total Interest Payments Differences
- An individual with bankruptcy pays a 5% higher rate on a 25-year loan compared to someone without it.
- This results in an extra $168,654.22 in total interest on a $160,000 home loan.
Chapter 7 Bankruptcy Eligibility
- A family with a monthly income of $4,650 can file for Chapter 7 bankruptcy in Virginia or Texas, depending on state-specific income limits.
Savings from Avoided Extra Charges
- Byron averages $79.15 monthly in additional bankruptcy-related charges; saved for one year and invested at 2% simple interest, he would end up with $968.80.
Understanding Chapter 13 Bankruptcy
- Chapter 13 bankruptcy is characterized by debt reorganization, enabling individuals to keep their property while managing repayment.
Financial Impact of Bankruptcy on Loans
- Zoe's bankruptcy results in higher loan payments—$819.20 instead of $440.82.
- Due to this, she will pay an additional $18,162.24 in interest over the loan's four-year term.
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Description
This quiz explores the financial implications of filing for bankruptcy, specifically focusing on increased mortgage costs and interest rates on home loans. Test your knowledge on how bankruptcy affects monthly payments, total interest paid, and understand the truths and misconceptions surrounding the process.
