Unit 25.

Default And Collection Practices

Read and translate the texts.

Consumers who use credit sometimes have difficulty making all their payments. Problems can arise because the consumer is overextended or too deeply in debt. Problems can also arise because of unexpected unemployment, family illness, or a variety of other reasons. A consumer who is unable or unwilling to pay a debt goes into default.

What a Consumer Can Do in Case of Default

If you have problems paying your bills, you should consider the following options:

1. Reassess your financial lifestyle to determine where the problem arose. If you are not already on a budget, consider starting one.

2. Notify each creditor of the problem and ask to have the term of debt extended (leading to smaller monthly payments) or to have the amount of the debt reduced or refinanced. Keep in mind that refinancing over a longer period usually results in increased finance charges.

3. Contact a consumer credit counseling service or a family service agency that offers free or low–cost financial counseling

4. Seek assistance from friends or relatives to reduce the debt to a manageable level.

Bankruptcy If these steps do not resolve your problem, you may have to declare bankruptcy. This is a procedure through which a person places assets under the control of a federal court in order to be relieved of debt. In recent years, an enormous number of bank­ruptcies have been filed in the United States. In 1991–1992, more than 70% of the civil cases filed in federal court were bankruptcies.

Under Chapter 13 of the federal bankruptcy law, a wage earner can make an arrangement, supervised by a federal court, to pay off some or all of what is owed to creditors over an extended period of time. A more severe form of bankruptcy is called a Chapter 7 bankruptcy. Under Chapter 7, the federal court takes control of most of the debtor’s assets (some states allow the debtor to keep certain items), sells them, and pays off as much debt as possible. Generally, the money received from the sale of the assets is not enough to fully pay all creditors.

A declaration of bankruptcy has serious long–term consequences for the debtor. Records of personal bankruptcy remain in credit reports for 10 years. Even after that time, it may be very difficult to obtain credit or borrow money. In addition, some debts are not wiped out through bankruptcy. Taxes, alimony, child support, and student loans must still be repaid.

Find the equivalents of the following words and expressions in the text.

Неожиданная потеря работы; объявлять дефолт; пересмотреть; составлять финансовую смету; продлить срок выплаты долга; объявить банкротство; поместить имущество под контроль федерального суда; огромное количество; долгосрочные последствия.

Answer the questions:

1. Why do consumers who use credit sometimes have difficulty making all their payments?

2. What steps should be taken by a consumer who is unable to pay his bills?

3. What is default?

4. What is bankruptcy? How does the procedure work?

5. What consequences does a declaration of bankruptcy have–term for the debtor?

6. Are there any laws in Russia concerning default and bankruptcy?

Match the words on the left with the correct definition on the right:

Default	the act or an instance of choosing or deciding.
Bankruptcy	restriction on expenditure.
Option	failure to meet a financial obligation.
On a budget	great.
Assets	working person.
Enormous	result or effect of some previous occurrence.
Wage earner	the property available to an executor or administrator for settlement of the debts and payment of legacies of a deceased person's estate any property owned by a person or firm.
Consequence	procedure through which a person places assets under the control of a federal court in order to be relieved of debt.