Filing For Bankruptcy: What Are Your Options
There are six main types of bankruptcy that you can file for in the United States: Chapter 7, Chapter 9, Chapter 11, Chapter 12, Chapter 13, and Chapter 15. Each type of bankruptcy has different requirements and guidelines, so its important to understand which one is right for your situation before filing.
Chapter 7
Also known as liquidation bankruptcy. Its the most common type of bankruptcy filed in the US, and it requires that you sell off any non-exempt assets to pay back creditors. If you dont have any non-exempt assets, your creditors may still be able to get reimbursed through your income if you have enough disposable income each month.
Chapter 9
Chapter 9 bankruptcy is only available to municipalities, including cities, towns, counties, and school districts. This type of bankruptcy allows them to reorganize their debt without liquidating any assets.
Chapter 11
Chapter 11 bankruptcy is also known as a business reorganization bankruptcy. Its available to businesses and individuals, and it allows you to keep your business or assets while you repay creditors over time.
Chapter 12
Only available to family farmers and fishermen. Its similar to Chapter 13 in that you can keep your assets and repay creditors over time , and the amount you have to repay each month may be lower.
Chapter 13
Chapter 15
Determine What Chapter To File Under
After deciding that you need to file bankruptcy, you and your lawyer can determine what chapter of bankruptcy to file under. As mentioned earlier, if youre declaring personal bankruptcy you will typically file under chapters 7 or 13. This decision depends primarily, but not exclusively, on several considerations, including how much debt you have, your income, and whether you have an asset that you owe money on but want to try to protect.
In a chapter 7 bankruptcy, the trustee collects and then sells a debtors nonexempt assets and uses the resulting proceeds to pay off creditors. Some of a debtors property may be subject to liens or mortgages that still have to be paid or the property surrendered.
Chapter 13 allows for an adjustment of the debt for an individual with a regular income. This way, the debtor can pay the debt over time, usually three to five years, depending on the debtors eligibility. The debtor and his/her lawyer construct a plan for repayment. The debtor makes payments to the trustee, who then distributes the funds to the creditors. This is ideal for a debtor who wants to protect any assets that they owe on, like a home or car. When the debtor makes all the payments required, any debt remaining at the end of that designated period is discharged. If the debtors income is above a certain median, they must file a chapter 13.
When The Bankruptcy Order Is Made
The early stages of a bankruptcy are normally handled by an official receiver. An official receiver works for the Insolvency Service and is attached to the court. They will also be your trustee unless an insolvency practitioner is appointed to take over that role. The trustee will realise any assets .
The official receiver will write to you within 2 weeks of the bankruptcy order being made, explaining what you need to know and what you must do.
Recommended Reading: How Do I File Bankruptcy And Keep My Car
The Final Steps Of Your Journey Towards Lasting Debt Relief
Getting all of your bankruptcy forms prepared and filed with the bankruptcy court is usually the most time-intensive process of a Chapter 7 bankruptcy. But that doesnât mean that your job is done. There are a few things everyone filing Chapter 7 bankruptcy has to do to successfully complete their bankruptcy case and receive a discharge. Letâs take a look at what you can expect will happen in your Chapter 7 bankruptcy.
Pay Filing Fee in Installment Payments
If you can’t pay the entire Chapter 7 bankruptcy filing fee and you don’t qualify for a fee waiver, then you can apply to pay the filing fee in installments. You can ask to make four installment payments. The entire fee is due within 120 days after filing.
If the bankruptcy court approves your application, it will grant an Order Approving Payment of Filing Fee in Installments. Your installment payment due dates will be in that order. You must pay all installments on time or your case is at risk of being dismissed.
Take Bankruptcy Course 2
You will complete a credit counseling course before filing bankruptcy. There’s a second course you must take after filing bankruptcy. It covers personal financial management and can help you take advantage of your fresh start after erasing your debts through bankruptcy.
You have to take this course after your case is filed but make sure itâs be completed within 60 days from the date of the meeting of creditors. A certificate of completion must be filed with the court.
How Does Going Bankrupt Affect My Credit Rating
Once a person files bankruptcy in Ontario, the Office of the Superintendent of Bankruptcy will notify the credit bureaus and the bankruptcy will be noted on your credit report. This will impact your report for 6 years after discharge. For a second-time bankrupt, it will remain for a period of 14 years.
Having a bankruptcy noted on your credit report flags you to lenders as being high risk. This high risk status will make your ability to obtain future credit much more difficult and increase the interest rates charged on any credit that you are able to obtain. However, there are ways to successfully rebuild your credit after bankruptcy.
You May Like: How Many Times Can Someone File Bankruptcy
What Are The Alternatives To Bankruptcy
- Trying to work out a repayment, or renegotiated settlement with your creditors on your own.
- Obtaining a debt consolidation loan through a bank or other traditional lender, which will pay off the individual creditors.
- Paying a debt or credit counsellor to set up a repayment program with your creditors.
- Filing a Consumer Proposal to cut your debt by up to 80%, halt interest and stop any collection action. .
How Long Does Bankruptcy Last
Bankruptcy lasts approximately 9 months, provided that it is your first bankruptcy and you complete all of the duties assigned to you. Your bankruptcy may last up to 21 months if you have to pay surplus income, which is calculated according to standards established by the Office of the Superintendent of Bankruptcy Canada and coordinated by your trustee after examining your income, expenses, and dependents in your household.
If it is your second bankruptcy, you will be bankrupt for 24 or 36 months. If you have been bankrupt more than once previously, have not complied with your duties, or have committed one or more bankruptcy offences, your bankruptcy timeline will be determined by the court.
After you have received an Absolute Discharge from your bankruptcy, you will no longer be responsible for any of the discharged debts. However, the fact that you filed a bankruptcy will appear on your credit rating for 6 to 7 years, depending on the province you live in.
Recommended Reading: How To File Bankruptcy In Iowa
How Do I File For Bankruptcy
The first step is to meet with an MNP LTD Licensed Insolvency Trustee. Together, you will review all available options, including bankruptcy alternatives like consumer proposals, debt consolidation and credit counselling. If, after going through your options, you decide that bankruptcy is the right debt relief solution for your situation, your Licensed Insolvency Trustee will guide you through the process in detail.
What Happens After My Bankruptcy Requirements Are Completed
When you complete all your duties in bankruptcy, you will obtain a type of discharge, which is the official certification of how it was completed.
A record of your bankruptcy will remain on your for several years after your discharge.
Apart from the note of your past bankruptcy, your credit status will be clear. It will be as if you had never had credit. Like a young adult starting independent life, you will have to earn the trust of creditors from the ground up.
Don’t Miss: How To Boost Credit After Bankruptcy
How Long Does A Chapter 7 Bankruptcy Stay On Your Credit Report
After you file for a Chapter 7 bankruptcy, it remains on your for up to ten years and youre allowed to discharge some or all of your debts. When you discharge your debts, a lender cant collect the debt and youre no longer responsible for repaying it.
If a discharged debt was reported as delinquent before you filed for bankruptcy, it will fall off of your credit report seven years from the date of delinquency. However, if a debt wasnt reported delinquent before you filed for bankruptcy, it will be removed seven years from the date you filed.
What Happens When You Declare Bankruptcy In Canada
Home > > How to File Bankruptcy> > What Happens When You Declare Bankruptcy In Canada?
What happens when you declare bankruptcy in Canada?Do you get out of all debts if you declare bankruptcy?What happens to your debts when you go bankrupt in Canada?Does declaring bankruptcy clear all debts?
These are common questions and complex topics. The answers depend on the type of debt, and in some cases on your payment status. There are actually some debts that stay , even if you file for bankruptcy.
Recommended Reading: Can You File Bankruptcy And Keep Your House
What Happens To Your Assets After Discharge
Assets that are part of the bankruptcy stay under the trustees control when your bankruptcy ends. It can take time for all assets to be dealt with.
You must keep making any payments agreed under an IPA or IPO.
Your family home
If your family home has not been dealt with 3 years after the bankruptcy order, the interest may be given back to you.
If the interest in your family home is returned to you, the Land Registry will be told that the property is no longer part of your bankruptcy estate. The trustee will send notice to the Land Registry and the restrictions will be removed.
Your business
The restrictions on your business end when bankruptcy ends, unless the official receiver feels youve been dishonest. They can then apply to extend the restrictions
You May Like: How Many Bankruptcies Has Donald Trump
What To Do If You Are Discriminated Against
Unfortunately, there is not much you can do if you are denied a job in the private industry after you file for bankruptcy, but if you are fired from your current job in either private or government agencies then you may have a case.
You need to make sure that your employer didnt have another acceptable reason for firing you. It can be hard to prove that your bankruptcy filing was the reason you were fired, especially if you have poor job performance or a history of showing up late to work.
It can be even harder to prove you were turned down for a job because of your bankruptcy filing, but an experienced lawyer can help you know if you have a claim and provide help with filing a claim.
___________________________________________________
Read Also: How To File Bankruptcy In Ky
Read Also: How To Find Home Foreclosures
What Are The Negative Consequences Of Declaring Bankruptcy
While the main benefit of bankruptcy is the removal of certain debts, the negative consequences are quite damaging. The most obvious is an immediate large and negative impact on one’s credit score, and bankruptcy will remain on your credit report for 7-10 years. This means that it may be difficult, more costly, or even impossible to borrow money for things like a business or home. There is also the social stigma of bankruptcy, where people may equate it with a lack of character or untrustworthiness.
Rebuilding Your Credit And Finances After Bankruptcy
When the process of bankruptcy is over, your LIT will give you a Notice of Discharge. This notice means you no longer have those debts. You are debt-free at this point, minus any other obligations that were not part of the bankruptcy. That may include secured debts on assets that qualified for exemption, taxes, child support, alimony, and student loans less than seven years old.
Now comes the process of rebuilding your credit and restoring your finances. Youve hopefully learned money management skills and know how to keep your budget. Easy ways to start new credit include secured credit cards and other new credit programs. A secured credit card is when you have an account with a credit card company that is secured by a cash deposit. Your credit limit is equal to the amount you deposit. Always follow and keep your budget. Understand what expenses you have and plan for your wants and needs.
Read Also: Maximum Debt To Income Ratio For Mortgage
When To File For Bankruptcy
Bankruptcy law exists to help people who have taken on an unmanageable amount of debtoften as a result of large medical bills or other unexpected expenses that are no fault of their ownto make a fresh start. But it isnt a simple process and doesnt always lead to a happy ending.
So before filing for bankruptcy, be sure to explore all your alternatives and be prepared for some of the negative consequences described above. If you decide that bankruptcy is your only viable optionas hundreds of thousands of Americans do every yearremember that the blot on your record will not be permanent. By using credit carefully in the future and paying your bills on time, you can begin to rebuild your credit and gradually put bankruptcy behind you.
Bankruptcy Is A Powerful Tool For Debtors But It Doesn’t Solve All Problems Learn What Happens When You File For Bankruptcy And What Bankruptcy Can Do To Help You Improve Your Financial Situation
When facing financial difficulties, it’s essential to know what happens in bankruptcy before deciding to file a bankruptcy case. There’s no doubt that if you’re experiencing severe debt problems, filing for bankruptcy can be a powerful remedy. It stops most lawsuits, wage garnishments, and other collection activities. It also eliminates many types of debt, including credit card balances, medical bills, personal loans, and more.
But it doesn’t stop all creditors, and it doesn’t wipe out all obligations. For instance, you’ll still have to pay your student loans unless you can prove hardship. You’ll also need to pay arrearages for child support, alimony, and most tax debts.
Find out what happens in bankruptcy and how bankruptcy works, including:
- what Chapter 7 and Chapter 13 bankruptcy can do
- what happens only in Chapter 13 bankruptcy, and
- what you can’t do in bankruptcy whatsoever.
Once you understand the basics, you’ll likely want information targeted to your situation. Look for the links to additional resources at the end of the article.
- Get answers to questions about bankruptcies.
You May Like: Chapter 13 Bankruptcy Illinois
What Happens To My Debt When I Claim Bankruptcy In Canada
Consumers end up in bankruptcy for a variety of different reasons, but the results of bankruptcy are the same for everyone who files. All who successfully complete their bankruptcy requirements enjoy the elimination of their unsecured debts and a clean start to their financial future.
What bankruptcy does not do, however, is get you off the hook for absolutely every debt that you have incurred. In fact, you will still be held liable for secured debts such as a mortgage or car loan, as well as various legal fines and other judgments against you. In personal bankruptcy, you give up some assets in exchange for having some debts wiped clean. That is, you no longer have to pay your unsecured debts and, from a certain point of view, you no longer have to pay your secured debts either. The reason you no longer have to pay your secured debts is that the lending institution has reclaimed the asset against which the debt was held. In other words, you dont pay your mortgage anymore because the bank has repossessed your house.
Filing The Bankruptcy Paperwork
If you decide to declare bankruptcy, your trustee is responsible for administering all aspects of your bankruptcy. Once you have signed the paperwork the trustee will electronically file the documents with the Office of the Superintendent of Bankruptcy, a division of the federal government that monitors all bankruptcies in Canada. Your bankruptcy will start immediately after the paperwork is filed. Within five days of filing all of your creditors are notified that you have filed bankruptcy, and they are directed to the trustee to file their claim for the amount they are owed.
Also Check: What Does Debt To Income Ratio Mean
Which Debts Can I Eliminate By Filing For Bankruptcy
Filing for bankruptcy allows you to eliminate all of your unsecured debts, including credit cards, lines of credit, bank loans, payday loans and income tax debts. Student loans can only be eliminated in bankruptcy if youve been out of school for more than seven years. If you have been out of school for less than seven years you may still be able to eliminate student loans under certain hardship conditionsyour local LIT can review those conditions with you.
Can I Keep My House If I File For Bankruptcy
Keeping your house when you file for bankruptcy is possible in some cases. If you have little or no equity in the property , and if your payments are reasonable, it can be possible to retain a home. Also, some provinces allow for an exemption of a portion of a houses value from being included in a bankruptcy to make it possible for more people facing bankruptcy to keep their homes.
In other cases, particularly if there is significant equity in the home, it must be liquidated to make the equity value available for distribution by the Trustee to the creditors who have filed claims in the bankruptcy.
Your Trustee can advise you further.
Don’t Miss: Bank Of America Foreclosed Homes
