Waiting Periods For Other Bankruptcies
While the legal implications behind debt discharge or dismissal outside of Chapters 7 and 13 bankruptcies are beyond the scope of this article, we can share the waiting periods for getting a new mortgage if youve filed Chapter 11 or 12 bankruptcies in the past.
For Chapter 11 bankruptcies, you can get a mortgage through the FHA or VA as long as you otherwise qualify and the bankruptcy was discharged or dismissed 2 years prior to application. The waiting period for conventional loans is 4 years and 7 years for jumbo loans.
For a Chapter 12 bankruptcy, conventional loan policy again differentiates between discharge and dismissal. If the bankruptcy is discharged, that has to have happened more than 2 years prior to application and it has to be filed more than 4 years ago. When the bankruptcy is dismissed, the waiting period is 4 years.
With an FHA loan, the bankruptcy only needs to be discharged or dismissed before you apply. Meanwhile, the VA has a 3-year waiting period prior to application.
Filing for bankruptcy is a big decision that has a lot of implications for your current and future financing. Make sure you discuss your options with a lawyer or your financial advisor before you stop making payments or file for bankruptcy.
What You Cannot Keep
Savings Bonds, TFSAs and RESPs can be seized in a bankruptcy as they are essentially cashable savings accounts. However, most people contemplating bankruptcy have depleted their savings accounts many months before filing a bankruptcy in an effort to avoid bankruptcy so this is not usually an issue. If you still have savings a consumer proposal might be a better option for you than bankruptcy as you may be able to keep some or all of your savings in a proposal.
Most people worried about losing an asset in a bankruptcy would choose to file a consumer proposal instead. In a consumer proposal you can keep control of all your assets regardless of their value.
Bankruptcy exemptions, and what you keep or lose in a bankruptcy in Canada, can be quite complicated. Talking with a Bankruptcy Canada Trustee over the phone or in person to review your options is always free. Our trustees offer convenient hours and the initial consultation is always free with no obligation to you. Contact a bankruptcy trustee in your area if you have questions.
Read about other common bankruptcy myths:
What Happens To Your Mortgage When You File For Bankruptcy
A mortgage is a secured debt that means that if you pay, you keep the security on it, which is your house. If you dont pay, you lose it. Bankruptcy, of course, complicates that.
Under Chapter 7, if its determined you cant pay your mortgage, then the bank will foreclose. The house will no longer be yours, and youll have to move out. You dont make any more payments in most cases.
With Chapter 13, you continue to make monthly mortgage payments, and also make past due payments, keeping the mortgage alive. But its not easy more Chapter 13 cases were dismissed in 2020, which means finished without being completed, than were discharged. When a case is dismissed, its as though the person never filed. The majority of dismissed cases was because homeowners didnt or couldnt make their payments. Whatever the reason, the debts are still owed, which puts you right back where you were before filing.
Whether you can or cant stick with the payment plan, you are still responsible for paying your mortgage or you will lose your house.
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How Long Do I Have To Wait After Chapter 13 To Get A New Mortgage
Rocket Mortgage and other lenders may give you the option of getting an FHA or VA loan as long as the Chapter 13 bankruptcy is discharged or dismissed before you apply.
If you’re looking to apply for a conventional loan, it matters whether your bankruptcy was discharged or dismissed. In the event of a Chapter 13 discharge, the discharge date has to be more than 2 years prior to the date credit is pulled and more than 4 years since the filing.
If the bankruptcy was dismissed, theres a 4-year waiting period until credit can be pulled for a new conventional mortgage.
Finally, jumbo loans still have a 7-year waiting period before you can apply.
What Doesnt Bankruptcy Do
Bankruptcy cannot, however, cure every financial problem. Nor is it the right step for every individual. In bankruptcy, it is usually not possible to:
- Eliminate certain rights of secured creditors. A secured creditor has taken a mortgage or other lien on property as collateral for the loan. Common examples are car loans and home mortgages. You can force secured creditors to take payments over time in the bankruptcy process and bankruptcy can eliminate your obligation to pay any additional money if your property is taken. Nevertheless, you generally cannot keep the collateral unless you continue to pay the debt
- Discharge types of debts singled out by the bankruptcy law for special treatment, such as child support, alimony, certain other debts related to divorce, some student loans, court restitution orders, criminal fines, and some taxes.
- Protect cosigners on your debts. When a relative or friend has co-signed a loan, and the consumer discharges the loan in bankruptcy, the cosigner may still have to repay all or part of the loan. Discharge debts that arise after bankruptcy has been filed.
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If You Have Multiple Mortgage Loans
Under Chapter 13, a borrower who has multiple mortgage loan on the same house can get all but the primary categorized as unsecured debt. That means they go into the category thats covered by your ability to pay, and likely wont have to be paid back in full. This only comes into play if you owe more on the house than its worth.
Where Will I Live If I Lose My Home Through Bankruptcy
Stop worrying and asking, Will I lose my house if I file bankruptcy? Even if you do, all hope is not lost! You can still have a new home even after bankruptcy.
Some programs are available to help you on your road to recovery. State governments and nonprofits have home-buying assistance programs that you can tap into. These include the following:
- Federal Housing Administration loans
- Veteran Affairs loans
- United States Department of Agriculture loans
- State housing finance agencies
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Managing Your Auto And Home Loans
Your debts can be unsecured or secured. Secured debts usually are tied to an asset, like your car for a car loan, or your house for a mortgage. If you stop making payments, lenders can repossess your car or foreclose on your house. Unsecured debts are not tied to any particular asset, and include most credit card debt, bills for medical care, and signature loans.
Most automobile financing agreements allow a creditor to repossess your car any time youre in default. No notice is required. If your car is repossessed, you may have to pay the balance due on the loan, as well as towing and storage costs, to get it back. If you can’t do this, the creditor may sell the car. If you see default approaching, you may be better off selling the car yourself and paying off the debt: You’ll avoid the added costs of repossession and a negative entry on your credit report.
If you fall behind on your mortgage, contact your lender immediately to avoid foreclosure. Most lenders are willing to work with you if they believe you’re acting in good faith and the situation is temporary. Some lenders may reduce or suspend your payments for a short time. When you resume regular payments, though, you may have to pay an additional amount toward the past due total. Other lenders may agree to change the terms of the mortgage by extending the repayment period to reduce the monthly debt. Ask whether additional fees would be assessed for these changes, and calculate how much they total in the long term.
Where Do I File If I Havent Lived In The Same State Or District For The Last Six Months
Federal Law requires that the case should be filed where the debtor has lived for the one hundred and eighty days immediately preceding such commencement, or for a longer portion of such one-hundred-and-eighty-day period. 28 U.S.C. sec 1408. This means that the case should be filed in the bankruptcy district in which the debtor has lived for the greatest portion of the last six months.
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No One Loses All Of Their Property When Filing For Bankruptcy Find Out What You’ll Keep
By Cara O’Neill, Attorney
Don’t worryyou won’t lose everything in bankruptcy. But you might lose unnecessary luxury items, like your fishing boat or a flashy car, or have to pay to keep them. To prevent expensive surprises, you’ll want to learn:
- how exemption laws protect property
- what happens to items you can’t protect, and
- where to find your state’s exemption laws.
Once you’ve mastered this area, it’s a good idea to review some other things you should know about filing for bankruptcy. Or check out our quick ten-question bankruptcy quiz. It can help you spot potential bankruptcy issues fast.
What Happens To Your Mortgage When You File Bankruptcy
Home loans, like mortgages, home equity loans, or home equity lines of credit are secured debts. This means the bank has a sort of ownership interest in the real estate. As long as you make your monthly payments, the home is yours to keep. If you donât pay your mortgage, the bank can take the house back by way of a foreclosure. Thatâs true even after you get a bankruptcy discharge.
Because of this, keeping your home means keeping your mortgage. Thereâs no such thing as a free house.
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Dealing With Debt Collectors
Federal law dictates how and when a debt collector may contact you: not before 8 a.m., after 9 p.m., or while youre at work if the collector knows that your employer doesnt approve of the calls. Collectors may not harass you, lie, or use unfair practices when they try to collect a debt. And they must honor a written request from you to stop further contact.
What Debts Cannot Be Discharged In Bankruptcy
The following debts cannot be discharged in either a Chapter 7 or a Chapter 13 bankruptcy case. If you file Chapter 7, you will still owe these debts after your case is over. If you file Chapter 13, these debts will either be paid in full during your plan, or the balance will remain at the end of your case.
Nondischargeable debts include:
- Unlisted debts, unless the creditor had knowledge of your bankruptcy filing.
- Recent income tax debt and other tax debt.
- Fines imposed for violating the law.
- Student loans, unless you can show that it will cause a hardship for you to repay them.
- Debts you owe under a divorce decree or settlement.
In a Chapter 7 and 13 case, a creditor may object, and a judge may agree, to theseadditional debts being discharged:
- Debts incurred by embezzlement, fraud, or larceny.
- Certain credit purchases made within 90 days or cash advances made within 70 days of filing.
- Restitution or damages awarded in a civil action for willful or malicious injury to a person.
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Check If You Can Stop Or Delay The Official Receiver Selling Your Home
You might be able to stop or delay your home from being sold if:
- someone else has a legal right about your home
- someone will buy your share of the home
- your mortgage covers most or all of what your home is worth – called low or negative equity
If someone else has a legal right about your home
The official receiver will usually only sell your home after youve been bankrupt for a year. This is because someone with a legal right about your home has more rights to keep it for a year after you go bankrupt.
If you need to keep your home for more than a year, youll need to show there are exceptional circumstances which mean you cant move earlier. For example, you might not be able to move earlier if someone you live with:
- is at school and needs to keep the support they get from school
- has a mental health problem
- is disabled, and the house has been adapted for their needs
- is over 70 years old
If you need to keep your home for more than a year, talk to an adviser to find out whether your circumstances are exceptional.
If someone will buy your share
You might be able to stop your home from being sold if someone agrees to buy your share of it.
It’s important to remember that you can’t just sign over your share of your home to someone else to avoid it being sold. If you want to sell your share, you need to do it at market value.
If your home is in low or negative equity
Navigating Your Bankruptcy Case
Bankruptcy is an unusual area of law because it’s essentially a qualification process. The laws provide instructions for completing a 50- to 60-page bankruptcy petition, and because all rules apply in every case, you can’t skip a step.
One way to keep track of your research is to use the bankruptcy forms as an outline. You’ll find links to the exemption-related bankruptcy forms and other exemption resources in the chart below. You can also look at the list of Chapter 7 and 13 bankruptcy forms to see where this topic fits in the bankruptcy scheme. And this handy bankruptcy document checklist will help you gather the things you’ll need to complete the petition.
Bankruptcy Exemption Information
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Will Bankruptcy Wipe Out All My Debts
A Bankruptcy will not eliminate all debts. For example, these debts will not be discharged in a bankruptcy if:
money owed for child support or alimony, fines, and some taxes debts not listed on your bankruptcy petition loans you got by knowingly giving false information to a creditor, who reasonably relied on it in making you the loan debts resulting from willful and malicious harm student loans owed to a school or government body, except if: the court decides that payment would be an undue hardship mortgages and other liens which are not paid in the bankruptcy case .
What Do You Lose When You File Bankruptcy
Most bankruptcy filers donât lose anything, actually. Property you own free and clear is yours to keep as long as thereâs a bankruptcy exemption to protect it.
Property that secures a lenderâs right to payment of a secured debt is yours to keep as long as you pay for it. The bankruptcy trustee doesnât even really get involved.
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What Happens If I Jointly Own A House
If you own a house with another person or people, your trustee becomes the owner of your share. You will no longer have any legal capacity to deal with the house. The co-owner won’t be able to deal with the property without your trustees consent.
If the co-owner is also bankrupt, they may have:
- the same trustee or
- another trustee .
If the co-owner is not bankrupt and wants to keep the house:
- they can submit an offer to your trustee to purchase the share you owned before you became bankrupt.
Some things to consider when proposing an offer:
- It should reflect what the trustee would get from selling the property on the open market.
- Your trustee doesn’t need to accept the offer simply because it is from a co-owner.
- Your trustee has a duty to seek the best financial benefit for creditors.
If all parties are not able to agree, your trustee may take legal action to proceed with the sale. If the court grants permission to sell the house, the trustee can use the proceeds to pay the sale costs. The trustee will divide any remaining money with the co-owner based on their share of ownership.
The co-owner may be liable for any outstanding debt owing to the secured creditor after the sale. You and the co-owner may wish to seek independent legal assistance regarding your legal standing.
What Happens To The Money When The Trustee Sells My House
Proceeds of the sale of your assets go towards paying:
- your mortgage
- other creditors in the bankruptcy
- outstanding fees and charges owing to your trustee.
If there is a remaining balance after paying these costs, your trustee will return it to you. If you still owe money after the sale, you can list this debt in your bankruptcy.
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