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
Protecting Your Home In Chapter 13 Bankruptcy
In Chapter 13 bankruptcy, you keep your property and repay your debts over time. Because you keep your property in Chapter 13, you won’t automatically lose your home. But keeping a home in Chapter 13 can be costly.
If you are current on your mortgage payments, and you can cover all of your equity with bankruptcy exemptions, you’ll be fine. However, here’s where it can get expensivea filer must pay the value of any nonexempt equity to creditors through the plan. So you’ll need to show that you have sufficient income to pay your monthly house payment, your nonexempt equity, and all other required debt payments over the course of the three- to five-year Chapter 13 repayment plan.
If you are behind on mortgage payments or facing foreclosure, Chapter 13 allows you to make up the arrearage through your repayment plan. For this reason, Chapter 13 is often the right choice for people at risk of losing their homes. But again, you’ll have to show that you have enough income to make your regular monthly payment and pay the arrearages and all other required amountsincluding nonexempt equity reimbursementover the course of the plan. Learn about calculating a repayment plan and the steps involved in Chapter 13.
Can I Erase My Student Loans By Filing Bankruptcy
Generally, student loans are not discharged in bankruptcy. In 11 U.S.C. sec. 523 there are two exceptions to this general rule:
Student loans more than 7 years old used to be dischargeable under certain circumstances, but this provision was removed by an appropriations bill passed in October of 1998.
Whether an exception applies depends on the facts of the particular case and may also depend on local court decisions. Even if a student loan falls into one of the two exceptions, discharge of the loan may not be automatic. You may have to file an adversary proceeding in the bankruptcy court to obtain a court order declaring the debt discharged.
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Can I Keep My Home
We understand that your house is likely your most valued possession. There are exemptions that allow you to keep some of the equity in your home when you file for bankruptcy. Generally speaking, however, if youve already paid off a large portion of your mortgage , filing for bankruptcy might not be the best solution for you the law requires you to use that equity to pay off some of the money you owe to your creditors.
To keep your home after filing a bankruptcy, you would need to pay a Licensed Insolvency Trustee the amount of home equity you have, minus any provincial exemptions. Home equity is calculated by subtracting the remaining amount of your mortgage, along with any outstanding taxes you owe, from what your house is currently worth on the market. For example:
|How to calculate Bob’s home equity|
|Current market value|
|Estimated home equity||$19,400|
Depending on which province he lives in, Bob would have to pay up to $19,400 during the bankruptcy process in order to keep his home. This is one of the reasons why bankruptcy is only considered after other debt relief solutions have been explored. If Bob can afford to repay a portion of his debt, but not the full amount of equity in his home, he may wish to consider an alternative to bankruptcy, such as a consumer proposal. A Licensed Insolvency Trustee will be able to explain every option to help Bob choose the best solution that is right for him.
In Many Cases You Can Keep Your Home In Chapter 7 Bankruptcy Learn More Here
By Cara O’Neill, Attorney
You won’t necessarily lose your home in Chapter 7 bankruptcyespecially if you don’t have much home equity and your mortgage is current. Whether you can keep your home after filing for Chapter 7 bankruptcy will depend on the following factors:
- whether your mortgage is current
- if you’ll be able to continue making the payments after bankruptcy
- how much equity you can protect with a homestead exemption, and
- the amount of equity in your home.
If you’re behind on your payment, in foreclosure, or have more equity than you can protect, you’ll have a better chance of keeping your home in Chapter 13 bankruptcy. Filers faced with those circumstances should learn more about choosing between Chapter 7 or Chapter 13 when keeping a home.
For step-by-step guidance through the bankruptcy process, read What You Need to Know to File for Bankruptcy in 2021.
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Restrictions On People Who Have Been Declared Bankrupt
Once you have been declared bankrupt, you will be guilty of an offenceif:
- You do not disclose the bankruptcy when getting a loan or any other credit facility of 650 or more
- When trading in a name other than that in which you were made bankrupt, you do not disclose the bankruptcy
- You act as a director, manager, auditor, liquidator or receiver of a company without permission of the court
These offences carry a maximum penalty of 5 years in prison and a fine of1,270.
Other consequences of bankruptcy are:
- If you wish to travel outside the State, you should tell the Official Assignee. You may be arrested if it seems to the High Court that you are leaving the State in order to avoid the consequences of your bankruptcy.
- You cannot be granted an enduringpower of attorney on behalf of someone else, and if you hold one already, it is automatically revoked if you become bankrupt.
- Under the Charities Act 2009, you may not be a trustee of a charity if you are adjudicated bankrupt.
- Some professional bodies disqualify members who are adjudicated bankrupt
Can I Get A Credit Card If I Declare Bankruptcy In Canada
No. Once you file for bankruptcy, you must hand over your credit cards to your trustee so they can be cancelled. Additionally, your credit rating will be negatively affected by your bankruptcy and Canadian credit bureaus will keep a note about your bankruptcy on your credit report for up to 7 years, depending on your province.
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Stop The Sale Of Your Home
You might be able to stop or delay the sale of your home if, for example:
- the value of your equity is less than £1,000
- the equity or legal title can be sold to someone else, such as a partner
- you need to organise somewhere for children or a partner to live – the sale can be delayed for up to 1 year
You may want to get legal advice to find out if you can stop or delay the sale of your home.
Check if you can get legal aid to help with your legal costs. You can get advice from Civil Legal Advice if youre eligible.
Will Bankruptcy Affect My Credit
There is no clear answer to this question. Unfortunately, if you are behind on your bills, your credit may already be badly damaged. Bankruptcy will probably not make things any worse. The fact that youve filed a bankruptcy can appear on your credit record for ten years. But since bankruptcy wipes out your old debts, you are likely to be in a better position to pay your current bills, and you may be able to get new credit.
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What Happens To My House If I Declare Bankruptcy
The amount of equity you have in your home will play an important part in deciding whether you can keep your house when you file bankruptcy. To determine the equity in your house, you need to know the current market value of your house, your mortgage amount and what you owe in property taxes. Heres what the calculation looks like:
Your equity = market value of your house –amount owing on your mortgage – unpaid property taxes
Lets look at an example. Using the above calculation, if the market value of your house is $350,000, your outstanding mortgage is $310,000 and you owe $2,500 in property taxes, your equity is $37,500 .
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:
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Downsides To Keeping Your House When Filing For Bankruptcy
You may desperately want to keep your house, even if youre so deep in debt youre considering filing bankruptcy. Thats understandable it not only has an emotional attachment, but could some day be an asset, even if youre behind on payments now.
That said, there are some financial downsides to hanging on to your house through a bankruptcy proceeding.
If you file for Chapter 13 bankruptcy, you have to continue making your monthly mortgage payments, as well as pay what you were behind on. This can be difficult, even if the payment plan that you, the court and your lenders agree to, seems to be doable.
Almost two-thirds of Chapter 13 bankruptcies fail. Its tough to keep to a payment plan over three to five years, even though modifications are allowed. Those involve going back to court and explaining why you need one. Through it all, you have to keep current on your mortgage payments, as well as all the other payments agreed to in the plan.
If you file for Chapter 7 and keep your house, you must make the monthly payments. The only hope for a modification, is the bank itself.
Bankruptcy, obviously, is complicated, and if youre worried about keeping your house, its even more so. If youre asking, Should I file for bankruptcy? your first move should be to talk to a credit counselor.
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When You File Chapter 13
Chapter 13 is designed to work out a payment plan with lenders for secured and unsecured debt over a three- to five-year period. It is more likely that youll be able to keep your home in a Chapter 13, because the bankruptcy trustee will roll the amount of money that you owe your lender into the repayment settlement. During the payment plan, you must not only repay the money mandated by your trustee, but also keep your mortgage payments current, in order to keep your home. If you pay on time through the length of the plan, you are out of bankruptcy and can keep your home. If you fall behind on your trustee payments or your mortgage payments again, you can lose the home.
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Will I Lose My Assets If I File For Chapter 7
You may possibly lose some assets if you file for Chapter 7. In Florida, we have a very extensive homestead exemption, it’s unlimited, so your home is protected. However, in exchange, they very much limited the personal property in vehicle exemptions. If you do own a home, your personal property exemption is limited to $1000 per person, and your vehicle exemption is also limited to $1000 per person. If you have valuable assets you may want consider filing a chapter 13 instead, where all of your assets are protected and you get the opportunity to repay some of the debt to your creditors.
Bankruptcy is a tradeoff. In exchange for the court reducing or eliminating your debt, you agree to release some of your assets to repay the creditors. Those assets are examined under Florida law to see what you are allowed to keep and what you must relinquish. The overall goal being that the trustee, or the court-appointed manager of your case, will try to recoup as many of your assets as possible and use those assets to pay the creditors. Here are the basics regarding assets in a Chapter 7 bankruptcy:
Some other personal property is exempt and not counted against the $1,000 such as education and health savings accounts and prescription health aids, plus pension benefits, qualified tax exempt retirement accounts, or public benefits like Workers Compensation or Social Security.
Find Out What Happens To Your Home In Chapter 7 And Chapter 13 Bankruptcy
Updated By Cara O’Neill, Attorney
Many people considering filing for bankruptcy worry about losing their homes. Some may be facing foreclosure others might be managing their mortgage just fine but don’t want to lose their home in bankruptcy.
The automatic stay will stop creditors and give all filers temporary breathing room, but whether you’ll be able to keep your home will depend on your situation, your state’s homestead exemption, and the chapter you file.
- Chapter 7 bankruptcy doesn’t have a mechanism to help filers who’ve fallen behind on payments. You must be able to exempt all of your equity and remain caught up on your mortgage payment.
- Chapter 13 bankruptcy can save a home from foreclosure. You must have enough income to pay missed payments, any portion of equity that you can’t exempt, and all other required amounts over three to five years.
Learn about the differences between Chapters 7 and 13.
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Consider The Type Of Bankruptcy You File
There are two types of bankruptcies to choose from: Chapter 7 and Chapter 13. There are many differences between the two, but the major difference has to do with the exemptions to which you are entitled.
The federal government assumes:
- Everyone must try to pay off their debt
- If someone has âexcessiveâ property they should sell it to pay off their debt
However, bankruptcy is designed to give you a fresh start, not to leave you impoverished. The federal and state governments often have exemptions. This means that if your property is worth less than a particular dollar amount, you can keep it.
In general, Chapter 7 exemptions are much lower, stricter, and offer less flexibility than Chapter 13 exemptions. So if you file a Chapter 13 bankruptcy, you are much more likely to keep your house than if you file a Chapter 7.
If I Keep My House After Filing Bankruptcy How Will I Pay My Mortgage
Since filing for bankruptcy eliminates most, if not all, of your unsecured debts , you may find it easier to meet the financial obligations of paying your mortgage, property taxes and utilities. During the bankruptcy process, youll attend two credit counselling sessions, during which your LIT will discuss strategies for budgeting, credit and debt management and rebuilding your credit during and after going bankrupt.
There are alternatives to bankruptcy that dont affect your house
During your initial meeting, an LIT will explore multiple debt relief options to find the right solution for your unique circumstances. Bankruptcy is only considered once all other debt solutions are ruled out. A consumer proposal is a formal debt relief option that allows you to keep your assets, including your house, and can substantially reduce the amount of unsecured debt you owe. To learn more about consumer proposals, check out our blog post, 10 things you need to know about consumer proposals.
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