When Your Bankruptcy Will End
You will be freed from bankruptcy after 12 months. This ends the bankruptcy restrictions and releases you from most of the debts you had when the bankruptcy order was made.
Youll normally be discharged automatically, even if:
- no payments have been made to your creditors
- youre still paying an IPA or IPO
- some assets havent been sold yet
Assets you had during bankruptcy can still be used to pay your debts once your bankruptcy has ended.
Your bankruptcy can be extended for longer than 12 months if you dont co-operate with your trustee. Check your discharge date using the Individual Insolvency Register on our website. If your discharge status is suspended indefinitely you need to contact the official receiver for an update.
What Do I Lose If I Go Bankrupt In Ontario
Although bankruptcy is governed by federal law, if you go bankrupt in Ontario what you are also allowed to keep items legislated by the Ontario Execution Act.
In Ontario, the bankruptcy exemptions include :
- All necessary clothing
- One motor vehicle worth up to $7,117
- $14,180 worth of household furnishings and appliances
- $14,405 worth of tools of the trade
- Certain types of life insurance
- All RRSP, RRIF and SPSP savings except contributions made in the 12 months before your bankruptcy.
What If My Car Is Being Repossessed Can I Stop It
If you are behind on your car payments, the lender has the right torepossess the vehicle. However, when you file either Chapter 7 or Chapter 13 bankruptcy, the court issues anautomatic stay. This freezes all repossessions, giving you time to catch up on missed payments. Even if your car was recently repossessed, filing bankruptcy can help you get it back and get it back fast.
If you file Chapter 7, you may be able to retain your car if you make timely payments. Under Chapter 13, you may be able to keep your vehicle by paying the creditor the value of the car rather than the full amount due on the debt.
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How Does Bankruptcy Affect Car Ownership
Bankruptcy is a legal process used to restructure and eliminate an individual or entityâs debt. Bankruptcy is often presented as an option when the amount of debt exceeds a debtorâs ability to repay it. The types of property and assets that filing for bankruptcy affects will depend on the chapter of bankruptcy that the debtor declares.
For example, individual consumers typically file for Chapter 7 or Chapter 13 bankruptcy. With Chapter 7 bankruptcy, a debtor may be forced to liquidate their assets in order to pay down their debts, but some of those debts can be erased or cancelled by a bankruptcy court.
On the other hand, with a Chapter 13 bankruptcy, a debtor will be granted a grace period in which they must reorganize their finances, come up with a repayment plan, and repay debts over a period of time.
Both Chapter 7 and Chapter 13 bankruptcy will affect a debtorâs ownership rights over their motor vehicle, but there also may be a way for a debtor to maintain possession of their car under both types of bankruptcy. Whether a debtor will be able to keep their car or not, will largely depend on the circumstances of the bankruptcy filing.
To learn more about the different chapters of bankruptcy you can file for and whether your ownership rights in your car will be affected by declaring bankruptcy, you should speak to a bankruptcy lawyer in your area as soon as possible.
Motor Vehicles With Non
The situation is straightforward if the motor vehicle exemption covers all of the equity in your car. You can use it to cover the car and keep the car during the bankruptcy. On the other hand, if you have equity left over after applying the amount of the exemption, this is a non-exempt asset that must be surrendered to the trustee under Chapter 7. They will sell your car, pay off any loan that may be attached to it, and reimburse you for the amount of the exemption. Any remaining proceeds from the sale will be used to pay your non-priority unsecured debts.
In some cases, especially when a debtor has a substantial car loan, the trustee may not find it worthwhile to sell the car. There may be minimal funds left to pay creditors after the sale, once the costs of the sale, the trustees commission, the loan balance, and the motor vehicle exemption have been covered.
Debtors who want to keep a certain vehicle may be able to negotiate with the trustee to buy the vehicle from the bankruptcy estate. They likely would need to pay less than the amount that would be distributed to creditors following a sale, since the trustee would not need to account for the costs of the sale.
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Learn About Exemptions Reaffirmation And More To See If You Can Keep Your Car
By Cara O’Neill, Attorney
Keeping a car in Chapter 7 bankruptcy is a top priority for almost all filers. Your ability to do so will depend on:
- the vehicle equity
- the exemptions available to you to protect it
- if you’re current on your payment, and
- whether you can stay current after bankruptcy.
Learn more about property in bankruptcy.
What Happens To A Financed Or Leased Car In Bankruptcy
Reading time: 8 minutes
Your car is perhaps one of the first things that come to mind when you decide to file a bankruptcy. If you depend on your vehicle to get to work, you may wonder if you can keep your leased car or do you have to surrender to the leasing company if you file bankruptcy in Canada? If your car payments are part of your debt problem, maybe you want to know if bankruptcy can get you out of a vehicle lease agreement? And what happens to your leased car if you file a consumer proposal instead of bankruptcy?
How you should proceed is based on what you want to do and whether you can afford your ongoing lease payments.
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Unprotected Car Equity In Bankruptcy
It’s not uncommon to have more equity in your car than you can exempt from bankruptcy. That doesn’t necessarily mean that you’ll lose the vehicle, however. Again, your options will depend on the bankruptcy chapter you file.
- Chapter 7 bankruptcy. Suppose that you have $10,000 in equity in your car, but your state’s vehicle exemption is $5,000. Typically, the bankruptcy trustee appointed to administer the case would sell the car, pay off any loan, and distribute the remaining funds to creditors. Keep in mind that if you want to keep the car, most trustees will let you pay for the nonexempt equity at a discount over a few months’ time. Filers often borrow the money from a friend or relative or use post-bankruptcy income to make the payments.
- Chapter 13 bankruptcy. You don’t have to give up property in a Chapter 13 case. Howeverjust as in a Chapter 7 caseyou must pay your creditors an amount equal to the nonexempt vehicle equity. Therefore, if you want to keep a car that has more equity than you can protect, you’ll pay for the nonexempt equity in your three- to five-year repayment plan.
What Happens To Your Pension
Most pension schemes arent included in your bankruptcy and they cant be claimed by the trustee.
The pension scheme must be a UK state pension scheme or a scheme approved or registered by HM Revenue & Customs. Approved or registered pension schemes are usually:
- occupational pension schemes approved for tax purposes
- personal pensions approved for tax purposes
- stakeholder pensions
- retirement annuity contracts
If your pension scheme is not an approved or registered scheme you may be able to exclude it from your bankruptcy by:
- applying to the court for an exclusion order, or
- making a qualifying agreement
If your pension is part of the bankruptcy, it can be used to make payments to your creditors.
Payments made to you from your pension scheme, including any lump sums, before the end of your bankruptcy can be used as part of an Income Payments Agreement or Income Payments Order . This will involve you paying some of your debt with your income.
If you are able to take money from your pension following changes to the law in April 2015, but have chosen not to do so, the trustee may look at the value of your available pension fund. If this would give you access to enough money to make a different arrangement to pay your creditors, the trustee can ask the court to cancel the bankruptcy.
Bankruptcies before May 2000
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Redeeming The Cars Current Replacement Value
There is a way to keep your car when you file for Chapter 7 bankruptcy even if its worth more than the exemption limit. You can pay the difference the remaining current replacement value to the lender, and own the car outright. This is called redeeming. Most people filing for bankruptcy, though, dont have the bundle of cash needed to do that. Fewer than 2% go this route.
Will I Lose My Car In A Chapter 7 Bankruptcy
If you are current on the vehicle payments, you will not lose your vehicle if you file for Chapter 7. Your creditor will ask you to re-affirm the debt you owe and ask that you continue making payments.
The purpose of the Chapter 7 is to press the reboot button with your budget and finances. You have the opportunity to legally eliminate unsecured debt that may be compromising your budget and making it difficult to maintain your car payments. Most often our clients find it is easier to maintain with vehicle after a Chapter 7 bankruptcy because they have a reduced debt load.
You also have the opportunity to refinance your vehicle during the Chapter 7 though a 722 redemption program. This program refinances your vehicle to the fair market value of the vehicle with a new lender.
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Northwest Territories / Nunavut / Yukon Exempt Property
The above exemptions for the territories do not apply if:
- You are behind on child or spousal support payments.
- You have absconded or are about to abscond from the territories, leaving no spouse or family behind.
A Licensed Insolvency Trustees is your trusted resource for current information on insolvency solutions, and factors that may affect your specific situation. Contact a Licensed Trustee today. Your first appointment is free, and your discussion is confidential.
Find a local trustee that you can rely on. We have trustees everywhere from British Columbia to Ontarioand more.
Can You Protect The Equity With A Motor Vehicle Exemption
Your next step is to compare the amount of your state’s motor vehicle exemption to your equity. If the exemption covers all of your equity, the trustee can’t sell your car.
If you have unprotected equity, the trustee can sell your car, give you your exemption amount, and distribute the remaining amount to your creditors.
Example 1. Joseph owns a Toyota Corolla worth $7,000. He still owes $5,000 on his car note. His state allows debtors to exempt up to $5,000 in equity. The trustee cannot sell Joseph’s car in Chapter 7 bankruptcy because the $5,000 motor vehicle exemption is enough to protect all of his vehicle equity.
Example 2. Ella owns a Harley motorcycle worth $15,000 free and clear. Her state’s motor vehicle exemption is $5,350, so the trustee sells the Harley and, after advertising and other sales costs, recoups $9,250. The trustee gives Ella her $5,350 exemption amount, deducts the statutory trustee percentage , and distributes the remaining proceeds to Ella’s creditors.
The trustee might also do the following:
To find out which exemptions apply in your case, see Which Exemptions Can You Use in Bankruptcy?
Exemptions In British Columbia:
- No limit on clothing for you or your dependents all clothing is exempt from bankruptcy
- Household furnishings and appliances up to $4,000
- One motor vehicle up to $5,000 unless you are behind on child support payments, in which case the limit is $2,000
- Work tools and work-related property up to $10,000
- No limit on medical and dental aids for you or your dependents
Protecting Your Car From The Trustee
When you file a Chapter 7 bankruptcy, ownership of all your property, including your car, is transferred temporarily to a Trustee appointed by the court. In order to get the vehicle back without buying it back, you must be able to claim the vehicle as exempt. In Chapter 13 the Trustee won’t want to claim the car for the creditors, but your Chapter 13 Plan payments will have to be high enough so that the unsecured creditors receive what they would have received if it was a Chapter 7.
See my Minnesota Bankruptcy Exemptions page for the exact amounts that you may claim for your automobile exemption. You are allowed to claim the equity you have, not the actual value of the car. In other words, the figure you use for claiming the exemption is the value minus the amount of the loan. These exemptions protect the asset from the bankruptcy Trustee, but they do not provide any protection from the automobile lenders. These lenders have a lien which is an ownership interest car. With few exceptions the bankruptcy does not change their ownership interest, and so such lenders have to be dealt with by at least continuing the payments if that is possible.
In either Chapter 13 Bankruptcy or Chapter 7 Bankruptcy,when you owe a lot more than the car is worth, the time may have come to surrender it to the lender. Forget about how much you like car and look at it from a strictly business perspective.
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Your Car In Chapter 13 Bankruptcy
Readers who filed for Chapter 13 bankruptcy were also very likely to keep their cars. If youre behind on your vehicle loan, you can use a Chapter 13 plan to catch up with your overdue payments , but you also have a couple of other options that dont apply to house loans. In Chapter 13, you might be able to stretch out the car payments over a longer period. Or, if the car loan is old enough, you might even be able to lower the balance on the principal and your interest rate.
I wish wed known that it would hurt us to sell a car before entering bankruptcy.
Sally, 48, Illinois
How To Avoid Losing My Car
While nothing can be guaranteed in a Chapter 7 bankruptcy filing, the best way to ensure you have done everything possible to keep your car is to consult with an experienced lawyer. The lawyers at Cravens & Noll Bankruptcy Law Group have years of experience in protecting you and your property.
Are you concerned about losing your car while filing? Contact us now for your initial bankruptcy consultation.
Ch. 7 Bankruptcy Lawyer Info
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Alternatives To Declaring Bankruptcyhow To Find Out More & What Might Be Available To You
Most of the time when someone is experiencing financial difficulty, they think that if things dont improve theyll have to go bankrupt. The truth is that between financial difficulty and bankruptcy there are a lot of options. Our credit counsellors are experts at helping people explore these options and find the solution that will not only work the best for you today but will put you on the path to achieve you future goals.
For some people, bankruptcy can prevent them from achieving future goals including some career paths. The nice thing is that there are often other options sometimes lots of them it all depends on your situation. The best thing you can do is make an appointment to speak with a credit counsellor, go over your situation with them, and see what your options are. If it turns out that bankruptcy is your best option, theyll layout your next steps for you and refer you to a reputable trustee.
Were a non-profit service. So appointments with our credit counsellors are always free, non-judgmental, and completely confidential. , or chat with us online. You have nothing to lose.
Fortunately, for many people who feel this way, there are other less severe options. Speak with one of credit counsellors to learn all your options. Theyll be happy to carefully review your whole financial situation with you and answer any questions you may have. Speaking with our certified counsellors is always free, confidential and without any obligation. Were here to help.
Car Loans: Additional Issues To Consider
Even if the trustee doesn’t sell your car to pay your creditors, you still have one more step to take if you have a car loan. If you don’t have a loan, you’re done.
If you’re behind on your vehicle payments, the lender can take back the car, even if an exemption protects your equity. You might be able to save it one of two ways:
- Redeem the car. Pay the market value of the car to the lender in one lump sum.
- Reaffirm the car loan. Sign a new loan that will remain in force after the bankruptcy is over and make up the payments in the new agreement.
Understand, however, that while you have the right to enter a reaffirmation agreement if you’re current on your payments , the lender doesn’t have to agree to “modify” the loan in any way.
So if you’re behind on your car loan before you file for Chapter 7 bankruptcy, and you don’t have the money to redeem it, you’ll be able to keep your car only if your lender is willing to work with you.
To learn more about these options, see Your Car in Chapter 7 Bankruptcy.
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