Three Types Of Claims
There are three types of Chapter 13 creditor claims: priority , secured and unsecured . The plan need not pay unsecured claims in full as long the plan provides that the debtor will pay all projected “disposable income” , and as long as unsecured creditors receive at least as much under the plan as they would receive if the debtor’s assets were liquidated under Chapter 7.
Debt That Can’t Be Forgiven
While bankruptcy can eliminate a lot of debt, it can’t wipe the slate completely clean if you have certain types of unforgivable debt. Types of debt that bankruptcy can’t eliminate include:
- Most student loan debt .
- Court-ordered alimony.
- A federal tax lien for taxes owed to the U.S. government.
- Government fines or penalties.
Filing For Bankruptcy Contact A Local Attorney
While the articles in this section provide additional detail about the basics of bankruptcy, it can be a wise decision to speak with a skilled bankruptcy attorney near you.
An attorney can help you determine which form of bankruptcy is the best choice to resolve your debt crisis and guide you through the process of filing for bankruptcy.
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Amount Of Debt For Chapter 7
Many people wonder if there is a debt threshold to file for Chapter 7 bankruptcy. The answer, put simply, is no. Though there is a debt maximum that can keep individuals from filing for bankruptcy, there is no minimum requirement to file for bankruptcy.
However, it is important to understand that bankruptcy is no walk in the park. There are consequences, and the process should not be taken lightly.
Summary Of Bankruptcy And Its Alternatives
During difficult times and with filings up, bankruptcy no longer carries the negative stigma it once did. Folks recognize it as an unfortunate fact of life as some of us need a “fresh start.” Still, it is not a step to be taken lightly and there are ways to avoid it that should be explored in many situations.
When bankruptcy becomes inevitable, however, it is important to distinguish between the two primary forms for most ordinary debtors. If you qualify by virtue of your income level and assets, Chapter 7 provides for a complete discharge of most debts. For those who have regular income, Chapter 13 allows one to keep his or her property and work out a revised repayment plan.
This content was created in partnership with the Financial Fitness Group, a leading e-learning provider of FINRA compliant financial wellness solutions that help improve financial literacy.
Read more information and tips in our Debt section
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Getting A Lawyer To Help You With Your Bankruptcy
Bankruptcy is a specialized area of law that is very complex. And the issues are not always apparent or simple. The bankruptcy laws changed in October 2005 to discourage many people from filing for bankruptcy. So the law became more complicated. And there are more situations where a mistake can result in your case getting dismissed. If your case is dismissed, the bankruptcy court often imposes a penalty of 180 days before you can refile, and in this time period a lot can happen. This is why it is so important to have a lawyer advise you and help you with your bankruptcy.
Find a lawyer who can help you work through the issues, alternatives you may have, and consequences of your choices.
- Pick a lawyer with whom you are comfortable, one who will allow you to ask questions and give you responses that you can understand.
- Pick a lawyer who either specializes in bankruptcy or does a large part of his or her practice in the field.
- Ask questions until you understand what your choices are.
- Don’t be afraid to interview a lawyer and leave without hiring him or her.
If you decide to represent yourself in bankruptcy court, read a guide for Filing for Bankruptcy Without an Attorney.
To find a good bankruptcy lawyer:
- Check state bar groups and specialization/certification programs for bankruptcy lawyers in your community.
- Ask other lawyers or tax preparers you know for recommendations.
Chapter 7 Is Liquidation Bankruptcy
Under a liquidation bankruptcy , the bankruptcy court can discharge your debts. Under Chapter 13 , you file a plan with the bankruptcy court proposing how you will repay your creditors. Depending on what the court finds you can afford, some debts must be repaid in full, while others may be only partially repaid or completely discharged.
Under Chapter 7, all non-exempt assets are sold and the proceeds are used to pay off creditors. Exempt assets are defined by the federal and state bankruptcy laws. The purpose of bankruptcy is to avoid destitution of individuals or families.
Recent changes in the law have made it harder to file Chapter 7
Significant changes were made to the federal bankruptcy law in 2005, and it is now much more difficult to file under Chapter 7 than in the past. Under the new rules, you must compare your current monthly income to the median income for a household of your size in your state. If your income is at or below the median, you can file for Chapter 7.
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This Problem Has Been Solved
How do bankruptcy laws help debtors? What are the bankruptcylaws discussed in the text? Are the bankruptcy laws too lenient andallow debtors to leave their creditors in a lurch? Discuss anddefend your position. In other words discuss ALL of the relevantfacts that pertain to the question and take a position, then givesupport to show why your position is the right one.
Make at least 100-150 words, thank you.
Bankruptcy Laws Of Ontario
Bankruptcy law in Ontario is governed by four primary pieces of legislation:
- The Canadian Bankruptcy and Insolvency Act
- Ontario Execution Act: bankruptcy exemptions that define what you keep when you claim bankruptcy in Ontario
- Limitations Act: how the statute of limitations affects old debt and
- the Personal Property Security Act of Ontario: how secured creditors are treated in a personal bankruptcy.
Taken together these laws deal with all aspects of your bankruptcy. They define your rights and the rights of your creditors.
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Will Your Payments Be Discharged
Another important consideration should be whether your debts will be discharged when you file for bankruptcy. Though this process does eliminate a fair amount of what you owe, it cannot rid you of all your debts. If you have more debt in areas that cannot be avoided by bankruptcy, the process will be for nothing.
Dischargeable debt includes:
- Utilities
- Collection agency debts
If the majority of your debt is in one of these categories, bankruptcy could have a significant impact on your financial life.
However, if most of your debt comes from secured loans, your debt will likely remain where it is. Secured loans are debts that you put up collateral for. For example, when you take out loans above your borrowing limit, the bank requires you to put up a significant asset, such as your home, as collateral. This means that if you cannot pay your debts or if you file for bankruptcy, they can take your collateral as payment.
Items that cannot be discharged include:
- Tax payments and fees
Where Bankruptcy Doesnt Help
Bankruptcy does not necessarily erase all financial responsibilities.
It does not discharge the following types of debts and obligations:
- Loans obtained fraudulently
- Debts from personal injury while driving intoxicated
It also does not protect those who co-signed your debts. Your co-signer agreed to pay your loan if you didnt, or couldnt pay. When you declare bankruptcy, your co-signer still may be legally obligated to pay all or part of your loan.
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Ii Limitation Periods Across Canada
The length of a limitation period varies significantly from one province to another. The majority of Canadians, however, live in a province where the Statute of Limitations is 2 years. In Quebec it is three years. In Manitoba, New Brunswick, Newfoundland, Prince Edward Island, and the three territories the limitation period is six years.
The Statute of Limitations will be of no assistance, whatsoever, to those with certain types of debts:
The Bankruptcy Process 101
You should first consider if debt relief options can help you or if bankruptcy is your best option. You can have a free consultation with a bankruptcy attorney to help you decide.
The process will require paperwork, finding documents, meeting with your trustee, and various court appointments. It generally takes two to six months from the day you start the paperwork to your last court appointment.
The court issues a protective order when you file for bankruptcy called an “automatic stay.” This stops most creditors from contacting you about your debts or making any collection efforts. Only the court has the authority to lift the automatic stay and allow creditors to seek repayment of debts.
Though it takes time, the bankruptcy process will resolve your debt crisis and help you start over financially.
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How Do I Handle Creditors
Depending on your province of residence in Canada, there are laws on how and when creditors may contact you. Most importantly, no debtor should feel harassed by receiving a high volume of calls from a creditor. There are also certain times at which a creditor is able to contact a debtor. If, as a debtor, you feel harassed by a creditor or it is simply becoming overwhelming, the best course of action to take is to contact a Licensed Insolvency Trustee. They will be able to help by providing advice and becoming the intermediary between yourself and your creditors.
Are There Alternatives To Filing For Bankruptcy
Yes. In fact, filing for bankruptcy is usually considered a last resort and many people are resolving their debt problems with other solutions, such as a consumer proposal. A Licensed Insolvency Trustee will carefully review your situation and explain all available debt relief options to help find the best solution available to you.
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Talk To A Bankruptcy Lawyer
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Alternatives To Chapter 7
Debtors should be aware that there are several alternatives to chapter 7 relief. For example, debtors who are engaged in business, including corporations, partnerships, and sole proprietorships, may prefer to remain in business and avoid liquidation. Such debtors should consider filing a petition under chapter 11 of the Bankruptcy Code. Under chapter 11, the debtor may seek an adjustment of debts, either by reducing the debt or by extending the time for repayment, or may seek a more comprehensive reorganization. Sole proprietorships may also be eligible for relief under chapter 13 of the Bankruptcy Code.
In addition, individual debtors who have regular income may seek an adjustment of debts under chapter 13 of the Bankruptcy Code. A particular advantage of chapter 13 is that it provides individual debtors with an opportunity to save their homes from foreclosure by allowing them to “catch up” past due payments through a payment plan. Moreover, the court may dismiss a chapter 7 case filed by an individual whose debts are primarily consumer rather than business debts if the court finds that the granting of relief would be an abuse of chapter 7. 11 U.S.C. § 707.
Debtors should also be aware that out-of-court agreements with creditors or debt counseling services may provide an alternative to a bankruptcy filing.
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What The Individual Must Do
In Chapter 13, the individual makes the plan payments to a trustee who then distributes payments to creditors according to the plan, which may offer creditors less than full payment on their claims. Individuals will have no direct contact with creditors while under Chapter 13 protection. Filing the petition under Chapter 13 automatically “stays” most collection actions against the debtor.
Role Of The Case Trustee
When a chapter 7 petition is filed, the U.S. trustee appoints an impartial case trustee to administer the case and liquidate the debtor’s nonexempt assets. 11 U.S.C. §§ 701, 704. If all the debtor’s assets are exempt or subject to valid liens, the trustee will normally file a “no asset” report with the court, and there will be no distribution to unsecured creditors. Most chapter 7 cases involving individual debtors are no asset cases. But if the case appears to be an “asset” case at the outset, unsecured creditors must file their claims with the court within 90 days after the first date set for the meeting of creditors. Fed. R. Bankr. P. 3002. A governmental unit, however, has 180 days from the date the case is filed to file a claim. 11 U.S.C. § 502. In the typical no asset chapter 7 case, there is no need for creditors to file proofs of claim because there will be no distribution. If the trustee later recovers assets for distribution to unsecured creditors, the Bankruptcy Court will provide notice to creditors and will allow additional time to file proofs of claim. Although a secured creditor does not need to file a proof of claim in a chapter 7 case to preserve its security interest or lien, there may be other reasons to file a claim. A creditor in a chapter 7 case who has a lien on the debtor’s property should consult an attorney for advice.
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How Much Do You Have To Be In Debt To File Chapter 7
It can be scary to think about, but many of us are just an accident or setback away from being in financial hardship. Though we like to think that we can control our financial lives, the truth is that we cant always do that. So, despite our best efforts, bankruptcy is sometimes the only option.
Nobody wants to file for bankruptcy, but it does offer an immense amount of financial freedom. Rather than trying to find your way out of deep debt, you can focus on rebuilding a new life for yourself and your family.
If bankruptcy is your next move, it is essential to understand some details about it. Unfortunately, this system has more complexities than meets the eye, and individuals often feel confused when going through the process.
Who Declares Bankruptcy
Most individuals and business who file for bankruptcy have far more debts than money to cover them and dont see that changing anytime soon. In 2020, bankruptcy filers owed $86 billion and had assets of $56 billion. Most of those assets were real estate holdings, whose value is debatable.
On the other hand, bankruptcy can often be used as a financial planning tool when you do have enough money to repay debts, but need to restructure the terms. This is often in cases when people need to repay mortgage arrears or taxes in a structured repayment plan.
What is surprising is that individuals not businesses are the ones most often filing for bankruptcy. They owe money for a mortgage, credit card debt, auto loan or student loan perhaps all four! and dont have the income to pay for it.
There were 774,940 bankruptcy cases filed in 2019, and 97% of them were filed by individuals. Only 22,780 bankruptcy cases were filed by businesses in 2019.
The other surprise is that most of the people filing bankruptcy were not particularly wealthy. The median income for those who filed Chapter 7, was just $31,284. Chapter 13 filers werent much better with a median income of $41,532.
However, in the end, there is a price to pay and youll pay it for 7-10 years.
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What Chapter 13 Does
Chapter 13 generally permits individuals to keep their property by repaying creditors out of their future disposable income. The Chapter 13 debtor proposes a three-to-five-year repayment plan that must be approved by the Bankruptcy Court. During this time the law forbids creditors from starting or continuing collection efforts.
Instead, the debtor pays the amounts set forth in the plan to the Chapter 13 trustee, who distributes the funds to creditors in return for a small fee. The debtor may not incur new debt without consulting the trustee, because additional debt may compromise the debtor’s ability to complete the plan. The Chapter 13 debtor receives a discharge of most debts after the debtor completes the payments required under the plan.
Types Of Personal Bankruptcy
Bankruptcy is the state of insolvency.
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Bankruptcy laws are complicated. Whether you should declare bankruptcy depends on complex federal and state bankruptcy laws. Determining how these laws fit into your personal financial circumstances is not always easy.
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Filing for bankruptcy can be an expensive, emotional, and harsh process that will affect your life for years.
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Bankruptcy attorneys, debt counselors, and loan consolidation officers all have a financial interest in what you decide. They only make money if they convince you to hire them.
Individuals filing for bankruptcy usually apply under one of two sections of the US bankruptcy code: Chapter 7 or Chapter 13. Bankruptcy generally protects persons from their creditors, but how it does this differs according to the section under which one applies. Chapter 7 is generally referred to as liquidation bankruptcy while Chapter 13 is based upon restructuring debt.
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