How Does Bankruptcy Work For Creditors

What Is A Trustee And What Is A Trustees Role

A Licensed Insolvency Trustee is the only professional who can administer a bankruptcy in Canada.

Licensed Insolvency Trustees are federally licensed and regulated by the Office of The Superintendent of Bankruptcy. Trustee fees are regulated under the Bankruptcy and Insolvency Act and are moderate, so the cost of bankruptcy is tends to be reasonable.

What Happens To Your Information

Any previous name included in the bankruptcy petition will appear on the bankruptcy order, and in the:

• notice of your bankruptcy, which is permanently recorded in the Gazette but excluded from search engine results one year and three months after publication
• Individual Insolvency Register which will be removed within three months of your discharge

Wipe Out Secured Debt

If you can’t afford a payment that you secured with collateralsuch as a mortgage or car loanyou can wipe out the debt in bankruptcy. But you won’t be able to keep the house, car, computer, or other item securing payment of the loan. When you voluntarily agree to secure debt with property, you must pay what you owe or give the property back .

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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.

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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Types Of Personal Bankruptcy

In the case of individuals, as opposed to businesses, there are two common forms of bankruptcy: Chapter 7 and Chapter 13. Here is a brief description of how each type works:

Chapter 7. This type of bankruptcy essentially liquidates your assets in order to pay your creditors. Some assetstypically including part of the equity in your home and automobile, personal items, clothing, tools needed for your employment, pensions, Social Security, and any other public benefitsare exempt, meaning you get to keep them.

But your remaining, non-exempt assets will be sold off by a trustee appointed by the bankruptcy court and the proceeds will then be distributed to your creditors. Non-exempt assets may include property , recreational vehicles, boats, a second car or truck, collectibles or other valuable items, bank accounts, and investment accounts.

At the end of the process, most of your debts will be discharged and you will no longer be under any obligation to repay them. However, certain debts, like student loans, child support, and taxes, cannot be discharged. Chapter 7 is generally chosen by individuals with lower income and few assets. Your eligibility for it is also subject to a means test, as explained bellow.

S In Development Of The Plan:

• The debtor company develops a plan with committees.
• Company prepares a disclosure statement and reorganization plan and files it with the court.
• SEC reviews the disclosure statement to be sure it’s complete.
• Court confirms the plan, and
• Company carries out the plan by distributing the securities or payments called for by the plan.

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Why Would A Company Choose Chapter 11

Most publicly-held companies will file under Chapter 11 rather than Chapter 7 because they can still run their business and control the bankruptcy process. Chapter 11 provides a process for rehabilitating the company’s faltering business. Sometimes the company successfully works out a plan to return to profitability sometimes, in the end, it liquidates. Under a Chapter 11 reorganization, a company usually keeps doing business and its stock and bonds may continue to trade in our securities markets. Since they still trade, the company must continue to file SEC reports with information about significant developments. For example, when a company declares bankruptcy, or has other significant corporate changes, they must report it within 15 days on the SEC’s Form 8-K.

Will Filing For Bankruptcy Affect My Spouse

If you file for bankruptcy, it will not go on your spouses credit report or affect their credit rating. However, if you have co-signed any loan agreements with your spouseor anyone else, for that matterthat person will then assume full responsibility for repaying the loan if you file for bankruptcy. In these circumstances, it is best for you and your co-signor to seek the help of a Licensed Insolvency Trustee at the same time, to make sure both of your needs are addressed.

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Life After Chapter 13 Bankruptcy

Once the court approves a repayment plan, it is up to the debtor to make the budget plan work. Failure to make agreed-upon payments will bring the matter back to court for further review, which could include selling the debtors property to pay debts. Alternatively, the trustee can simply request the case be dismissed.

Bankruptcy may give debtors a breather from creditors, but there is a penalty to be paid on their . Under the federal Fair Credit Reporting Act, a Chapter 13 bankruptcy will be listed on the report for seven years. Debtors in this situation may find it difficult to get additional credit for years.

Chapter 13 bankruptcy can be a useful financial tool for people with serious debts who worry about losing their homes to bankruptcy. Anyone considering this course should consult a bankruptcy lawyer.

What Not To Do Before Filing Bankruptcy

If you are considering bankruptcy, there are certain things you should not do before filing.

• Dont max out your credit cards and lines of credit or take on new debt just before filing.
• Do not sell or transfer any assets to someone else with the intent to hide them from your creditors.
• Dont omit creditors from your creditors list thinking you can keep that debt or pay them separately.
• Dont make a preferential payment to or pay off any single creditor at the expense of your other creditors.
• Dont hide information about a potential future inheritance, bonus, or windfall.
• Dont forget to tell your trustee if you have filed a bankruptcy or consumer proposal before.

Activities like this will affect the advice you are given by the trustee, at best, and if viewed as fraudulent, could jeopardize your bankruptcy discharge. Your trustee is required to ask a series of general questions to review past transactions like these, so avoid these reviewable actions and be honest with your trustee in your disclosure.

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Exceptions To Discharge From Personal Bankruptcy In Nine Months

The length of your bankruptcy will be nine months, unless one or more of the following is true:

• You fail to perform all your bankruptcy duties, such as regular payments of surplus income to the trustee.
• You have surplus income .
• You have been bankrupt before.
• There is an objection filed to your discharge.

How much longer your bankruptcy period will be depends on the details of your case. Twenty-one month is typical when the bankrupt individual makes a good salary .

Things Debt Collectors Cannot Do

• Visit your property or call you without first trying to contact you in writing.
• Threaten you or use abusive language.
• Contact your employer, friends or family for any reason other than to verify your phone number, address or employment status.
• Depending on the province you live in, there are restrictions on the number of times that debt collectors or creditors can contact you in a set time period.

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You May Make Surplus Income Payments

When you file for bankruptcy, you must do the following:

• disclose to the LIT information about all of your assets and liabilities
• advise the LIT of any property that was sold or transferred in the past few years
• surrender all your credit cards to the LIT
• attend the first meeting of creditors
• attend two counselling sessions
• advise the LIT in writing of any address changes
• if required, attend an examination at the Office of the Superintendent of Bankruptcy and
• assist the LIT as needed in administering your estate.

You may be required to make additional payments to your LIT for distribution to your creditors.

In addition to paying the LIT’s fees, you may be required to make additional payments to your LIT for distribution to your creditors. These are called surplus income payments.

Each month during the bankruptcy process, you must submit a copy of your pay stubs and proof of other income to the LIT. The LIT then calculates your surplus income.

Surplus income is the part of your earnings that exceeds the amount of income a family needs to maintain a reasonable standard of living. This amount is set by the OSB annually. The larger your family, the more you are allowed to keep the more you earn, the more you are required to contribute.

In other words, if your household income exceeds the level set by the OSB, then you must make additional payments to your LIT during your bankruptcy.

Bankruptcy Process And Outcomes

There are several steps you must take when you have decided to make yourself bankrupt. While instructing a solicitor is notnecessary, the ISI considers it advisable to get professional legal advice inadvance of declaring yourself bankrupt or defending any bankruptcy proceedings.The Irish Mortgage HoldersOrganisation provides a free service in relation to bankruptcy.

The process is summarised below:

• Lodge 200 with the Official Assignee
• Complete your petition, which must be verified by a sworn affidavit and a sworn statement of affairs
• Get the above documents stamped at a court Stamp Office
• File the stamped documents and statement of affairs at the Examiners Office and get a court date
• Attend the court hearing on that date, where the judge, if satisfied, will adjudicate you bankrupt
• Meet the Official Assignee or Bankruptcy Inspector to be interviewed about all your assets and debts
• Place a notice of your adjudication as a bankrupt in Iris Oifigiúil
• Place a notice of your adjudication as a bankrupt either on the ISIs website or in a national daily newspaper

Before 2016 a statutory High Court sitting was also required, but thisrequirement was removed by the Bankruptcy Act 2015.

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You Can Protect Some Property

The Bankruptcy Code allows an individual debtor to protect a certain relatively modest amount of property from the claims of creditors because it is exempt under federal bankruptcy law or under the laws of the debtor’s home state. Since the determination of what property is exempt and which you may keep is often a question of state law, you should consult an attorney to advise you.

Chapter 13 Process Nuances

How Chapter 13 bankruptcy works is a bit more complex than chapter 7 as it requires the creation, approval of, and adherence to a debt repayment plan.

With a chapter 13 bankruptcy, you must submit a repayment plan to the court within 14 days of filing. You also need to make payments to your court-appointed trustee within 30 days of the plans creation even if your case hasnt been heard yet.

Within 45 days of the meeting with the creditors, a judge must hold a confirmation hearing. Creditors will be notified and may contest if they feel the repayment plan is unfair.

If the court confirms your repayment plan, your trustee will start paying your creditors. If the court denies your plan, you can attempt to submit a modified plan or convert your filing to a chapter 7 liquidation.

Chapter 13 bankruptcy is a long process. You must strictly follow your repayment plan. If you want to take on any additional debt, you must get approval from your trustee first as it could compromise your ability to make payments as agreed.

If you fail to make payments, your case could be dismissed or automatically converted into a chapter 7 liquidation. However, if you become unable to work, you may qualify for a hardship discharge, which would absolve you from making additional payments.

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What Happens After You File For Bankruptcy

Your bankruptcy is complete when you receive your Notice of Discharge from your Trustee. At that point, you will be free of the unsecured debts that were included in your bankruptcy. You can begin to rebuild your credit.

A notation about your bankruptcy will remain on your credit bureau report after the date of discharge. This is usually removed automatically after six years. Even while the bankruptcy is still noted on your report, you may be able to get credit from certain lenders. You can help this along by taking active steps to rebuild your credit. Your Trustee can give you advice on getting a new start.

Dont waste any more time. Contact a Licensed Trustee near you. We have trustees everywhere from Toronto to Ottawa and everywhere in between. Get the help you need today!

Stop A Foreclosure Repossession Or Eviction

The automatic stay will stop these actions as long as they’re still pending. Once complete, bankruptcy won’t help.

• Evictions. An eviction that’s still in the litigation process will come to a halt after a bankruptcy filing. But the stay will likely be temporary. Keep in mind that if your landlord already has an eviction judgment against you, bankruptcy won’t help in the majority of states. Learn more about evictions and the automatic stay.
• Foreclosure and repossession. Although the automatic stay will stop a foreclosure or repossession, filing for Chapter 7 won’t help you keep the property. If you can’t bring the account current, you’ll lose the house or car once the stay lifts. By contrast, Chapter 13 has a mechanism that will allow you to catch up on past payments so you can keep the asset. Find out more about bankruptcy’s automatic stay and foreclosure and car repossession and bankruptcy.

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Signing A Bankruptcy Petition

To file for bankruptcy protection, you sign various bankruptcy forms, including an Assignment and a Statement of Affairs. In your bankruptcy assignment, you state that you are handing over your property to the Licensed Insolvency Trustee for the benefit of your creditors. The statement of affairs is a list of all your assets and liabilities.

You will also be required to answer several questions about your situation including details about your family, work, and disposition of assets before bankruptcy. It is an offence under the Bankruptcy & Insolvency Act to sell or hide assets from your creditors when you know you intend to go bankrupt.

With the advent of COVID-19 and the required social distancing, it is now possible to file bankruptcy online by video-conference and electronic signature. However, you must still file with a trustee in the province where you live or where most of your assets are if you live outside of Canada.

What Is The Role Of The Us Securities & Exchange Commission In Chapter 11 Bankruptcies

Generally, the SEC’s role is limited. The SEC will:

• review the disclosure document to determine if the company is telling investors and creditors the important information they need to know and
• ensure that stockholders are represented by an official committee, if appropriate.

Although the SEC does not negotiate the economic terms of reorganization plans, we may take a position on important legal issues that will affect the rights of public investors in other bankruptcy cases as well. For example, the SEC may step in if we believe that the company’s officers and directors are using the bankruptcy laws to shield themselves from lawsuits for securities fraud.

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