Limitations Of Bankruptcy Discharge
Contrary to what some consumers may believe, bankruptcy is not always the best option in a financial crisis, and a bankruptcy discharge may not relieve them from the obligation of paying off all their debts. Simply put, there are some debts that just cant be discharged.
According to the Federal Judiciary, there are 19 different types of debt that are not eligible for discharge. The most common are spousal child support, alimony payments, and debts for willful and malicious injuries to person or property.
For certain kinds of bankruptcies, condo fees, debts owed to some tax-advantaged retirement plans, debts from DUIs, and student loans are also among them. And any debt not listed on the bankruptcy cannot be discharged. In addition, valid liens on specific property to secure payment of debts that have not been discharged will remain in effect after the discharge, and a secured creditor has the right to enforce the liens to recover such property.
As mentioned above, creditors listed on the discharge are not permitted to contact the debtor or pursue collection activity, and a debtor may file a report with the court if a creditor violates the discharge order. The court may sanction the creditor with civil contempt, which also may be accompanied by a fine.
How Long Does Bankruptcy Affect Me
There sure is a lot of misinformation out there about bankruptcy, how long it lasts and what the long term effects are. Just when I think I have heard it all, someone comes up with a new one, I heard you cant have a bank account for 10 years when youre bankrupt A person said that to me just last week.
So, how long does a bankruptcy affect you? There are three answers to that question:
How Long Will You Wait Until You Hear From The Official Receiver
Once you are bankrupt your circumstances are then managed by the Official Receiver . Generally speaking an Examiner from the ORs office will contact you within a week of your bankruptcy date.
They will want to arrange a time have an interview with you so they can understand more about your situation. This will normally take about an hour and be conducted on the telephone.
The Examiner will speak to you about your debts and how they came about. They may also want to clarify information about your assets, income and living expenses budget.
Need more advice or assistance to go bankrupt. Call 0800 044 3194 or complete the form below.
Limitations Of Chapter 7 Discharges
Section 523 of the Bankruptcy Code describes the types of debt that can’t be discharged in Chapter 7 proceedings, including:
- Domestic obligations such child support, alimony, and debts owed under a marriage settlement agreement
- Certain fines, penalties, and restitution resulting from criminal activities
- Certain taxes, including fraudulent income taxes, property taxes that came due within the previous year, and business taxes
- Court costs
- Debts associated with a DUI violation
- Condo or other homeowners association fees that were imposed after you filed bankruptcy
- Retirement plan loans
- Debts that weren’t discharged in a previous bankruptcy
- Debts you failed to list on your bankruptcy petition
What Is A Discharge In Bankruptcy
A bankruptcy discharge releases the debtor from personal liability for certain specified types of debts. In other words, the debtor is no longer legally required to pay any debts that are discharged. The discharge is a permanent order prohibiting the creditors of the debtor from taking any form of collection action on discharged debts, including legal action and communications with the debtor, such as telephone calls, letters, and personal contacts.
Although a debtor is not personally liable for discharged debts, a valid lien that has not been avoided in the bankruptcy case will remain after the bankruptcy case. Therefore, a secured creditor may enforce the lien to recover the property secured by the lien.
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How Long To Recover From Bankruptcy
That one is entirely up to you. Most people, once they file for bankruptcy, immediately begin to feel better. They are no longer dealing with phone calls from their creditors or struggling to balance monthly debt payments.
Having eliminated their current debt problems, most find they are able to build a stronger financial future. Unless you urgently need to purchase a home for the first time or buy a car, you may not even need to worry about qualifying for credit right away. Many find they are able to live without immediate credit and since they have a stronger cash flow than before bankruptcy, they are able to start saving for when they do.
Having said that, approximately 10% of all Canadians will declare bankruptcy at some point in their life. The critical period is the period you remain in bankruptcy and the first two or three years after you have completed the process. During this time access to credit will be restricted. You can slowly start rebuilding your credit during your bankruptcy using a secured credit card. Once you have completed your bankruptcy you will start to rebuild your credit. As you , traditional credit will become available again.
What about the I heard you cant have a bank account for ten years even if you file for bankruptcy? Of course you can have a bank account if you file for bankruptcy. In fact, one of the last things you do just before you file is .
When The Court Will Close Your Bankruptcy Case
The only cases that tend to remain open for extended periods are Chapter 7 cases with hard-to-sell assetsusually real estateor those involving fraud litigation.
Chapter 7 cases without these issues usually close within four months. Chapter 13 cases tend to resolve within a month or two after the debtor completes the repayment plan. Why? The Chapter 13 trustee doesn’t sell property, and most litigation resolves long before the debtor finishes making plan payments.
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How Long Does Bankruptcy Remain On Your Credit Report
Your credit report will have a record of your bankruptcy for a minimum of six years after you are discharged a consumer proposal remains on your credit report for a maximum of three years after you have completed all of your payments.
This means that if you apply for a loan or credit card during these time periods, the lender will know that you went bankrupt or filed a proposal, which may make it more difficult to borrow for a period of time.
However this does not mean you have to wait out this period to begin to rebuild credit.
How Bankruptcy Impacts Your Credit
, but it may not be as long as you think. While bankruptcy can impact your credit score for a while, time heals your credit reports.
If you filed Chapter 13 bankruptcy, the good news is that your bankruptcy is only listed on your credit reports for up to seven years, starting from the date that you file. Since Chapter 13 typically lasts either three or five years, you only have two to four years of it being reported on your credit reports if everything goes well. Once it falls off, thats it no more negative impact from the bankruptcy on your credit score.
Chapter 7, though, can remain on your credit report for up to ten years starting from the date you file. This type of bankruptcy is much shorter, generally only lasting four to six months. Its known as the liquidation bankruptcy and your assets are sold to repay your creditors, unlike in Chapter 13 where you work with your trustee to repay your debts. For this reason, Chapter 7 sticks around on your credit reports longer.
However, even if your bankruptcy is set to impact your credit reports for a few more years, it doesnt mean that its impact stays the same during that time. Negative marks lose some of their potency with each passing year, including bankruptcy. It could take a few years for your credit score to fully recover from bankruptcy, but there are some tips we can offer to start you off in the right direction.
How Discharge Affects Your Belongings
Discharge from bankruptcy doesn’t mean you’ll get back any belongings, even if they haven’t been sold yet. It might take some time for the official receiver to deal with them.
If you come by any new assets after you’ve been discharged, these will usually remain yours and can’t be claimed by the trustee. An important exception to this rule is any payments you receive by claiming for payment protection insurance which was mis-sold before you become bankrupt.
Become An Authorized User On A Credit Card
If you dont want to take out a secured credit card, you can ask a family member or friend who has good credit to add you as an on one of their credit cards. You may see an increase in your credit score if the issuer reports the cards positive payment history to the three main credit bureaus. However, your score could take a dip if the primary cardholder makes a late payment or maxes out their credit limit.
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How Long Does It Take For A Chapter 13 Bankruptcy To Be Discharged After Paid In Full
Going through a Chapter 13 bankruptcy is a time-consuming process that can take as long as five years, depending on the repayment plan approved by the bankruptcy court. When you make the final payment on the approved plan, you are ready for the discharge of debts to happen immediately. You must complete several steps in conjunction with making the final Chapter 13 payment, which could delay the discharge paperwork.
Chapter 7 Bankruptcy Discharge Timeline
While it’s possible that you could receive a discharge within as few as 82 days after filing your case, it would be unusual. The court usually needs an additional twenty days to accommodate scheduling and other procedural requirements.
So that you’ll know what to expect, the Chapter 7 discharge timeline below covers all aspects of a typical bankruptcy filing, from the initial gathering of documents up until receiving the discharge, and should help clarify how long it will take to get a Chapter 7 discharge:
- Gathering documents. You’ll start by locating financial information, such as bills banking, retirement, and investment account statements paycheck stubs and tax returns.
- Preparing the paperwork. You’ll disclose all aspects of your finances on official bankruptcy forms. Once completed, the average bankruptcy petition, including schedules and other required documents, will be between 35 and 50 pages.
- Completing the credit counseling course. If you’re an individual bankruptcy debtor, you’ll also need to take a credit counseling course from an approved provider. Business entities are exempt from this requirement. Most courses can be completed online within a few hours.
- Passing the deadline for creditors to object. Creditors can object to the court discharging its debt but must do so within 60 days of the first day set for the 341 meeting of creditors. The court will wait until this deadline passes before issuing the discharge.
Can The Discharge Be Revoked
The court may revoke a discharge under certain circumstances. For example, a trustee, creditor, or the U.S. trustee may request that the court revoke the debtor’s discharge in a chapter 7 case based on allegations that the debtor: obtained the discharge fraudulently failed to disclose the fact that he or she acquired or became entitled to acquire property that would constitute property of the bankruptcy estate committed one of several acts of impropriety described in section 727 of the Bankruptcy Code or failed to explain any misstatements discovered in an audit of the case or fails to provide documents or information requested in an audit of the case. Typically, a request to revoke the debtor’s discharge must be filed within one year of the discharge or, in some cases, before the date that the case is closed. The court will decide whether such allegations are true and, if so, whether to revoke the discharge.
In chapter 11, 12, and 13 cases, if confirmation of a plan or the discharge is obtained through fraud, the court can revoke the order of confirmation or discharge.
Limitations Of Chapter 13 Discharges
Some debts can’t be discharged under Chapter 13 bankruptcy, including:
- Child support and alimony
- Certain fines, penalties, and restitution resulting from criminal activities
- Certain taxes, including fraudulent income taxes, property taxes that became due within the previous three years, and business taxes
- Debts you didnt list on your bankruptcy petition
- Debts incurred due to personal injury or death caused by drunk driving
- Debts arising from fraud or recent luxury purchases
It’s extremely difficultif not impossibleto discharge student loans in either chapter of bankruptcy.
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How To Get Proof You’ve Been Discharged
Your discharge from bankruptcy will happen automatically, so you won’t necessarily get proof sent to you.
Email the Insolvency Service to get a free confirmation letter. You should only ask for this after the discharge date.
If you ask for a confirmation letter, you must include your:
- full name
- National Insurance number
- court reference number
If youre applying for a mortgage, youll need a Certificate of Discharge. If you originally applied for bankruptcy through a court then youll need to ask them for a certificate. This costs £70 and £10 for extra copies.
If you originally applied for bankruptcy online, email the Insolvency Service for a certificate. Theres no fee for a Certificate of Discharge if you applied online.
How Long Does It Take To Get My Credit Back After Bankruptcy Or Proposal
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Bankruptcy is designed to eliminate overwhelming debt and reset your finances. One of the most common concerns I hear is: How long does it take to get my credit back after my bankruptcy or consumer proposal is over? There are two answers to this question. How long bankruptcy will remain on your credit report and what you can do to rebuild your credit.
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How To Find The Date A Bankruptcy Was Discharged
Finding your bankruptcy discharge order is the simplest way to find the date your bankruptcy was discharged. When a person files for bankruptcy, they eventually receive a bankruptcy discharge that signifies the end of the process and releases the debtor from personal liability for their debts. All debts involved in the bankruptcy case are no longer legally enforceable. The discharge is a permanent order prohibiting any creditors listed in your bankruptcy petition from making any contact with you or taking any action to collect the discharged debts.
If you plan on applying for credit after completing bankruptcy, new lenders may require you to provide proof that your discharge has taken place. If you are uncertain of the date of your bankruptcy discharge, there are a few different ways to find it.
Reopening Your Bankruptcy Case After It’s Over
You, the trustee, or your creditors can ask the court to reopen your bankruptcy case. But why would someone want to reopen it?
You might want to reopen it if you accidentally forgot to list a debt or if a creditor is violating your discharge. In these situations, you could ask the court to reopen your case and address these issues.
Or, suppose someone suspects that you provided false information on your bankruptcy papers or didn’t disclose all of your property. The court could reopen your case to evaluate the claim, and, if necessary, instruct the trustee to administer those assets. The court could even revoke your discharge.
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How Long Do Bankruptcies Impact Your Credit Scores
Since your credit score is based on the information listed on your credit reports, the bankruptcy will impact your score until it is removed. This means a Chapter 7 bankruptcy will impact your score for up to 10 years while a Chapter 13 bankruptcy will impact your score for up to seven years. However, the impact of both types of bankruptcies on your credit score will lessen over time. Plus, If you practice good credit habits, you could see your score recover faster.
Also, how much your credit score decreases depends on how high your score was before filing for bankruptcy. If you had a good to excellent score before filing, this likely means your credit score will drop more than someone who already had a bad credit score.
How Does The Chapter 7 Process Differ From Others
There are several different types of bankruptcy, though the two most used by individuals are Chapter 7 and Chapter 13. About 70% of those who filed for bankruptcy in 2020 filed Chapter 7, with almost all remaining filing Chapter 13. A small fraction filed Chapter 11, which is a reorganization bankruptcy most commonly used by businesses.
Chapter 7 is a much faster process than Chapter 13. Once Chapter 7 is discharged, the court process is finished. The rest maintaining a budget and living within your means is up to you. With Chapter 13, the court, you, your trustee and your creditors agree to a repayment plan that takes 3-5 years. The plan is based on what the court determines your ability to pay is, and if you stick with it, the rest of your unsecured debt is discharged once its completed. If you dont, the bankruptcy is dismissed and youre back in the situation you were in before filing.
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