Chapter 13 To Chapter 7 Time Limit
The standard wait is six years, but its not chiseled in stone.
The waiting period is often waived if you repaid all your debts under Chapter 13 provision, or you repaid at least 70% of them and showed a good-faith effort to pay them all.
If you meet those requirements, you could file for Chapter 7 within a year of the Chapter 13 discharge.
Is A Lawyer Necessary
Unlike corporations and partnerships, individuals can file for bankruptcy without an attorney. It’s called filling the case “pro se.” But because filing for bankruptcy is complex, and must be done correctly to succeed, it’s generally unwise to attempt it without the help of an attorney experienced in bankruptcy proceedings.
Even the Internal Revenue Service is sometimes willing to negotiate. You may be able to reduce the amount you owe in taxes or spread your payments out over time.
Your Interview With The Official Receiver
If your bankruptcy is approved, youll have an interview with the official receiver. If youve presented your own bankruptcy petition, this may happen directly after the bankruptcy order is made. Alternatively, your letter from the official receiver may invite you to an interview either in person or by telephone. If offered a telephone interview you can ask to be interviewed in person if you prefer.
If you have been made bankrupt by one of your creditors the official receiver may also contact you by telephone to find out if there is anything that needs to be sorted out urgently.
You must attend the interview and cooperate with the official receiver. If you dont, your bankruptcy could be extended beyond the normal 12 months and you could face an examination in court. The more organised you are, the more straightforward the process will be.
Before the interview, telephone the official receiver to confirm or rearrange the appointment; let them know if:
- you require special facilities
- there is anything that needs to be sorted out urgently
- you need more time to gather the paperwork for the meeting
If you have been sent a questionnaire, fill it in, noting anything you dont understand .
Collect together all the paperwork you have been asked to take to the interview or have with you during the telephone call.
Face-to-face interviews may take 2 to 3 hours.
After you arrive:
Telephone interviews take at least 30 minutes.
The examiner will:
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Disadvantages Of Filing For Bankruptcy
The Bankruptcy and Insolvency Act is the legislation by which licensed trustees administer bankruptcy files. Its rules and laws are meant to balance the scales between the need of an honest unfortunate debtor for a fresh financial start and the rights of the creditors. For this reason, filing for bankruptcy in Canada has some disadvantages:
- It will lower your credit score and credit history to the lowest level for a minimum to six years from the time your bankruptcy is completed;
- While most assets will not be affected by declaring bankruptcy, there may be some assets that will need to be surrendered or may mean your bankruptcy will have an additional cost; and,
- In bankruptcy you must provide the trustee with detailed income and expense information, and including your income tax information.
If you have reached the point where you are over-extended and can no longer afford your debt, the advantages far outweigh the disadvantages in most cases.
Your Responsibilities When A Bankruptcy Order Is Made
You must:
- give the official receiver information on your finances
- give the official receiver a full list of your assets
- tell your trustee about any rise in income during your bankruptcy
- tell anyone who offers to loan you over £500 that youre bankrupt
- go to court to explain why you owe money if asked to do so
There are also things you cant do while bankrupt. These are called restrictions.
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How Often Can You Be Discharged In Personal Bankruptcy
There are several different types of bankruptcy you can file for. Each one is a little different and has different rules regarding discharge. For most personal bankruptcies, debt can be discharged with the exceptions of student loans and tax debts.
The rules for discharge are:
- Chapter 7: If you have already filed for a Chapter 7 bankruptcy, a bankruptcy court will deny your request for discharge if you have been given a discharge from a previous Chapter 7 or Chapter 11 in the last eight years.
- If you have been given a discharge in a Chapter 12 or Chapter 13 bankruptcy case within the last six years, you will also be denied a Chapter 7 discharge.
- Chapter 13: If you have been given a discharge in a prior Chapter 7, 11 or 12 case, which was filed within the last four years, you will be denied a Chapter 13 discharge. The same applies if you have been awarded a discharge for a Chapter 13 case within the past two years.
These time limits only apply to discharges and not to bankruptcy filings. There is no minimum period you must wait to file for another bankruptcy. If you really want, you could file for another bankruptcy the day after your first one. However, filing too soon will affect how your debt is resolved and you may not be given discharge.
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.
Pension Payments
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.
Death benefits
Bankruptcies before May 2000
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Bankruptcies Can Be Revoked Seek Legal Advice
Bankruptcy courts have the right to revoke a bankruptcy or discharge. There are specific conditions for the various types of bankruptcy. Chapters 7, 11, 12 and 13 all have their own unique reasons for why they can be revoked.
Revocation of Chapter 7
A trustee, creditor, or the U.S. trustee may submit a request to the bankruptcy court that a discharge or bankruptcy be revoke based on an allegation against the debtor.
Explanations of the Reasons Bankruptcies Can Be Revoked:
If you are considering filing for bankruptcy again, then you should take advice. Youll need to file with the court and must be certain that you are filing correctly and discharges are applicable.
You should also be aware of the With Prejudice rulings, and how they affect your ability to file for bankruptcy.
AllLaw has excellent resources online to help you navigate this tricky legal procedure. They have an interactive calculator that can help you establish the best next step based on the amount of money you owe. Their resource also clearly and simply explains the various types of bankruptcy and what you can do if the court has dismissed a previous case with prejudice.
Do You Have Surplus Income
If your monthly income is $200 or more in excess of the current surplus income limit set by the government, it is possible that your bankruptcy will be extended for longer than nine months, and you will be required to pay a portion of this income into your bankruptcy.
It is not wrong to make surplus income, but it is only fair that a portion of it be paid to your creditors. Having surplus income also lengthens the period you are bankrupt usually to twenty-one months for first-time bankruptcies.
For more information, see our page on surplus income.
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Understanding Your Debt Relief Options
Bankruptcy is an option of last resort. It is just one solution available for Canadians struggling with debt.
Before choosing bankruptcy, your trustee will talk with you about your financial situation. What assets you own, what debts you owe, and your income will affect the choice about which debt solution is right for you.
Not every person experiencing debt problems needs to file bankruptcy. When you meet with a Licensed Insolvency Trustee for a debt assessment, part of the review includes a discussion of the;alternatives to bankruptcy.
Some bankruptcy alternatives your trustee will review with you will include:
- Filing a debt management plan. If you do not have enough debts to file bankruptcy, a credit counsellor can help you work out a plan to pay back your debts. This has the same credit impact as a consumer proposal but is good for small debt amounts.
- Taking out a debt consolidation loan. Well help you consider whether you have the credit capacity to afford a new loan to consolidate debts and if you can qualify at a reasonable rate.
- Making a proposal to creditors. Settling your debt through a consumer proposal is less harmful to your credit and has significant advantages over bankruptcy.
As one of Ontarios largest consumer proposal administrators, we have the experience to help you choose between claiming bankruptcy and making a debt proposal to creditors.
Evaluate your alternatives to bankruptcy with our;Debt Options Calculator.
What Happens To Your Credit Score
Your will fall because of filing bankruptcy; however, this is temporary. The information about your bankruptcy will remain on your report for six to seven years for a first bankruptcy, but this does not mean you have to wait that long to get new credit.
Depending on the reasons you filed, and what your payment history looked like before your bankruptcy, some creditors will offer an existing bankrupt person a credit card. It is almost always possible to get a secured credit card even while bankrupt. Getting new credit is your chance to build a new credit history and show future creditors that you can handle credit wisely.
Many people opt to file a consumer proposal since a consumer proposal can be better for your credit report.
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What Other Factors Impact Bankruptcy Length
Bankruptcy Duties
The length of time before a bankruptcy discharge also depends on whether you have completed your;duties under bankruptcy law. Some of the most important duties include:
- Disclose all property in your possession and delivering non-exempt assets to the Licensed Insolvency Trustee
- Surrender all credit cards to the Trustee for cancellation
- Report your household income and monthly expenses to your Trustee
- Make all of your required payments, which include surplus income
- Attend two mandatory credit counselling sessions
You can find a complete list of duties here. Failure to complete them will increase how long you will be bankrupt. If you have any problems in completing your duties, you should speak to your Trustee for advice as soon as possible.
Discharge Opposition
While this is rare, if one of your creditors opposes your bankruptcy discharge, a court hearing will be held. It will then be up to the court to decide whether you will be discharged. If you face this process, it would extend the length of your bankruptcy.
But, as mentioned earlier, if its your third bankruptcy, youre required to go to court to be discharged.
Bankruptcy Filings By State
Considering how much their populations vary, it doesn’t make sense to evaluate states by their number of bankruptcy filings.
In the table below, states are ranked by their number of bankruptcy filings per 1,000 residents to provide a more accurate picture of where debtors file bankruptcy the most. It also includes the numbers for Washington, D.C., and the United States as a whole.
Bankruptcy is a much bigger problem in the South — the four states with the highest bankruptcy rates are all Southern states. This could be in part because these states often have more seasonal work and fluctuating wages. Median incomes in several of these states are below the national average, too.
Interestingly, Chapter 13 filings are far more common in the South than they are in the rest of the country. Of the 25 federal judicial districts with the most Chapter 13 filings from 2006 to 2017, 23 were in the South. Chapter 13 bankruptcy originated in this region, which could partially explain this, but fee structures for bankruptcy attorneys in this part of the country are a more likely explanation.
In several Southern states, bankruptcy attorneys don’t charge anything upfront for Chapter 13 cases. Instead, they let debtors pay through their bankruptcy payment plan. With Chapter 7 cases, attorney fees are usually due immediately or shortly. This leads lower-income debtors in these states to predominantly choose Chapter 13 bankruptcy, even if they’d be better off filing through Chapter 7.
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Consider The Cons Of Double Filing
If you file too soon, you cannot legally have another debt discharge until the time limits have passed, so the process could waste your time and money.
Furthermore, if a judge finds that you have filed again “in bad faith,” they will stop your automatic stay , unless you can provide clear and convincing evidence that you filed in good faith. They might even throw your case out.
How Your Creditors Are Paid
The official receiver will take control of your assets unless an insolvency practitioner is appointed. An insolvency practitioner is usually an accountant or solicitor.
The person who takes control of your assets is known as the trustee. The law says you must cooperate fully with them.
The trustee will sell your assets and tell the creditors how the money will be shared. Creditors must then make a formal claim. You cant make payments directly.
If you have assets, money from the sale of these will be used to pay the costs of the bankruptcy process before creditors are paid. If your case is administered by the official receiver the following fees will all be deducted from the money realised:
- an administration fee of £1,990 if you applied for your own bankruptcy or £2,775 if someone else applied
- a general fee of £6,000
- 15% of the total value of assets realised
- a fee charged at an hourly rate where money is paid to creditors
If there are insufficient assets in your case the official receiver will still process your bankruptcy.
Next, money will be used for:
- certain debts in relation to employees, if you had any
- your other creditors
- interest on all debts
Any money left over will be returned to you. If everyone is paid in full you can apply to have your bankruptcy cancelled .
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When Should I Declare Bankruptcy
When asking yourself Should I file for bankruptcy? think hard about whether you could realistically pay off your debts in less than five years. If the answer is no, it might be time to declare bankruptcy.
The thinking behind this is that the bankruptcy code was set up to give people a second chance, not to punish them forever. If some combination of bad luck and bad choices has devastated you financially, and you dont see that changing in the next five years, bankruptcy is your way out.
Even if you dont qualify for bankruptcy, there is still hope for debt relief. Possible alternatives include a debt management program, a debt consolidation loan or;debt settlement. Each one of those choices typically require 3-5 years to reach a resolution, and none of them guarantees all your debts will be settled when you finish.
Remember that bankruptcy carries significant long-term penalties. It is stuck on your credit report for 7-10 years, which can make getting loans in the future very difficult.
The flip side of that is there is a great mental and emotional lift when all your debts are eliminated, and youre given a fresh start.
What Happens Once You File For Bankruptcy
Once your bankruptcy is filed, there is an immediate stay of proceedings. This means that unsecured creditors cannot begin or continue lawsuits, wage garnishees, or even contact you to request payment.
Within five days of the bankruptcy starting the trustee will send a copy of the bankruptcy paperwork to creditors, so they can file a claim.
The trustee will file outstanding tax returns up to the date of bankruptcy. Any outstanding taxes or penalties owed CRA will be included.
You will have certain obligations that you will have to fulfill including a monthly income statement and attending credit counselling sessions.
- Filing bankruptcy immediately halts most creditors from taking your wages.
- Your Trustee will deal with your unsecured creditors on your behalf.
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Refiling Bankruptcy After A Dismissal
Dismissal may sound like discharge, but theres a huge difference.
A discharge means youve met all the requirements set by the bankruptcy court. Youre no longer on the hook for the applicable debts and your case is closed.
Dismissal means your case has been closed without your debts being eliminated. Its as if you never filed for bankruptcy. Youre back to Square One and your creditors can start hounding you again.
You can refile after a dismissal, but how soon depends on why your case was dismissed. For instance, you must complete a credit counseling course from an approved agency within 180 days before filing for bankruptcy.
The counselor gives you an idea whether theres a better alternative to bankruptcy, like enrolling in a DMP. If you decide to go ahead with bankruptcy, you must have a certificate showing you completed the counseling course.
Failure to comply will result in the court automatically dismissing your case. But if you scramble and take the course, you would likely be permitted to refile right away.
If it looks like youre trying to game the system, you will have to wait 180 days to refile. The bankruptcy code defines that as willful failure of the debtor to abide by orders of the court, or to appear before the court in proper prosecution of the case.
Examples would be:
- Lying to the court.
- Concealing or transferring property in an attempt to defraud creditors.
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