What Happens To Your Motor Vehicle
Your motor vehicle will be sold to pay for your bankruptcy debts, unless you need it:
- for your work or vocation
- to meet basic domestic needs where alternative transport is not practical
If the official receiver agrees you need the vehicle, it will be classed as exempt and not included in your bankruptcy. This does not apply if you own your vehicle through an ongoing hire purchase agreement .
If you are allowed to keep the vehicle you remain responsible for road tax, MOT and insurance.
If your vehicle is exempt but valuable it can be replaced with a cheaper alternative. The official receiver will use the money from the sale to either pay for the new vehicle directly or give you the money to buy one. You must provide proof of purchase for your new vehicle within 1 month. The guide price for a replacement is £1,000.
Stop the sale of your vehicle
If your vehicle is not exempt you may be able to keep it if a third party can pay to transfer it to them for you and you provide a:
- current insurance certificate
- vehicle registration document
- a valid MOT
The price paid will be the market value of the vehicle but must at least cover the agents costs for the sale of the vehicle.
If you dont want to keep the vehicle the official receiver will dispose of it.
Vehicles under finance agreements
A finance agreement can be a:
- hire purchase
- conditional sale
- leasing agreement
If the trustee decides they wont be claiming the vehicle they will give notice to you and the finance company.
What Happens To Your Credit Rating After Discharge
The official receiver wont tell the credit agencies when your bankruptcy ends. You may need to ask the credit agencies to update their records to include details of your discharge.
The bankruptcy can stay on your record for 6 years after the date of the bankruptcy order.
Read more on this in the Information Commissioners Office Credit explained document.
Are Your Creditors Willing To Work With You
You may not have to resort to bankruptcy if your creditors are willing to work with you. If you can settle your debts outside of bankruptcy, you may not need to file. But if your creditors are suing you, garnishing your wages, or trying to foreclose on or repossess your property, filing for bankruptcy may be your best option to stop the collection activities.
To learn more about ways to deal with your debts outside of bankruptcy, see our Bankruptcy Alternatives topic.
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Chapter 7 Bankruptcy Vs Chapter 13 Bankruptcy
There are two common types of bankruptcy you might consider as an individual consumer: Chapter 7 bankruptcy and Chapter 13 bankruptcy.
With Chapter 7 bankruptcy, many of your assets are liquidated, and the proceeds are used to repay your creditors. After your creditors are paid and your eligible debts are discharged, youre no longer responsible for repaying your debts .
Rather than having eligible debts completely discharged, Chapter 13 bankruptcy is more like an extended repayment plan. You develop a plan to repay your debts over a period of three to five years, giving you an opportunity to retain more of your assets than if you filed for Chapter 7 bankruptcy.
Can all debts be eliminated in a Chapter 7 bankruptcy?
While credit card debt and many other forms of debt can be eligible for discharge when you file Chapter 7, some are not. Examples of ineligible debts include alimony or child support, some taxes, certain student loans and more. If you have nondischargeable debt, youll be responsible for repaying it even if you file for Chapter 7 bankruptcy.
Debts That Can And Cant Be Discharged In Chapter 7 Bankruptcy
Chapter 7 should dismiss most of the debts you owe, but there are some hard-and-fast debts that cant be discharged in Chapter 7.
The list of non-dischargeable debts includes:
- Child support
- Student loans must prove undue hardship
- HOA fees if you surrender your home or condo
- Any other form of unsecured debt.
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The Bankruptcy Filing Process
There are a number of legally required steps involved in filing for bankruptcy. Failing to complete them can result in the dismissal of your case.
Before filing for bankruptcy, individuals are required to complete a credit counseling session and obtain a certificate to file with their bankruptcy petition. The counselor should review your personal situation, offer advice on budgeting and debt management, and discuss alternatives to bankruptcy. You can find the names of government-approved credit counseling agencies in your area by calling the federal bankruptcy court closest to you or by visiting its website.
Filing for bankruptcy involves submitting a bankruptcy petition and financial statements showing your income, debts, and assets. You will also be required to submit a means test form, which determines whether your income is low enough for you to qualify for Chapter 7. If it isnt, you will have to file for Chapter 13 bankruptcy instead. You will also need to pay a filing fee, though it is sometimes waived if you can prove you cant afford it.
You can obtain the forms you need from the bankruptcy court. If you engage the services of a bankruptcy lawyer, which is usually a good idea, they should also be able to provide them.
Assuming the court decides in your favor, your debts will be discharged, in the case of Chapter 7. In Chapter 13, a repayment plan will be approved. Having debt discharged means that the creditor can no longer attempt to collect it from you.
The Individual Insolvency Register On Annulment
Once notice of the annulment is received your bankruptcy will be removed from the Individual Insolvency Register after:
- 28 days if the bankruptcy order shouldnt have been made
- 3 months if the debts were paid in full or an IVA has been agreed
If an IVA has been agreed, details of this will appear on the register.
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What Happens To Your Debt Payments If Your Circumstances Change
If your financial circumstances change while you are bankrupt you are legally obliged to inform the OR. They will then re-assess your disposable income and determine whether there is any change.
If there is a change and you are already making IPA payments these will either increase or decrease accordingly. Where your disposable income increases and are not already making payments it is likely that these will start.
If you are required to start an IPA part way through your bankruptcy it will still last for three years. You will still be discharged in the mean time but the payments will continue for the full 36 months.
A IPA can be put in place at any time before you are discharged. However if it has not happened by the time you are discharged it will never happen. Any extra you earn after this time is yours to keep.
Is Credit Card Debt A Good Reason To File Chapter 7
Yes, Chapter 7 bankruptcy erases almost all credit card debt. So, if you owe far more than you think you can pay, Chapter 7 can likely help you get back on your feet and stay there.
If you are paying the minimum payments on your credit cards each month, it could take you 10 or 15 years to pay off the credit card debt, depending on the balances on your credit cards and the interest rate.
Paying the minimum payments on credit cards can cost you thousands of dollars that you do not have to pay. In addition, if you miss even one payment, the credit card company could raise your interest rate substantially. For most people, credit card debt is the main reason they need to seek debt relief.
However, a credit card company may obtain a personal judgment by filing a debt collection lawsuit. If the company is successful in obtaining a judgment, the credit card company may take actions to collect the debt that could affect your property and income.
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What Happens When You File For Bankruptcy
If bankruptcy is the option you choose, you will work with the LIT to complete the required forms. The LIT will then file these documents with the OSB and you will be formally declared bankrupt.
From that point on, the LIT will deal directly with your creditors on your behalf. Once you have been declared bankrupt
- you will stop making payments directly to your unsecured creditors
- any garnishments against your salary will stop and
- any lawsuits against you by your creditors will also be stopped
What Does Discharged Mean
Discharged means your bankruptcy has ended you no longer have to pay your debts and you are able to apply for credit. However, if you do not complete your duties during bankruptcy, you will not get discharged, your trustee will close your file, and creditors can resume collection efforts against you. To learn more about how to get out of bankruptcy, read about how long bankruptcy lasts in Canada.
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How Much Debt Do I Need To File For Chapter 7
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In a Nutshell
There’s no such thing as too much or too little debt for Chapter 7 bankruptcy. But, there are a lot of important factors to consider when determining if filing bankruptcy now is the best debt relief solution for you.
Written by Attorney Eva Bacevice.
There is no threshold amount that you need to reach to file a bankruptcy. Some chapters of bankruptcy have debt limits, but there is no such thing as a debt minimum. That being said, you certainly can and should evaluate if filing a bankruptcy makes sense in your current situation.
The better question to ask is do I qualify for a Chapter 7 and will it afford me the relief I am seeking?
Gifts Transfers Of Property Or Special Treatment
Any gifts or transfers of property youve made in the year prior to filing for bankruptcy will need to be reviewed by your LITand could be reversed by the court. You will also need to advise your LIT of any payments or preferential treatment to your creditors in the three months prior to declaring bankruptcy .
For more information about bankruptcy exemptions, you can click the button below to book a free initial consultation with a Licensed Insolvency Trustee.
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Will You Have To Pay Towards Your Debts Once Bankrupt
If you have no surplus income, you will not have to make any payments towards your debts after you go bankrupt. This is one of the major advantages of the solution. As long as your income does not improve while you are bankrupt no further payments will be required.
However, where you do have a surplus income, you will have to pay this towards your debts. The payments will last for a maximum of 3 years. After this time the payments stop and any debt still owed is written off.
When you do have to make payments towards your debts, this is known as an IPA . If your income falls while it is in place, your payments are reduced or stopped altogether. In the same way, if your income improves your payments may have to increase.
If you receive a bonus payment or earn significant extra overtime during an IPA you must report this to the Official Receiver. They will normally take this money from you in addition to your standard monthly payment.
Choose The Right Bankruptcy Filing For You
We are proud to represent our clients in four primary areas of bankruptcy relief. Called Chapters, each of these forms of bankruptcy has its own advantages and disadvantages. The four Chapters used for filing for bankruptcy, where we help clients find debt relief, include:
- Chapter 7: Straight bankruptcy, where debts are fully forgiven
- Chapter 11: Complex business bankruptcies with debt reorganizations and restructures
- Chapter 12: Debt relief and repayment plans for family farmers and family fishermen
- Chapter 13: Debt relief for income earners that can help stop foreclosures and other looming debt recovery efforts
When you decide to declare bankruptcy, your lawyer will help you choose the right Bankruptcy Chapter for your financial situation. Filing for bankruptcy is a complex, time-consuming procedure. Your lawyer can help you understand and navigate the filing process from your initial petition to final discharge.
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Exceptions To Payment Rules
There are some exceptions to the payment rules. You can make direct payments for:
- secured creditors, like a mortgage lender
- debts which are not included in the bankruptcy , these are called non-provable debts
- money owed after 19 March 2012 to the Department for Work and Pensions for budgeting or crisis loans
You must keep paying rent and any new debts after the bankruptcy. You may not need to pay bills that are unpaid at the date of your bankruptcy order. You may have to pay a deposit for future supplies of gas, electricity or other utilities. Or your utility accounts may be transferred to a spouse or partner.
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
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How To File Chapter 7 Bankruptcy
The most important factor in filing Chapter 7 bankruptcy is finding an experienced bankruptcy attorney. Once you decide on an attorney, you can refer creditors to your lawyers office. Filing the petition will trigger an automatic stay, which means creditors cant pursue lawsuits, garnish your wages or contact you about your debts. Heres a potential timetable:
If youre qualified, it will take 4-6 months to complete the bankruptcy process.
Here are the steps you must take when filing for bankruptcy:
Ive Declared Bankruptcy: Now What
Bankruptcy should be seen as your final resort. Only when you have no viable options left for repaying your debt should you even consider bankruptcy. It can be a difficult hurdle to overcome, but sometimes there are no other alternatives. A failed business, economic downturn, major illness, or even a divorce can leave you unexpectedly broke. If youre facing the possibility of bankruptcy or surmounting debt, keep reading.
Well explain everything there is to know about bankruptcy, how it works, when its necessary, how it will affect and of course, how you can avoid it! Read on to learn everything there is to know about declaring bankruptcy.
What Happens When You Declare Bankruptcy in Canada?
In Canada, when you file for bankruptcy, you are essentially turning over all of your assets in exchange for having all of your debts removed. However, thats a very general description to bankruptcy. Like with anything else, there are some limitations and exceptions. For example, if you have a secured debt, like a mortgage, the lender has the right to take your asset to resolve the payment for themselves. You cannot surrender that asset to anyone else.
How Much Debt Do You Have to Have to File Chapter 7?
Do You Stop Paying Bills Before Chapter 7?
Does Bankruptcy Clear CRA Debt?
What Assets Can CRA Seize?
Can You Negotiate with CRA?
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Who Can Be Made Bankrupt
A bankruptcy order can be made for one of three reasons:
- you cant pay what you owe and want to declare yourself bankrupt
- your creditors apply to make you bankrupt because you owe them £5000 or more
- an insolvency practitioner makes you bankrupt because youve broken the terms of an individual voluntary arrangement
How Do I Declare Bankruptcy
You can go bankrupt in one of two main ways. The more common route is to voluntarily file for bankruptcy. The second way is for creditors to ask the court to order a person bankrupt.
There are several ways to file bankruptcy, each with pros and cons. You may want to consult a lawyer before proceeding so you can figure out the best fit for your circumstances.
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