What Is A Bankruptcy Discharge
The goal of a bankruptcy is to get your creditor to forgive outstanding debt, or at least put you in a position to pay off that debt according to a court-specified plan. Discharge is the legal term meaning youre not legally required to pay the debt, and collectors cant take any further action to collect it.
Following a bankruptcy discharge, debt collectors and lenders can no longer attempt to collect the discharged debts. That means no more calls from collectors and no more letters in the mail, as you are no longer personally liable for the debt.
A bankruptcy discharge doesnt necessarily apply to all of the debt you owe. For example, if you owed $100,000 and get half of your debt discharged, you now owe $50,000. The type of bankruptcy you choose will determine what is discharged and what happens to other property during and after the bankruptcy process.
In 2016, there were 770,846 non-business bankruptcies in the United States. Nearly 62% percent were Chapter 7, 38% were Chapter 13 and less than 1% were Chapter 11. This makes Chapter 7 the most common type of bankruptcy in the U.S. But just because its popular doesnt necessarily make it right for you.
The question of What happens to my property? looms large in many bankruptcy cases. Although youre not personally liable for discharged debts, a valid lien can remain in place even after debt is discharged. That means a secured creditor may still enforce the lien to recover any property that is rightfully owed.
How To See If A Bankruptcy Has Been Discharged
When a bankruptcy proceeding is completed, the debts involved in the proceeding and approved by the court are discharged, which, according to the United States Courts website, means the debtor no long has to pay them. The court issues a discharge notice which is sent to the debtor and his attorney, if he has one, automatically. This form may be required if you go to make a large purchase, such as a new car or a home.
If you don’t have your discharge notice handy, you can get a copy in several ways. If you aren’t sure whether or not your bankruptcy has been discharged, or if you are looking for the status of someone else’s bankruptcy, it’s possible to find out.
Land Registry/registry Of Deeds
Bankruptcy petitions and orders are registered at the Registry of Deeds against your name and may be recorded against documents of title in the Land Registry. If your petition is dismissed or you are discharged from bankruptcy you can vacate your registration in the Registry of Deeds by completing Form 11 or form 13 of the Registration of Deeds Regulations 1997 and lodging at the Registry of Deeds. There will be a charge of £4.
If notice of the presentation of the petition or the bankruptcy order has been given to the Land Registry the Order of Annulment should include provision permitting cancellation of any entry in the Land Registry or notice of the petition or any bankruptcy inhibition against your title as the registered owner of the land. You should take a copy of the Order to the Land Registry to have the cancellation made.
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Why A Case Isn’t Over After A Bankruptcy Discharge
Most people file for bankruptcy for the debt discharge. It’s the last court action that directly affects many filers, so, understandably, they think the case is over once it’s received. It’s also confusing that, in many instances, the court will close the case soon after the entry of discharge. But the discharge order and case closure are different.
The bankruptcy discharge releases the debtor from liability for certain debts, so the debtor is no longer legally required to pay the balance. The discharge also prohibits creditors from collecting discharged debts in any manner, including through lawsuits, demand letters, and telephone calls.
In some cases, the bankruptcy will continue for some time after the discharge order is issued. In fact, for creditors, the trustee, and the court, the case could be just getting underway.
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Why Should I Find Out If Someone Filed Bankruptcy
Discharging debts in bankruptcy means that a debtor is no longer required to pay those debts. Debs are either discharged and assets sold to pay the creditors, or the court creates a repayment plan for the debtor to repay debts in a way that is more manageable based on their current income and finances.
The court enters an order that prohibits creditors to attempt to collect the discharged debts via legal action, telephone calls, letters, or other forms of contact.
There are a variety of reasons why someone might file for bankruptcy. Some of the more common reasons include:
- Overextended personal lines of consumer credit
Filing for bankruptcy is generally not a decision people take lightly, but the fact that someone has taken that route to get out of debt might be of interest to other individuals who have an interest in their financial history and current financial health.
Bankruptcy cases are exclusively the jurisdiction of federal bankruptcy courts. Bankruptcy records are public information and can be helpful for making financial decisions. There are several reasons why you might want to find out if someone filed for bankruptcy. Some of the more common reasons are:
- Researching the financial history of a potential business partner;
- You need to determine whether it is a smart decision to loan money to someone; or
- You are interested in the financial history of a business.
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Court Hearing And Discharge
While most bankruptcies end in an automatic discharge, there are circumstances when the courts will be required to approve your discharge. You are not eligible for an automatic discharge and court hearing is required if:
- You do not complete your duties,
- any of your creditors or your trustee objects to your discharge, or
- if this is your third bankruptcy.
In bankruptcy court the bankruptcy judge will determine what actions you are required to take to receive your discharge.
There are four types of discharge that the judge can order:
- Absolute discharge; You will be fully released from your debts, except debts that are excluded by bankruptcy law.
- Conditional discharge; You are required to fulfill certain conditions prior to obtaining your absolute discharge. Conditions may include making additional payments, or completing your duties.; Once you have completed the conditions, the trustee must return to court to obtain your absolute order of discharge.
- Suspended discharge; This is an absolute discharge that does not take effect until a specific date in the future.
- Discharge refused;The court may refuse a discharge.
If you are thinking of filing for bankruptcy, contact an Ontario Bankruptcy Trustee about your situation. We can explain what your discharge will mean and help you through the process.
Avoid Unnecessary Services And Costs
Save your hard-earned money. You may see ads offering to retrieve the bankruptcy discharge notice for you for a fee of up to $30 or more. While paying someone else to do it can save you some time and effort, there’s no need to use a service.
Such services most likely use the PACER system, paying only a few dollars to access the records and charging you many times their cost. Unless you don’t mind the expense, it’s usually better just to do it yourself.
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Getting Public Records Changed
After discharge from bankruptcy, your details will still be included in several public records. Some of these will be removed automatically after a certain time, while you’ll need to take action to get others changed, as follows:
- your details will automatically be removed from the Insolvency Register 3 months after your discharge
- if you want your credit record to show you’ve been discharged, you should send confirmation to each of the credit reference agencies and ask them to update your file – remember the bankruptcy will show on your file for 6 years after the bankruptcy order
How Funds Are Recovered And Distributed
To help creditors recover some of what they are owed, non-exempt property owned by the bankrupt as of the date of the bankruptcy, or acquired prior to the bankruptcy discharge, may be seized and sold by the LIT. Exempt property includes property protected by applicable provincial and federal laws , property held by the bankrupt in trust for another and, in some cases, goods and services tax payments.
In addition, the LIT determines the bankrupt’s “surplus” income, i.e., the amount beyond what the bankrupt requires to maintain a reasonable standard of living. The bankrupt must pay this amount to the estate for distribution to the creditors after the costs of administration are deducted.
After the LIT has sold all of the bankrupt’s property, he or she must prepare a final statement of receipts and disbursements and a dividend sheet. The dividend sheet contains a list of creditors who will receive dividends and the amount to which they are entitled. You will be paid the dividends to which you are entitled before the bankruptcy file is closed, which is before the discharge of the LIT.
Once the secured claims have been settled, the dividends are distributed in the order set out in section;136 of the
These prior claims are subject to certain conditions and this list is not exhaustive.
The law gives priority to the claims of preferred creditors over those of other unsecured creditors.
When Does The Discharge Occur
The timing of the discharge varies, depending on the chapter under which the case is filed. In a chapter 7 case, for example, the court usually grants the discharge promptly on expiration of the time fixed for filing a complaint objecting to discharge and the time fixed for filing a motion to dismiss the case for substantial abuse . Typically, this occurs about four months after the date the debtor files the petition with the clerk of the bankruptcy court. In individual chapter 11 cases, and in cases under chapter 12 and 13 , the court generally grants the discharge as soon as practicable after the debtor completes all payments under the plan. Since a chapter 12 or chapter 13 plan may provide for payments to be made over three to five years, the discharge typically occurs about four years after the date of filing. The court may deny an individual debtor’s discharge in a chapter 7 or 13 case if the debtor fails to complete “an instructional course concerning financial management.” The Bankruptcy Code provides limited exceptions to the “financial management” requirement if the U.S. trustee or bankruptcy administrator determines there are inadequate educational programs available, or if the debtor is disabled or incapacitated or on active military duty in a combat zone.
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.
Bankruptcy Process And Discharge
When individual debtors file for bankruptcy, most of their debts are discharged at the conclusion of their bankruptcy case. In Chapter 7 cases, a debtor’s non-exempt assets are seized, and the proceeds are used to pay creditors. This is a short process lasting usually a few months, after which any remaining unpaid debts are discharged and the debtor is no longer legally responsible for them. In Chapter 13 cases, a debtor pays his debts with a repayment plan that lasts three to five years. As with Chapter 7, any unpaid debts left behind are discharged as long as the debtor completes all obligations under the plan.
At the completion of the case, the court enters an order discharging debtor, which is public record and available to you and to anyone else who wants to find it. Read More:What Happens After Bankruptcy Discharge?
Preferences Or Transfers At Undervalue
A transfer of property can be set aside if, in the three months prior to the date of the initial bankruptcy event, the debtor made a payment to one creditor that favored the creditor over others. .
A disposition of property or provision of service for which no consideration is received by the debtor or the consideration received is less than the fair market value of the consideration by the debtor can be set aside if made in the one year before the initial bankruptcy event. If the creditor is not at arms length from the debtor, the disposition of property can be reviewed by up to 5 years before the initial bankruptcy event if the debtor was insolvent or was rendered insolvent by the transaction or the debtor intended to defraud, defeat or delay a creditor.
If you have reasonable grounds to believe that the bankrupt or someone else is guilty of an offence under the BIA or any other statute, you should contact the LIT in charge of the estate or the OSB.
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What Bankruptcy Records Exist In Canada
The official bankruptcy records in Canada are compiled by the Office of the Superintendent of Bankruptcy Canada and are public records. This means that any member of the public can access them via an internet search tool on the OSB website, although there is a fee, and searches must be very specific.
The OSB sends a monthly list of new bankruptcies to each of the credit bureaus , who record them on their credit histories of individual consumers. The OSB also sends information on bankruptcies that have been discharged , and the bankruptcy record for each person is removed from that persons credit report after a set number of years.
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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.;
What Types Of Bankruptcy Should I Look For
Individuals and businesses can file for several different types of bankruptcy depending on the reasons for filing.
Some of the common types of bankruptcy include:
Regardless of the type of bankruptcy that was filed, it can be searched the same way. The easiest way is using the online PACER system to access bankruptcy documents. You do not need to know which chapter the bankruptcy was filed under to search online for the record.
If you know the name of the individual or the name of the business, you can begin the search for bankruptcy documents. Chapter 7 bankruptcy is the most common type of claim for individuals. If your search reveals that the person you are looking into filed for Chapter 7 bankruptcy, you will know that their debts were likely more of a personal nature than business related.
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