Learn About The Court Order That Wipes Out Your Debt In Bankruptcy
By Cara O’Neill, Attorney
The most important part of a bankruptcy case for many individual debtors is the bankruptcy dischargethe order that wipes out qualifying debt, such as credit card balances, utility bills, and medical debt.
Once entered, the filer is no longer responsible for the discharged debt, and a creditor can’t call, send demand letters, report nonpayment of the debt to credit reporting agencies, file a lawsuit, or take other actions to collect the discharged debt.
If you’d like step-by-step guidance through the bankruptcy process, read What You Need to Know to File for Bankruptcy in 2021.
How Long Will I Be Bankrupt
Most bankrupts will be eligible for an automatic discharge after 9 months. The length of your bankruptcy may change under certain circumstances and can be quite confusing. There are three main factors that affect the length of your bankruptcy:
If you have been bankrupt before.If you have been bankrupt before you will not be eligible for a discharge in 9 months. Your bankruptcy will be extended. If you are a second time bankrupt your bankruptcy will extend for 24 months.
If you have surplus income.If your surplus income exceeds the minimum amount set by the government your bankruptcy can be extended for a longer period of time. If you are a first time bankrupt and your surplus income is too high you may not be eligible for an automatic discharge for 21 months . If you are a second time bankrupt, your bankruptcy period will be extended from 24 months to 36 months .
We can summarize these time periods is the following table:
|Automatic Discharge Period|
If you are not eligible for an automatic discharge.
If this is your first or second bankruptcy, you are eligible to receive an automatic discharge based on the conditions noted earlier. There are, however, a few reasons why you would not receive an automatic discharge the most common of which are:
Again, be sure to complete all of your duties so that you receive your discharge from bankruptcy, and officially eliminate your debts.
The Pacer System & Court Records
A bankruptcy filing becomes public record after you submit your bankruptcy petition. Someone from the court will upload your documents and bankruptcy schedule into the Pacer system.
The PACER system is a program used by the federal courts to keep track of any and all court documents. Any kind of paperwork that goes through a court will usually be added to the PACER system, and can therefore be accessed by the public. To access the system, you need to create a PACER account and pay a small fee per page that is viewed.
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How Long Does Bankruptcy Stay On Your Credit Report
Your bankruptcy will be listed in your credit report which may mean it will be harder for you to get credit. The bankruptcy can stay on your credit report for at least 6 years from the date you were declared bankrupt. This period can be longer if your bankruptcy continues. Once the bankruptcy is removed you will be able to apply for credit.
After Your Bankruptcy Application Is Accepted
Once your application is accepted, it is important to note that:
- your details will appear on our website.
- all your creditors will be sent a report. They can log onto our website to get updates after the first report is sent.
- you should contact your secured creditors and arrange to either:
- keep making payments under the agreement or
- arrange for the secured item to be returned/repossessed. You can then stop making any payments under the agreement. They can claim against you for any unpaid amount.
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Getting A Search Started
The best place to start is to search the London Gazette, on The Gazette website, by name of bankrupt. This has notices published by officials to inform creditors about their proceedings.
If you have found an entry in the London Gazette you can try looking for bankruptcy case files at the National Archives but only very few survive.
If you cannot find a case file you will need to browse various register and enrolment series that will normally only provide brief formal entries. They will confirm if a bankruptcy took place, but will not provide much detail.
From 1842 district bankruptcy courts were established for cases outside London. Case files and some bankruptcy registers from these should be at local archives. Search our catalogue using keywords, and refine your results using the filters. Alternatively, look for a particular local archive using Find an Archive.
What Will Still Be Affected
Unfortunately not everything will return to normal:
A bankruptcy will affect your credit rating for at least 6 years. So your credit score will be very poor, and you’ll be unlikely to find it easy to get credit, even after you’re discharged.
Your assets from when you were made bankrupt still remain under the control of the Official Receiver or Trustee, and they can be dealt with at any time in the future. So even if you still have them in your possession, they cannot be considered ‘yours’.
If the Official Receiver or Trustee obtains a charging order over the interest in your house – which can be done providing you own more than £1,000 of its value – this will remain in place for up to three years. So if your bankruptcy is discharged within a year, this charging order will remain.
If you are making payments into your bankruptcy fund from your wages through an Income Payments Order – which is also in place for three years – you may have to continue these for up to three years, even if your bankruptcy has been discharged before this time.
If any debts arose from fraudulent activity, they cannot be dealt with under a bankruptcy order. If you are paying personal injury damages, these would have to continue until the court determines that you can be released from doing so.
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Accounts Included In Bankruptcy
When you include an account in your bankruptcy filing, the lender will update the account to show the status as “included in bankruptcy.” Once the bankruptcy is discharged, the status will be updated again to show that it has now been “discharged” in bankruptcy.
Whether you file Chapter 7 or Chapter 13, an account that was never late and then included in bankruptcy will be removed seven years from the bankruptcy filing date. If the account was delinquent at the time it was included in the bankruptcy, it will be removed seven years from the original delinquency date on the account. In both cases, accounts included in bankruptcy will continue to show the payment history on the account prior to the bankruptcy status.
What Can You Do If You Can’t Find A Licensed Insolvency Trustee
If you are unable to get an LIT to accept your file, or if you cannot afford to hire an LIT, the OSB’s Bankruptcy Assistance Program may be able to help, provided that you:
- have contacted at least two LITs and tried to obtain their services
- are not, and have not recently been, involved in commercial activities
- are not required to make surplus income payments and
- are not in jail
A creditor is harassing me daily. What should I do?
Although the regulations differ slightly across Canada, there are limits on what creditors and collection agencies are allowed to do. For example, they cannot make telephone calls of such a nature or frequency that they amount to harassment of you or your family. In addition, there are certain times when they are not allowed to call.
Tips for dealing with collection agencies If you feel you are being harassed, contact either an LIT or a qualified and experienced credit counsellor. They can help you by serving as an intermediary between you and your creditor.
and we will send you some information and a list of LITs who participate in the program.
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You Will Be Discharged From Bankruptcy
A discharge releases you from the legal obligation to repay the debts you had as of the date you filed for bankruptcy, except for specific types of debts that are excluded by law. These include alimony and child support payments, student loans , court-ordered fines or penalties, and debts arising from fraud.
The timing of your discharge depends on a number of factors, including whether this is your first bankruptcy, and whether you are required to make surplus income payments.
Timing of your discharge from bankruptcy
If this is your first bankruptcy and you are not required to make surplus income payments , you will be eligible for an automatic discharge from bankruptcy in nine months. If your surplus income is higher, your bankruptcy will be extended to 21 months and you will be required to make payments from your surplus income.
Your discharge from bankruptcy will happen automatically if
- the discharge is not opposed by the LIT, a creditor or the Office of the Superintendent of Bankruptcy
- you have attended the mandatory financial counselling sessions and
- this is your first or second bankruptcy.
To ensure that a greater percentage of debts is repaid to creditors, the following standards set out when an automatic discharge will occur.
|Surplus income is greater than $200 per month||36 months after filing|
What Is The Npii
The National Personal Insolvency Index is a publicly available and permanent electronic record of most personal insolvency proceedings in Australia.
See National Personal Insolvency Index for more information.
Note: The NPII does not include records of company insolvencies. The NPII records are for individuals only.
Information about corporate insolvencies is available from the Australian Securities & Investments Commissions website. You can also search to see if a business name is registered and, if so, to whom.
Where an individual operated a sole trader business, there is no record of a business insolvency. Instead, you may wish to search the NPII for any records for the individual.
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What Other Ways Can Bankruptcy Affect You
Although bankruptcy can protect you from further escalation by your creditors and offer you a basic, if restricted, lifestyle, there are far-reaching consequences to consider.
- Bankruptcy will be made public
Once declared bankrupt, your name will be entered into Singapores bankruptcy register, which can be freely searched by anyone, including potential employers, clients and the public. This can affect your career path.
- A declared bankrupt can continue to work, but not in high positions
Contrary to what some might believe, persons under bankruptcy can continue to take up a job. However, part of their wages will be deducted and paid to their bankruptcy estate.
Also, they are not allowed to be involved in the management of a business or act as a director of a company, unless prior permission has been granted by the court or the OA.
Bankruptcy will cause your credit score to take a hit, and credit bureaus continue to report default in payment for three years from the date of settlement, and bankruptcy data for five years from the date of discharge. This will severely affect your ability to apply for loans, credit cards and mortgages even in the future.
Which Debts Get Discharged In Bankruptcy
Debts that are part of a Chapter 7 discharge include unsecured debts, collection agency accounts, medical bills, utility bills, dishonored checks, certain tax penalties, attorney fees, judgments from lawsuits, and any lease contracts a consumer may have.
In 2020, the CARES Act provides temporary relief to Chapter 13 debtors who have a confirmed plan. A revised provision in the bankruptcy code allows those who have experienced financial hardship to extend their plan for up to seven years.
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What Can Make Your Bankruptcy Last Longer
If you are dishonest in your dealings with the Official Receiver or Trustee, or you are to blame for your debts, there is always the option for him or her to apply to the court for a bankruptcy restrictions order.
This will extend the period of your bankruptcy conditions to between two and 15 years – so always be honest with your Trustee or Official Receiver at all stages.
For more information check out our guide on declaring yourself bankrupt.
What If You Live Overseas
If you are living overseas you can still become bankrupt. Creditors that are not based in NZ will be sent a report if they are listed in your bankruptcy, but they can continue to chase you for any money you owe them.
Your assets in New Zealand become the property of the Official Assignee. If you have assets outside of NZ, the Official Assignee may have your NZ bankruptcy recognised in the overseas country and may deal with those assets also.
You can return to NZ during your bankruptcy, but if you want to leave again you will need to apply for permission.
The public register can be searched from overseas. Several credit reporting companies operate in more than one country so your credit rating outside of NZ may be affected.
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Californians Get Broader Discharge
In California, where 9th Circuit decisions are controlling, the Beezley opinion tells us that even a creditor who wasnt listed is discharged in a no asset bankruptcy.
The caveat is that if the creditor has a claim to non dischargeability because of the debtors bad acts, the claim survives until the creditor has a chance to challenge the discharge of his debt.
Beezley stands for the proposition that even creditors not listed are discharged in a no asset case.
If everything you owned when you filed bankruptcy was exempt or not worth the trustees time to administer, you dont need to amend your bankruptcy schedules to add creditors that you forgot when you filed. If there are no assets, they didnt miss anything financial by being omitted.
Other circuits have similar case law, too.
How Do My Creditors Learn Of My Bankruptcy
The Licensed Insolvency Trustee in an individuals consumer bankruptcy mails a notice of bankruptcy to each of the individuals creditors. Creditors of a bankrupt individual record the bankruptcy when they receive this notice.
If you are applying for new credit while your bankruptcy remains on your credit bureau records, the companies considering granting credit to you may record the bankruptcy when they check your record at a credit bureau.
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Whats The Earliest Date I Can Expect My Chapter 7 Discharge
The earliest date you can get your Chapter 7 bankruptcy discharge depends on the date of the Meeting of Creditors , whether there are any objections, and whether a reaffirmation hearing was requested. Bankruptcy laws give time for creditors, bankruptcy trustees, and U.S. trustees to object.
If there are no objections and a reaffirmation hearing is not needed, the earliest date you can get your Chapter 7 discharge is after the deadline for objections expired. The deadline for creditor and trustee objections is 60 days from the first scheduled 341 meeting.
The official date the discharge order will be entered will also depend on the day of the week, holidays, and the courtâs caseload. You could get your discharge the day after the objection deadline expires. Bankruptcy records show discharge filing dates are around four months after filing a bankruptcy petition. If you have a reaffirmation hearing scheduled after the deadline for objections, the earliest you can get your bankruptcy discharge is after the court makes a ruling on the reaffirmation.
Where Can I See Insolvency Notices In The Gazette
You can view all corporate and personal insolvency notices on The Gazette website.
The Gazette also provides a data service which gives access to official intelligence on all UK businesses, corporate and personal insolvencies. Benefits of The Gazettes data service include:
- Bespoke reports – tailored around your specific business
- Geo-targeted editions – available for specific geographical targeting
- Custom filters – specific custom attributes
- Data at regular intervals – delivered at a rate to match your business needs
For more information on The Gazettes data service, contact the team on 01603 985949 or email .
About the author
Neil Dingley is restructuring and insolvency Partner at Moore Recovery Stoke on Trent and has a background in information technology and accountancy.
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Bankruptcy Will Also Protect Some Assets
Earlier on, we stated that bankruptcy will result in having your assets seized and sold.
But there are some assets which are protected by law which you will be allowed to keep, such as:
- Property held by you as a trustee for someone else
- Your HDB flat
- Money in your CPF account
- Life insurance policies held in express trust for your spouse or children
- Any items/equipment required for the personal use in your employment, business or vocation
- Equipment/furniture required for your familys needs
- The remainder of your monthly income after deduction of the monthly contribution
- Any annual bonus or annual wage supplement paid as part of your income
These items listed above will be excluded from the bankruptcy estate, and thus protected from distribution to your creditors.
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How Can I Use The Gazette And The Individual Insolvency Register If I Am A Creditor
The Gazette and the Individual Insolvency Register will tell you who is handling the affairs of a bankruptcy. This will either be the Official Receiver or an Independent Insolvency Practitioner .
You should contact the OR or the IP if you are a creditor in the bankruptcy estate. They will normally ask you to submit your claim in the bankruptcy. If you are owed more than £1,000 you will need to submit a formal proof of debt form.
After you have submitted your claim there is nothing more you need to do at this stage. The OR or the IP will contact all creditors if a dividend is to be declared.
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