How To File For Bankruptcy
Yeahit’s going to feel like you’re digging up and showing off every bit of private information you’ve ever had. Really, the only upside is they dont ask for that awkward eighth grade yearbook photo.
What Are The Consequences Of Filing For Bankruptcy
Individuals and businesses sometimes reach a level of financial difficulty that a decision is made to look into the possibility of filing for bankruptcy. Indeed, there are situations where choosing bankruptcy is the most logical course. At the same time, bankruptcy filing should never been seen as an easy way to get out from under a mountain of financial obligations. There are consequences to bankruptcy that should be carefully weighed against the benefits. Here are a few examples.
Filing for bankruptcy can also impact future career opportunities. Often, a person who has gone through bankruptcy filing in the recent past is not eligible for consideration as a director in a business. It may also be impossible to hold certain offices in local organizations that would be helpful in furthering the career. The simple act of filing may diminish the level of confidence that current customers have in the individual or company, and can also put off potential clients who prefer to go with an entity that is more financially stable.
What Is The Downside Of Filing For Bankruptcy
Filing for bankruptcy protection is considered a statement on your ability to repay your debt to your creditors. The fact that you sought and received bankruptcy protection will remain on your credit record for as long as 10 years. Additional factors regarding what is the downside of filing for bankruptcy can include:
- Filing for bankruptcy can negatively impact your immediate financial future.
- Obtaining credit after filing for bankruptcy could mean increased interest rates.
- Obtaining credit after filing for bankruptcy might require security deposits.
Filing for bankruptcy can give you the opportunity to start over and create a new financial reality for you and your family. It can also come with many downsides that you should be aware of in order to make a fully informed decision.
In addition to these credit issues, certain bankruptcy filings will leave you with nondischargeable debt that must still be paid back. Nondischargeable debt can include property debt, tax debt, student loans, spousal support, child support, and criminal debt. While some bankruptcy chapters will allow you to manage many of these nondischargeable debts more readily, they will not be dismissed or discharged.
Don’t Miss: Bankruptcy Document Preparers
Keeping You From A Better Job
A bankruptcy filing might even keep you from landing that new job, though this is a bit complicated.
Potential employers cant check your credit score. But they can order what is known as an employment screening. This is a summarized version of your credit report. But unlike the credit reports maintained by TransUnion, Experian and Equifax, this report doesnt contain all of your personal information. It will, though, list Chapter 7 bankruptcies that are less than 10 years old and Chapter 13 bankruptcies that are less than seven.
Tayne said that these filings might cause employers to pass you over for a job, especially if you are applying for a position in finance or law enforcement.
Not all employers will run a screening. And employers cant surprise you with an employment screening. They have to ask for your written permission to run your report. Still, if you are applying for a job that requires you to manage money? You might find that the bankruptcy in your recent past could ruin your chances.
The bottom line? Bankruptcy might be the right choice for you. But dont go into it thinking that your financial challenges will magically disappear. Filing will solve some problems, but it will also create others.
Understand What Bankruptcy Means
Unexpected or lengthy illnesses, sudden or prolonged unemployment, and many other factors beyond your control can plunge you into debt that you might struggle to recover from. Insurmountable debt can make it impossible to meet your daily needs and can also lead to persistent pressure and anxiety.
When that happens, you can file for one of many chapters of bankruptcy, which will allow you to greatly decrease or completely dismiss overwhelming debt. Bankruptcy protection is a federal process and cannot be filed or tried in a state court. Federal bankruptcy laws will allow you to begin the credit and finance journey over with a new start.
In addition to removing debt for consumers and businesses, bankruptcy also provides some measure of protection for creditors who might still recover a portion of the debt they are owed through restructured or reorganized debt payments. Your lawyer can help you choose the right bankruptcy chapter and filing to fit your specific financial needs.
For a legal consultation, call
Don’t Miss: Can You File Bankruptcy On A Title Loan
How Bankruptcy Affects Your Financial Future
A question we often hear from people considering bankruptcy and from clients who have filed for protection from creditors is whether they will have any access to credit after a bankruptcy. Can you get a loan while in bankruptcy? Will you be able to get a car loan or qualify for a mortgage to buy a house or simply get a credit card?
Bankruptcy offers people who cannot pay their debts an opportunity to get a fresh start. Nearly 790,000 individuals and businesses filed for bankruptcy in 2017, according to the Administrative Office of the U.S. Courts. Many more are working through the bankruptcy process. Most will have access to credit again.
Fortunately, many individuals who go through bankruptcy do re-establish their creditworthiness and have access to credit again within one to three years. Rebuilding your credit is a process that takes time and financial discipline. To start, you may want to consider getting a secured credit card if you are having difficulty get approved for an unsecured credit card. Keeping the credit card account payments current is a good way to start re-establishing your credit score and repairing your credit history.
How Bankruptcy Affects Credit
A recent study by Lending Tree, an online marketplace for consumer loans, on the cost of bankruptcy shed some interesting light on the topic. Researchers at Lending Tree compared the types of automobile, mortgage and personal loans received by consumers who had declared bankruptcy in the last seven years and the loans extended to those who did not have bankruptcies on their credit file.
Among the interesting findings, the researchers said that within two years of a bankruptcy approximately 65 percent of people had a credit score of 640 or above. That score is generally considered the threshold at which consumers are eligible for a loan.
Within five years, three fourths of those with a bankruptcy had raised their credit scores to levels that made them eligible for loans.
The study found that a typical $15,000 auto loan incurred an extra $2,200 in borrowing costs for consumers seeking loans with a year of the bankruptcy, but only $800 more for those who waited two years.
The Lending Tree study indicated that borrowers who applied for a mortgage three years after filing for bankruptcy were offered home loans with interest rates that were about 20 basis points higher that consumers who did not have a bankruptcy. The higher the annual percentage rate, the higher your borrowing costs are.
The study shows that with hard work and a disciplined approach, you can repair your credit score and regain your financial footing within one to three years of a bankruptcy filing.
Don’t Miss: How Much To File Bankruptcy In Va
What Are The Consequences Of Declaring Bankruptcy
Declaring bankruptcy is a last resort for individuals or businesses who unable to handle their debts. One of the advantages of declaring bankruptcy is that some debts are discharged . This may help out a person who is in debt and needs some of their debt cancelled. In fact, this is one of the main effects of a Chapter 7 discharge, although not all types of debt can be discharged.
On the other hand, declaring bankruptcy can sometimes result in negative consequences, including long-term damage to a persons credit score.
File Chapter 7 Bankruptcy For Free With Upsolve
If you have minimal assets and simply need a fresh start, Upsolveâs free web app gives you the tools you need to successfully navigate the Chapter 7 bankruptcy process without a lawyer. If your financial situation is a bit more complex, and Upsolve is not a good fit for you, it can help you find a bankruptcy attorney in your area.
Ready for the next step? If so, take this short quiz to find out if Upsolve is a good fit for you. Not quite sure how it works? Check out this 10-Step Guide on how to file bankruptcy for free. And feel free to browse our Learning Center to find answers to all of your questions!
You May Like: How Many Times Has Trump Filed For Bankrupcy
Dealing With Your Vehicle
One of the forms you will file with the bankruptcy court is called the Statement of Intention. In this form, you tell the court what you plan to do with property that is securing a debt you owe, like real estate or a vehicle.
If you own your vehicle but are still paying on the loan, you have a few options on how to deal with it in Chapter 7 bankruptcy.
You can reaffirm the debt, keep your vehicle, and continue making payments. This means the debt will not be discharged and you will continue making monthly payments during and after bankruptcy. If you miss future payments the lender will have the right to repossess the vehicle and possibly try to collect on any deficiency between the balance you owe and the amount they get when selling the vehicle.
If you select this option in your Statement of Intention, your car lender will send you a reaffirmation agreement for you to complete and return. In some bankruptcy cases a reaffirmation hearing will be scheduled.
If you choose to surrender your vehicle, then it will be repossessed and the debt will be discharged in your bankruptcy. Filers with high car payments they can’t afford often choose to surrender their car to get out of the debt.
Surviving The Emotional Effects Of Bankruptcy
Filing bankruptcy can stir up many stressful or negative emotions. Your sense of self, security, and worth are often closely tied to financial circumstances. Loss of money can feel like a personal loss of identity, self-esteem, and confidence. A real or perceived loss of interpersonal power can happen before or after you file bankruptcy.
Recommended Reading: How To Become A Bankruptcy Petition Preparer
Will The Bankruptcy Trustee Take My Home
This is a complicated question, as the specific answer will vary according to your individual circumstances and the amount of equity in your home.
However, generally the answer is: If you dont have significant equity in your home, then claiming bankruptcy should not affect your house.
More detailed information is available in our article about how a house is treated in a bankruptcy.
Possible Loss Of Assets
Upon receiving a bankruptcy discharge, you shall assign or turn over your properties or assets to a trustee, who will then sell and distribute any funds collected from the sale to pay your debts or creditors.
Furthermore, there are regulations set by the provincial legislation of Canada to exempt particular assets from surrendering to a trustee. These regulations, however, vary on the territory where you are living.
The common types of properties excluded from surrendering to a trustee are:
- personal belongings such as clothes
- house furniture or any equipment
- device/s used for work
- vehicles with a value limit, for example, an old car
Read Also: Purchasing A Car After Bankruptcy
Get Relief From Financial Stress
No one wants to be in a situation where they cant pay their bills! Bad times come upon good people all the time. Divorce, failed business, assisting family members in need, job loss and health problems. There are a host of reasons why Canadians run into financial problems. Weighing your financial choices can feel overwhelming as choices have to be made.
Some individuals worry that their credit will be destroyed, or that they will lose their home and vehicle. In reality, relief is the word we hear most often to describe the most immediate effect of claiming bankruptcy.
Lets look at why:
- Collection actions stop. As soon as a bankruptcy is filed we take action to stop collection actions, including harassing phone calls, collection letters and lawsuits.
- Enforcement actions stop. As soon as a bankruptcy is filed we put a stop to enforcement actions, such as the freezing of bank accounts and wage garnishments.
- Immediate relief in monthly payments. In most cases, the monthly payment in bankruptcy is far lower than what was being paid in monthly payments to creditors.
- Convenience. You will only have to make a single affordable monthly payment to us, as Trustee.
- Knowledge. We will teach and coach you to be an effective budgeter and money manager, including how to re-build your credit score once you are discharged from bankruptcy.
Start the process to financial recovery here.
Will My Canadian Student Loans Go Away If I Declare Bankruptcy
If you were a student, either part-time or full-time, less than seven years from the date that you declared bankruptcy, you will have to repay your student loan debt, including the interest charges. Check with Canada Student Loans to learn what they consider to be the last official date you were in school.
If your official last day is under seven years ago, you may still be able to get your student loan debts discharged. You can retain a lawyer and make an application to the court.
You must meet the following requirements:
- You have been out of school for a minimum of five years
- You acted in good faith with regard to the liabilities under the loan
- You have and will continue to experience financial difficulty to such an extent that you will be unable to pay the liabilities under the loan
Don’t Miss: How Many Bankruptcies Has Donald Trump Filed
How Much Cash Can I Keep
It depends on the exemption amount in your state. Most states allow some amount of cash to be kept under either Chapter. Keep in mind that some financial institutions may be able to take money from your accounts held with them to satisfy debts to them.
There are some exemptions, like child support payments, alimony and public benefits like Social Security, disability payments and unemployment.
Retirement accounts and pensions are also protected, so at least you wont have to start dining at the local soup kitchen if youre over 65 and bankrupt.
A Creditor Making You Bankrupt
Your creditors can present a creditor’s petition if you owe them an unsecured debt of over £5,000. This may be the sum of two or more debts which total over £5,000. There might be different petitioning creditors on the same petition for different debts you owe.
Once bankruptcy proceedings have started, you must co-operate fully even if it’s a creditor’s petition and you dispute their claim. If possible you should try to reach a settlement before the petition’s due to be heard – doing it later can be difficult and expensive.
You May Like: How Many Times Donald Trump Filed Bankruptcy
Will The Bankruptcy Trustee Take My Car
In most cases the answer to this question is no, you can keep your car.
Historically, Hoyes Michalos has only repossessed a vehicle in less than 1% of all bankruptcies filed. If your car is leased or fully secured by a car loan, you can usually just continue to make your monthly payments. If you own your car outright or it is mostly paid off, Ontario legislation allows you to keep up to one vehicle worth up to $6,600. Even if your car is worth more than that, we can still provide you with alternatives.
Learn more in our article how to claim bankruptcy and keep your car.
What Are Some Effects Of Declaring Bankruptcy
Again, declaring bankruptcy may seem like a simple solution to resolving your debt. Some of the pros of declaring bankruptcy are eliminating debt that is crippling your everyday life. Debt like credit cards, tax debts, and even certain student loans. Declaring bankruptcy also can give you protection from your creditors. Bankruptcy may even prevent collection callsno one likes those. Essentially, having the ability to be debt free in less than a year allows a fresh financial start.
However, there are also lasting negative effects and also more immediate consequences that will affect your day-to-day life. An obvious effect is your loss of property or non-exempt assets.
In a legal proceeding for bankruptcy, it may be required of you to give up any possessions that may have significant monetary value. This repossession of items by the government means that your assets can be put up for sale to cover the cost of your lost debt. This property can be anything from your home to your car or other items you may own that hold value. In addition, while declaring bankruptcy can eliminate most debts, there are some that by law, may be excluded from this action. Therefore, you may still be left with some debt. These debts include a majority of student loan debt , court-ordered debts like alimony and child support, reaffirmed debt, government penalties or issued fines, court fines, and federal tax debt owed directly to the federal government.
Recommended Reading: Which Of The Following Phrases Best Summarizes Chapter 7 Bankruptcy