Reaffirming A Debt In Chapter 7 Bankruptcy
Sometimes after you file a Chapter 7 bankruptcy, a creditor will want you to reaffirm the debt. When you reaffirm a debt, you enter into a new contract with the creditor. Reaffirmation agreements commonly occur when you’ve financed a car that you’d like to keep after your bankruptcy case.
Because you are creating a new contract and a new obligation to pay after filing your bankruptcy case, reaffirmed debts are post-petition debts. Your bankruptcy will not discharge your responsibility to pay these debts after your bankruptcy is over. If you fail to make payments, the creditor has the right to sue you for the money you owe and repossess or foreclose on the property.
Disadvantages Of Filing For Bankruptcy:
The Bankruptcy and Insolvency Act is the legislation by which Licensed Insolvency Trustees administer bankruptcy files. The laws and regulations of the Act are meant to balance the scales between the need of an honest but unfortunate debtor for a fresh financial start, and the rights of the creditors. For this reason, filing for bankruptcy in Canada has some disadvantages:
- Filing for bankruptcy will lower your credit score for a minimum of six years from the time your bankruptcy is completed
- Some of your assets may need to be surrendered, and/or a portion of your income above a certain level may need to be paid into your bankruptcy
- In bankruptcy, you must provide the Trustee with detailed income and expense information
- Your income tax refund, if you get one, is part of the bankruptcy and is forfeited to the Trustee for the year of bankruptcy
If you have reached the point where you are over-extended and can no longer afford your debt, the advantages of filing for bankruptcy or consumer proposal likely far outweigh the disadvantages.
How Chapter 7 Works
A chapter 7 case begins with the debtor filing a petition with the bankruptcy court serving the area where the individual lives or where the business debtor is organized or has its principal place of business or principal assets. In addition to the petition, the debtor must also file with the court: schedules of assets and liabilities a schedule of current income and expenditures a statement of financial affairs and a schedule of executory contracts and unexpired leases. Fed. R. Bankr. P. 1007. Debtors must also provide the assigned case trustee with a copy of the tax return or transcripts for the most recent tax year as well as tax returns filed during the case . 11 U.S.C. § 521. Individual debtors with primarily consumer debts have additional document filing requirements. They must file: a certificate of credit counseling and a copy of any debt repayment plan developed through credit counseling evidence of payment from employers, if any, received 60 days before filing a statement of monthly net income and any anticipated increase in income or expenses after filing and a record of any interest the debtor has in federal or state qualified education or tuition accounts. Id. A husband and wife may file a joint petition or individual petitions. 11 U.S.C. § 302. Even if filing jointly, a husband and wife are subject to all the document filing requirements of individual debtors.
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How Bankruptcy Can Help You
Bankruptcy in Canada is designed to permit an honest but unfortunate debtor to obtain relief from his or her debts while treating creditors equally and fairly. Another goal of the bankruptcy process in Canada is the rehabilitation of the debtor through financial counselling.
Through bankruptcy, a person hopelessly burdened with debt receives a chance for a fresh start and a better financial future. Bankruptcy is not a punishment. Although bankruptcy can be difficult, it is a constructive process.
The legal process of bankruptcy features a stay of proceedings that prevents a garnishment or any legal action from taking place and stops your creditors from calling. Most first-time personal bankruptcies in Canada last nine or 21 months, depending on the debtors income and other factors.
When you are discharged from bankruptcy, you can make a fresh financial start.
Learn The Basics About Chapter 7 How It Works And What It Can Do
By Cara O’Neill, Attorney
COVID-19 Updates: Retirement and Stimulus Fund Protections Safe Filings.
If you’re one of the millions laid off due to COVID-19, bankruptcy can erase bills while keeping most retirement accounts intact. And you don’t need to worry about losing your stimulus fundsthe new bankruptcy “recovery rebate” law protects stimulus checks, tax credits, and child credits. Bankruptcy lawyers will consult with you virtually, and courts continue to hold 341 creditor meetings telephonically or by video appearance unless an in-person meeting is necessarysee the U.S. Trustee’s 341 meeting status webpage for details.
Streamline your researchtake our bankruptcy quiz to identify potential issues with your bankruptcy case.
Chapter 7 bankruptcy is the type of bankruptcy most people prefer to file because it’s quick and filers aren’t required to pay back any debt. In this article, you’ll learn about the basics of Chapter 7 bankruptcy, including who can file, the forms you’ll need, how the process works, and what happens to your property and debts.
For step-by-step guidance through the bankruptcy process, read What You Need to Know to File for Bankruptcy in 2021.
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Chapter 13 Meeting Of Creditors
The meeting of creditors in a Chapter 13 bankruptcy is highly similar to the meeting of creditors in a Chapter 7 bankruptcy. Many creditors will likely not show up, but the trustee and those creditors who do come will be allowed to ask you questions about your financial situation and your repayment plan. This meeting happens at some point within the first 40 days after your petition is filed.
In Indiana What Property Can I Keep
In a chapter 7 case, you can keep all property which the law says is exempt from the claims of creditors. Indiana exemptions provides a list of the exemptions available for Indiana. In determining whether property is exempt, you must keep a few things in mind. The value of property is not the amount you paid for it, but what it is worth now. Especially for furniture and cars, this may be a lot less than what you paid or what it would cost to buy a replacement. You also only need to look at your equity in property. This means that you count your exemptions against the full value minus any money that you owe on mortgages or liens. For example, if you own a $50,000 house with a $40,000 mortgage, you count your exemptions against the $10,000 which is your equity if you sell it. While your exemptions allow you to keep property even in a chapter 7 case, your exemptions do not make any difference to the right of a mortgage holder or car loan creditor to take the property to cover the debt if you are behind. In a chapter 13 case, you can keep all of your property if your plan meets the requirements of the bankruptcy law. In most cases you will have to pay the mortgages or liens as you would if you didnt file bankruptcy.
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It Is Possible To Make A Fresh Start With Discipline And Focus
What does life after bankruptcy look like? When you’re considering this move, it’s important to look ahead before you decide your next steps.
People can find themselves at a point where there is no chance they will be able to pay off the debts they have accumulated. For example, consider someone who has depleted all their savings and maxed out all of their credit cards due to medical problems and losing their job. Even with unemployment or a temp job, they might find that they can no longer make even the minimum monthly payments on their cards or keep up with their rent and car loan. That’s when a helpful option is talking to a bankruptcy attorney. Chapter 7 could turn out to be the logical next move.
Unfortunately, this situation is all too commonin fact, Mark Twain, Walt Disney, Elton John, and Henry Ford all filed for bankruptcy at some point in their lives. If you think bankruptcy could be looming for you as well, read on to discover what you can expect and what to watch out for after filing for personal bankruptcy.
Meet With Your Trustee To Review Your Options
Now that youve selected your trustee you should contact them and schedule a free initial consultation. You will be asked to bring some specific details of your financial situation, including your income and expenses, assets and debts.
At your first meeting, your trustee will review your financial details, and outline the alternatives to bankruptcy that could be chosen in your case, ranging from debt consolidation through consumer proposals and including the bankruptcy process. Your trustee will provide you with information and advice on each which is best for you but the decision will remain in your hands and you will have as much time as you need.
- If you have enough income, debt consolidation or credit counseling are good debt relief options.
- Consumer proposals allow you to keep your house and other assets, subject to the rights of secured creditors.
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What Happens After You File
After Filing the Bankruptcy Petition Once Your Petition is Filed With the Fort Lauderdale Bankruptcy Court
When the petition is filed, the Bankruptcy Court will mail a Notice of Bankruptcy Case, Meeting of Creditors, and Deadlines. This Notice will be mailed to all of the creditors that were included in the petition, to the debtor, and his attorney. The notice will tell all your creditors the time and place for your “341 meeting” with the trustee and creditors.
Bankruptcy Automatic Stay and Suggestion of Bankruptcy
Immediately upon filing bankruptcy, your creditors are prohibited from contacting you. Filing bankruptcy creates an “automatic stay.” The automatic stay halts creditors from engaging in collection efforts against you. It protects you from harassing collection methods, including letters and phone calls demanding payment. The automatic stay also stops any legal proceedings that are pending in state court, or garnishments.
If you are involved in a foreclosure action, a “suggestion of bankruptcy” is filed with the state court letting them know that you have filed bankruptcy. The filing of Bankruptcy stops the foreclosure action from moving forward until the bankruptcy case is resolved.
If you have been served with any lawsuits prior to the bankruptcy or after you retained an attorney, make sure to give your bankruptcy lawyer a copy of the lawsuit immediately.
Motion for Relief From Stay How to Handle Creditors After You’ve Filed Bankruptcy Chapter 13 Trustee
Your Chapter 7 Bankruptcy Case Does Not End When You Get Your Discharge It Ends With The Court’s Final Decree
Updated by Cara O’Neill, Attorney
For most filers, a Chapter 7 case will end when you receive your dischargethe order that forgives qualified debtabout four to six months after filing the bankruptcy paperwork. Although most cases close after that, your case might remain open longer if you have property that you can’t protect . During that time, you must cooperate with the trustee appointed to administer your case. Your case will close after the trustee sells the assets, pays out the funds, and files a report with the court.
You’ll find a complete overview of the bankruptcy process in What You Need to Know to File for Bankruptcy in 2021.
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Negotiating With The Trustee
Most Chapter 7 bankruptcy cases are what is called “no-asset” cases, which means everything the filer owns is protected through bankruptcy exemptions. Exemptions are specific to where cases are filed and vary by state law. Exempt property can’t be taken from the filer.
Nonexempt property is not protected through Chapter 7 bankruptcy and can be taken by the trustee and sold to pay back your unsecured debt. If a bankruptcy filer wants to keep otherwise nonexempt property, they can usually pay the trustee the value of the property. This is generally an option because the creditors will ultimately get the same amount whether the nonexempt asset is sold by the trustee or is bought by the filer.
Life After Bankruptcy Chapter 13
Your debt is reorganized in a way that is more sustainable for you, and you use a portion of your income to pay some bills for three to five years as part of declaring Chapter 13 bankruptcy. Its critical to stick to your payment schedule throughout this period to avoid losing any assets.
Most leftover debt is dismissed at the conclusion of the payback period, which means you are no longer liable for making payments. The bankruptcy, on the other hand, remains on your credit record for seven years and can reduce your credit score by up to 200 points. You may use a number of strategies to try to rebuild your credit profile faster, similar to Chapter 7 bankruptcy.
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How Can I Clean Up My Credit Report After Bankruptcy
My spouse was married before, and they accrued a lot of debt and filed bankruptcy. This was over eight years ago, but the bankruptcy still appears on credit reports. We’ve also taken care of a lot of old debt, but it still shows up on our credit report as unpaid. How can we fix it?
Chapter 7 bankruptcy typically stays on a credit report for 10 years. There are circumstances, however, where it can be removed. And there have been plenty of times where credit reports have been inaccurate.
You can clean up an inaccurate credit report with the credit bureau itself. There is a form called “request for reinvestigation” that is available with your . You could fill this out and submit it to the credit bureau, or you can write the credit bureau and include all of the inaccurate information that needs to be updated.
In your letter, ask the bureau to reinvestigate all of the inaccurate information. If the bureau insists that the information is accurate, you can directly contact the creditors and have them verify that the debts have been satisfied in writing. Then, send that writing to the bureau as proof, and ask them to update the information. You can also call the customer service line of the credit bureau.
Stopping Creditors With Bankruptcy’s Automatic Stay
Filing for Chapter 7 bankruptcy puts into effect something called the “automatic stay.” The automatic stay immediately stops most creditors from trying to collect what you owe them. So, at least temporarily, creditors cannot legally grab your wages, empty your bank account, go after your car, house, or other property, or cut off your utility service.
Learn more about bankruptcy’s automatic stay.
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Filing A Proof Of Claim Is Only The First Step
Several events occur in a typical bankruptcy case, and each step will impact how much you receive on account of your claim, and when you receive it. A typical timeline for a chapter 11 case is provided here. Because of the way bankruptcy law works, there is usually no way for a creditor to get paid from a debtor until months or years after a bankruptcy case starts. Even then, many creditors receive little or nothing on account of valid claims.
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