What If I Lose My Property
Whether you file chapter 7 or chapter 13, bankruptcy, what happens to your property will depend on which option you choose. You can find out which bankruptcy option is best for you by reading Bankruptcy: Chapter 7, vs. Chapter 13. Based on the route you choose, heres what you can expect.
Chapter 7
Chapter 7 bankruptcy is also known as liquidation bankruptcy. This is because you will need to sell some assets to pay at least a portion.
However, some assets are exempted from liquidation by state law. This includes your retirement accounts, home, and car. To find out which property you are allowed to keep, consult a bankruptcy lawyer in your state.
Chapter 13
Chapter 13 bankruptcy means that you wont have to sell your assets to pay your debts. Instead, your debts are reorganized so you can pay them off in part or full over the next three- to five years.
Remember that creditors could sue you if your payments are not made according to the plan.
The Advantages And Disadvantages Of Declaring Bankruptcy
When your debt exceeds your assets and your ability to pay your creditors, bankruptcy can offer you a financial lifeline. Filing for debt relief through bankruptcy can have many advantages and disadvantages. Advantages of bankruptcy protection include:
- A new start that can help you create a healthy financial future
- The ability to retain much, if not all, of your personal property and assets
- Your creditors will be required to cease all debt collection actions
In addition to putting a stop to relentless phone calls and other debt collection efforts, filing for debt relief through bankruptcy can also have disadvantages that you should be aware of. Disadvantages of filing for bankruptcy protection include:
- Filing for bankruptcy stays on your credit profile for 7 to 10 years
- Filing for bankruptcy can lead to higher interest rates when you are eventually able to obtain financing
- You can be ordered to undergo court-approved credit counseling
- You cannot use bankruptcy to discharge overwhelming debt, again, for at least four to eight years, depending on what type of bankruptcy you had filed.
Each individual or business debt load is unique and requires close scrutiny and careful debt reduction planning. Your lawyer can take a clear, objective, and comprehensive view of your financial situation and help you create a plan to reorganize, reduce, or eliminate your debt.
For a legal consultation, call
What Happens To My Debts When I Go Bankrupt In Canada
Home > > How to File Bankruptcy> > What Happens to My Debts when I Go Bankrupt in Canada?
What happens to your debts when you go bankrupt in Canada? Does declaring bankruptcy clear all debts? These are complex topics. The answers depend on the type of debt, and in some cases on your payment status. There are actually some debts that stay , even if you file for bankruptcy.
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Is It Better To Pay My Debt Or File Bankruptcy
Each persons situation is unique, and factors that may indicate bankruptcy as the best solution to one persons financial problems may not be the same for someone else. The amount of debt that you need to have in order to file personal bankruptcy in Canada is just $1,000 this means there is access to bankruptcy as a debt solution, if it makes sense in your situation.
Many people believe that when they are facing unmanageable debts they have two basic options in addition to borrowing more paying the debts in full or declaring bankruptcy. In Canada, another powerful debt solution exists that will allow you to consolidate your debts without borrowing and avoid filing bankruptcy, this is called a Consumer Proposal.
When you meet with a Licensed Insolvency Trustee or Insolvency Estate Manager to discuss bankruptcy and bankruptcy alternatives such as Consumer Proposals, some of the factors that will be taken into consideration when evaluating the options that may fit you best will include:
- The overall amount of debt you have and who you owe money to.
- Any assets that you may own and whether any have been pledged as security .
- Most people keep all their assets when they file bankruptcy in BC it is a myth that you are not entitled to have any assets.
What Else Can I Do If I Owe The Cra Money
While CRA debt forgiveness through insolvency will provide the most relief and eliminate a considerable portion of what you owe, there are reasons you may not want to pursue them. Under most circumstances, there is no reason for your employer to know that you have filed for bankruptcy, but if you work in certain professions that require you to have a security clearance, responsibility for an organizations or clients finances, or if you work in a bonded profession, you may not be able to file bankruptcy. Bankruptcy and consumer proposals will also both appear on your credit report for several years after you have been discharged, which can make it harder to qualify for another loan down the line.
You also have a debt consolidation option such as a debt consolidation loan, but you should proceed with caution. With a debt consolidation loan, you borrow money in order to pay off other unsecured debts such as the CRA, for example. Ideally, the new loan offers a lower interest rate than the original, so not only do you make a single monthly payment, but the debt will ultimately be cheaper.
This is where it can become difficult. Sometimes debt consolidation loans offer lower initial interest rates that increase after a year if the balance hasnt paid off. It can also be harder to negotiate with another lender than the CRA, which offers ways to negotiate payment plans outside of debt relief.
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What Happens When I Default On My Loan
When you default on a loan, the debt will often be sold to a collection agency, which will then try to collect on the amount owed. The lender can also try to sue you in court to garnish your wages or even try to put a lien on your house to collect some of the profits when you sell the home.
The type of action that is taken against you largely depends on whether your debt is secured or unsecured. Secured debt uses your asset as collateral, which can be repossessed if you default. For instance, if you default on an auto loan, the lender will often try to repossess the vehicle.
Unsecured debt, like credit card debt, has no collateral in these cases, its harder for a collection agency to recoup the debt, but the agency may still take you to court and attempt to place a lien on your home or garnish your wages.
A default will also result in a huge drop in your credit score, ultimately staying on your credit report for seven years. Having a default could make it very difficult to qualify for another loan or credit card.
What If A Non
If the inheritance belongs to your spouse, who didn’t file for bankruptcy with you, that money or property is not part of your marital property or part of your bankruptcy estate. However, even if the inheritance is considered your spouse’s separate property, commingling it with your assets may cause the inheritance to lose its separate status. For example, if your spouse spends part of the inheritance buying you an expensive sports car, the car may become part of your bankruptcy estate.
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The Benefits Of An Automatic Stay Of Proceedings
As soon as the trustee files your paperwork, the Bankruptcy and Insolvency Act guarantees your right to an automatic stay of proceedings. This means that all collection actions and attempts to force repayment are suspended immediately while you go through the legal process of bankruptcy. This includes:
- Collection calls
- Repossession
- Foreclosure
No new enforcement actions can be started, and even current enforcement actions must cease. For example, if you owe back taxes to the Canada Revenue Agency and they are garnishing your wages, the garnishment will stop once you file.
This can give you some welcome breathing room if your wages are being garnished or if youre dealing with threatening calls from collectors.
What Happens To My Debt If I Declare Bankruptcy In Canada
Bankruptcy will eliminate most of your debts, such as unsecured debts including credit card bills, medical bills, and payday loans. You may still be required to pay your secured debts, such as your mortgage or motor vehicle loan.
Some debts cannot be eliminated by your bankruptcy. Those include:
- Court-imposed fines
- Debt incurred by misrepresentation
- Alimony or maintenance payments
- Debt for damages imposed by Civil Court for intentional bodily harm, sexual assault, or wrongful death
- Student loans, if bankruptcy occurs within 7 years of ceasing full- or part-time studies
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Are You Getting A Refund
Refunds that are issued as a result of returns for years prior to the year of bankruptcy are considered to be the property of the estate in bankruptcy. As a result, these refunds will be sent to the trustee. Any refunds issued in relation to returns for years subsequent to the year of bankruptcy will be sent to you, unless the trustee has obtained a court order.
For the year of bankruptcy, any issued refund related to the pre-bankruptcy return will be sent to the trustee. Issued refunds related to the post-bankruptcy return will also be sent to the trustee if your bankruptcy assignment date is July 7, 2008, or later. Post-bankruptcy refunds that are issued for bankruptcies with an assignment date prior to that will be sent to you, unless the trustee has obtained a court order or has provided us with an Authorization and Direction letter.
The Trustee May Sell Some Of Your Property
If you filed Chapter 7, the trustee may liquidate some of your non-exempt assets and distribute them to creditors according to the priorities stated in the bankruptcy laws. You will get to keep many of your assets like some household items, your car, and items of clothing. You can learn more about this on our page about bankruptcy exemptions.
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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
The Things That Happen Immediately After Filing Bankruptcy
As soon as you file your Chapter 7 bankruptcy, you are given a case number and a bankruptcy trustee is assigned to your case. The bankruptcy trustee will oversee your bankruptcy filing, will review your bankruptcy forms, and may ask for additional documents to verify your information. The trustee will also conduct the meeting of creditors.
Protection from your creditors begins immediately after filing for Chapter 7 or Chapter 13 bankruptcy. This is called the automatic stay. Once you file and the automatic stay takes effect, your creditors are not allowed to take collection action against you.
After you file for bankruptcy protection, your creditors can’t call you, or try to collect payment from you for medical bills, credit card debts, personal loans, unsecured debts, or other types of debt. Wage garnishments must also stop immediately after filing for personal bankruptcy.
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File Chapter 7 Bankruptcy For Free With Upsolve
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Who Deals With Your Bankruptcy
An Official Receiver is appointed to protect your assets. They act as trustee of your bankruptcy affairs if you have no assets.
If you have assets, an Insolvency Practitioner will be appointed to act as trustee and sell your assets to pay your creditors. To read more, go to:
Once a bankruptcy order has been made against you, your creditors cannot pursue you for payment. The trustee is responsible for payments.
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Is A Lawyer Necessary
Unlike corporations and partnerships, individuals can file for bankruptcy without an attorney. It’s called filling the case “pro se.” But because filing for bankruptcy is complex, and must be done correctly to succeed, it’s generally unwise to attempt it without the help of an attorney experienced in bankruptcy proceedings.
Even the Internal Revenue Service is sometimes willing to negotiate. You may be able to reduce the amount you owe in taxes or spread your payments out over time.
Alternatives To Chapter 7
Debtors should be aware that there are several alternatives to chapter 7 relief. For example, debtors who are engaged in business, including corporations, partnerships, and sole proprietorships, may prefer to remain in business and avoid liquidation. Such debtors should consider filing a petition under chapter 11 of the Bankruptcy Code. Under chapter 11, the debtor may seek an adjustment of debts, either by reducing the debt or by extending the time for repayment, or may seek a more comprehensive reorganization. Sole proprietorships may also be eligible for relief under chapter 13 of the Bankruptcy Code.
In addition, individual debtors who have regular income may seek an adjustment of debts under chapter 13 of the Bankruptcy Code. A particular advantage of chapter 13 is that it provides individual debtors with an opportunity to save their homes from foreclosure by allowing them to “catch up” past due payments through a payment plan. Moreover, the court may dismiss a chapter 7 case filed by an individual whose debts are primarily consumer rather than business debts if the court finds that the granting of relief would be an abuse of chapter 7. 11 U.S.C. § 707.
Debtors should also be aware that out-of-court agreements with creditors or debt counseling services may provide an alternative to a bankruptcy filing.
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Will Filing For Bankruptcy Make The Lawsuit More Problematic
Its important to keep in mind that angry people tend to pursue litigation out of a need for vengeance rather than a monetary incentive. And, the federal bankruptcy court isnt always the best place to resolve such disagreements.
Here are a few situations that might give you and your lawyer strategic pause:
- When facing an adversarial opponent. If youre dealing with someone emotionally invested, such as a spurned ex-spouse or business partner, and assets are involved, the court might be inclined to see how the case develops. Because of the interest to creditors, filing bankruptcy might serve to move your lawsuit to a new forum onlythe bankruptcy courtand depending on the facts, that move might not be a good one.
- When facing a large organization. Sometimes companiesfor instance, utility providerswant to take a stand against fraud by pursuing a case even when recovering money isnt expected. A win would allow the company to continue to collect the amount owed . Keep in mind that a utility company can refuse to provide service to a bankrupt customer who wipes out a utility balance unless the customer pays a deposit.
- When youve done something questionable. Also, keep in mind that bankruptcy judges dont shrink from punishing inappropriate conduct. If one of the above situations exists and your case isnt very sympathetic, a bankruptcy court might not be the best place to resolve the issue.
Discharging Debt Through Bankruptcy
When you file for bankruptcy protection, a discharge from the court will relieve you of your obligation to repay your creditors for certain debts. Once your debt is discharged, your creditors cannot contact you or attempt to collect the debt in any way. A discharge of your debt is also permanent and final for all unsecured debt you include in your bankruptcy filing.
The timing of your discharge will vary according to the type of bankruptcy you filed. A Chapter 7 bankruptcy discharge order can take as little as four months while a Chapter 13 bankruptcy discharge can take three to five years.
If you are represented by a lawyer in your bankruptcy filing, you and your lawyer will each receive a copy of your debt discharge order. Your lawyer will help you understand what happens if you declare bankruptcy and which debts were discharged by your bankruptcy filing as well as those you might still be obligated to pay.
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