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.
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.
What Is An Automatic Stay
After you file for bankruptcy, you have the protection of an immediate, but temporary, automatic stay. The automatic stay can, for example, immediately stop a foreclosure, an eviction, car repossession, or wage garnishment. It can also stop debt collection, harassment, and disconnection of utilities.
The automatic stay may provide a powerful reason for filing for bankruptcy. In most of the situations listed above, the automatic stay can buy you a few days or weeks in which to figure out your next move. If your primary motivation in filing bankruptcy is to gain the benefits of the automatic stay, you donât need to file all of your papers at once. You just need to file the three-page petition, a signature declaration, and a listing of your creditors. In addition, within 180 days prior to filing, you will have to visit an approved credit counseling agency for advice and budget analysis. You will have to file a certification of such counseling when you file your petition. You have 15 days in which to file the rest of your papers. If you donât, your case will be dismissed.
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How Do I Find Out More About What Will Happen To My House In A Bankruptcy
The rules regarding houses and bankruptcy are somewhat complicated, so to find out how they will apply in your specific situation, and for details on what will happen with your house after filing bankruptcy, we recommend that you contact a Licensed Insolvency Trustee.
Your first appointment with a Trustee is free, and you will learn more about your options. For instance, perhaps you can use consumer proposal as an alternative to bankruptcy. Knowledge is power: contact a Trustee today.
What Debts Cannot Be Discharged In Bankruptcy
The following debts cannot be discharged in either a Chapter 7 or a Chapter 13 bankruptcy case. If you file Chapter 7, you will still owe these debts after your case is over. If you file Chapter 13, these debts will either be paid in full during your plan, or the balance will remain at the end of your case.
Nondischargeable debts include:
- Unlisted debts, unless the creditor had knowledge of your bankruptcy filing.
- Recent income tax debt and other tax debt.
- Fines imposed for violating the law.
- Student loans, unless you can show that it will cause a hardship for you to repay them.
- Debts you owe under a divorce decree or settlement.
In a Chapter 7 and 13 case, a creditor may object, and a judge may agree, to theseadditional debts being discharged:
- Debts incurred by embezzlement, fraud, or larceny.
- Certain credit purchases made within 90 days or cash advances made within 70 days of filing.
- Restitution or damages awarded in a civil action for willful or malicious injury to a person.
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Bankruptcy Exemptions In Newfoundland And Labrador
- Food and fuel required by you and your dependants for 12 months
- Clothing for you and your dependants up to $4,000
- Household furnishings and appliances up to $4,000
- One motor vehicle up to $2,000
- No limit on medical and dental aids for you and your dependants
- Items of sentimental value up to $500
- All pets are exempt from bankruptcy
- Up to $10,000 of equity in your home
- Tools of your trade or business up to $10,000
- Certain income and pension plans
How Does Bankruptcy Work In Canada
If you looking to learn how bankruptcies work in Canada, youve found the right page.
Bankruptcy is a legal procedure in which you assign your property to a Licensed Insolvency Trustee as part of a process that relieves your debts. You are allowed to keep certain assets, depending on where you reside. Laws dealing with personal bankruptcy are meant to allow the honest but unfortunate debtor a chance to re-start their financial life.
Learn more about what is exempt from Bankruptcy here: Bankruptcy Exemptions.
Lets continue and cover more information on bankruptcy.
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The Effects Of Bankruptcy On An Existing Mortgage
If you declare bankruptcy, there are established procedures of due process. You dont automatically lose your house. Nor is your loan accelerated to automatically become due if youve been current up to this point on your payments.
The following sections will go over how bankruptcy affects your current mortgage.
What Different Types Of Bankruptcy Should I Consider
There are four types of bankruptcy cases provided under the law:
- Chapter 7 is known as straight bankruptcy or liquidation. It requires a debtor to give up property which exceeds certain limits called exemptions, so the property can be sold to pay creditors.
- Chapter 11, known as reorganization, is used by businesses and a few individual debtors whose debts are very large
- Chapter 12 is reserved for family farmers.
- Chapter 13 is called debt adjustment. It requires a debtor to file a plan to pay debts from current income. A corporation cannot file a Chapter 13.
Most people filing bankruptcy will want to file under either chapter 7 or chapter 13. Either type of case may be filed individually or by a married couple filing jointly.
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What Happens To Your Mortgage When You File Bankruptcy
Home loans, like mortgages, home equity loans, or home equity lines of credit are secured debts. This means the bank has a sort of ownership interest in the real estate. As long as you make your monthly payments, the home is yours to keep. If you donât pay your mortgage, the bank can take the house back by way of a foreclosure. Thatâs true even after you get a bankruptcy discharge.
Because of this, keeping your home means keeping your mortgage. Thereâs no such thing as a free house.
How Do I Know How Much Equity I Have
You can calculate your homes equity by taking the value of your house, and subtracting the amount you owe on your mortgage and the currently owed property taxes from this value.
House value amount owed on mortgage currently owed property tax = Equity
In most personal bankruptcies, the home must be sold so that this equity value can go to your creditors.
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Find Out Whether You Can Keep Your Home In Chapter 7 Or Chapter 13 Bankruptcy
Updated by Cara O’Neill, Attorney
It’s possible to keep a home when you file for bankruptcy, but the circumstances must be right. You’ll need to be sure that you meet the requirements of the chapter you file. For instance, Chapter 7 filers must be current on payments and protect all home equity with a bankruptcy exemption. By contrast, Chapter 13 filers can catch up on missed mortgage payments and keep the home. Read on to learn about:
- protecting home equity in Chapter 7 and 13
- keeping a home in Chapter 7
- catching up on past-due payments in Chapter 13, and
- removing liens and lowering mortgage payments in Chapter 13.
If you’d like step-by-step guidance through the bankruptcy process, read What You Need to Know to File for Bankruptcy in 2021.
Does A Parents Bankruptcy Affect Eligibility For Student
Apr 12, 2021 A green light for financial aid and federal loans A parents bankruptcy has no direct impact on their childs eligibility for federal student;
Dec 18, 2020 Chapter 13 bankruptcy is a reorganization where youre required to repay part of your debt, likely over three to five years. Some of your;
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Can I Own Anything After Bankruptcy
Yes. Many people believe they cannot own anything for a period of time after filing for bankruptcy. This is not true. You can keep your exempt property and anything you obtain after the bankruptcy is filed. However, if you receive an inheritance, a property settlement, or life insurance benefits within 180 days after your bankruptcy, that money or property may have to be paid to your creditors if the property or money is not exempt. You can also keep any property covered by Indiana bankruptcy exemptions through the bankruptcy.
The Automatic Stay Provides Temporary Relief
When you file for bankruptcy the automatic stay prevents your lender from continuing with foreclosure proceedings. However, your lender can ask the court to remove the stay so that it can continue with the foreclosure. The court is likely to do so if you are behind in your payments and will lose your home eventually.
Making Changes To Your Bankruptcy Forms
Your bankruptcy forms are signed under penalty of perjury. When you file, you’re declaring that the information in your bankruptcy forms is true and correct to the best of your knowledge. If you accidently leave something out or make a mistake, you’ll need to make changes to your forms.
This is done by filing an amendment with the court. You might need to file an amendment because you forgot to list an asset or a , you need to add information that was originally missed, you change your mind about signing a reaffirmation agreement, or the trustee requests that forms be amended.
What Happens To The Property I Own That Is Subject To A Lien
In some cases, the Bankruptcy Court can set aside or reduce a lien on your property. Additionally, individuals who want to keep the property secured by a lien can enter into reaffirmation agreements with the secured creditors. Under a reaffirmation agreement, the debtor promises in writing to continue to pay the amount owed to the creditor despite the bankruptcy and in return, the creditor agrees to not seize the secured property so long as the debtor continues to make the necessary payments. All reaffirmation agreements must be filed with the bankruptcy court. If you default on your payments under a reaffirmation agreement, the creditor can hold you liable on any deficiency and repossess the secured property accordingly.
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Protecting Equity With The Homestead Exemption In Chapter 7
You can keep your home in Chapter 7 bankruptcy if you don’t have any equity in your home, or the homestead exemption covers all of your equity.
Figure out the equity amount. You can determine the amount of equity in your home by subtracting all mortgages and liens on your home from the current market value of your home . If you get a negative number, you don’t have any equity, and you won’t lose your home through bankruptcy. A positive number is your equity amount.
Find the homestead exemption. Homestead exemptions protect a certain amount of equity from the reach of the bankruptcy trustee. Most states protect at least some equity in your primary residence. A few states protect your entire home, regardless of how much equity you have. The federal exemptions protect up to $25,150 in your primary residence . Find the most recent federal bankruptcy exemption figures.
Nonexempt Equity In A Chapter 13 Case
As a Chapter 13 debtor, you won’t surrender any property to the Chapter 13 trustee. Instead, you’ll make a monthly payment for three to five years to a trustee who will distribute the money to your creditors.
Your Chapter 13 payment amount will depend on your income, expenses, the amount of your debt, and the value of your nonexempt property, and will have to be enough to cover at least what your unsecured creditors would receive if you filed a Chapter 7 case.
For instance, if you have $60,000 in nonexempt home equity that your unsecured creditors would receive in a Chapter 7 case, you’ll have to pay at least $60,000 to those same creditors over the course of your three- to five-year repayment plan.
Example. Margaret owns a house worth $150,000. Her mortgage balance is $100,000, leaving her with $50,000 of equity. The exemption in her state will protect $25,000. If she files a Chapter 7 case, the cost to sell the house would be $10,000, and the trustee would realize $15,000 to distribute to unsecured creditors. Instead, Margaret files a Chapter 13 case, so that she won’t have to surrender her home. Her monthly plan payments will have to be at least $250 per month so that her unsecured creditors will receive at least $15,000 over five years.
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If You File For Chapter 7 Protection
Your accounts will be forgiven in full and your case will be resolved within 90 days from the time you file. You may begin applying for new credit after that 90 days, but you may not qualify right away. Many creditors wont want to extend credit to someone with a recent bankruptcy on their credit reports. Your bankruptcy will remain on your credit reports for 10 years from the date you filed.
How Much Equity Is In Your Home
If your mortgage payment is up-to-date, your next step will be determining how much equity exists. You’ll start by valuing your home. Then you’ll subtract any outstanding mortgage balance from the home value. The equity would be the amount you’d have in your pocket if you were to sell the house.
If you don’t have any equity, you’re in good shapetrustees don’t sell houses without equity. Otherwise, you’ll need to be able to protect your equity with a bankruptcy exemption to avoid losing the home in Chapter 7 bankruptcy.
Learn more about filing for bankruptcy if you have equity in your home.
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Can I Get A Credit Card After Bankruptcy
Yes, there are several options available. While technically not a credit card you could use a bank or debit card to perform activities for which you normally would use a credit card. You also may be able to keep the credit card you already have if the creditor grants approval. If these options do not work you can get secured credit card which is backed by your own bank account.
Will Bankruptcy Wipe Out All My Debts
A Bankruptcy will not eliminate all debts. For example, these debts will not be discharged in a bankruptcy if:
money owed for child support or alimony, fines, and some taxes; debts not listed on your bankruptcy petition; loans you got by knowingly giving false information to a creditor, who reasonably relied on it in making you the loan; debts resulting from willful and malicious harm; student loans owed to a school or government body, except if: the court decides that payment would be an undue hardship; mortgages and other liens which are not paid in the bankruptcy case .
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Bankruptcy Exemptions On Prince Edward Island
- No limit on clothing for you and your family
- No limit on medical or health aids
- Any motor vehicle needed for transportation to work up to $6,500, or up to $3,000 if not used for work
- Household furniture, utensils, equipment, food and fuel up to $5,000
- Tools used by you in your business or trade, up to $2,000
Will Bankruptcy Affect My Job Or Future Employment
Twenty-nine percent of employers run a credit check on new job applicants, according to a survey by CareerBuilder. As a result, declaring bankruptcy could affect your ability to get a new job, especially if that job is in the financial services industry or with a government entity.
They do this primarily to make sure you’re a good fit for the jobssuch as handling moneyand that you’re not financially stressed, which could increase the likelihood of theft or fraud.
If an employer simply runs a routine criminal background check, however, your bankruptcy won’t show up.
It’s less likely that employers would conduct background checks on current employees. So if you’re not planning to switch jobs, you likely don’t need to worry much about a bankruptcy affecting your employment.
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