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.
Exceptions To Discharge From Personal Bankruptcy In Nine Months
The length of your bankruptcy will be nine months, unless one or more of the following is true:
- You fail to perform all your bankruptcy duties, such as regular payments of surplus income to the trustee.
- You have surplus income .
- You have been bankrupt before.
- There is an objection filed to your discharge.
How much longer your bankruptcy period will be depends on the details of your case. Twenty-one month is typical when the bankrupt individual makes a good salary .
How To Get Proof You’ve Been Discharged
Your discharge from bankruptcy will happen automatically, so you won’t necessarily get proof sent to you.
Email the Insolvency Service to get a free confirmation letter. You should only ask for this after the discharge date.
If you ask for a confirmation letter, you must include your:
- full name
- National Insurance number
- court reference number
If youre applying for a mortgage, youll need a Certificate of Discharge. If you originally applied for bankruptcy through a court then youll need to ask them for a certificate. This costs £70 and £10 for extra copies.
If you originally applied for bankruptcy online, email the Insolvency Service for a certificate. Theres no fee for a Certificate of Discharge if you applied online.
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Asset Chapter 7 Cases Take Longer
If the case involves assets the trustee needs to sell, the case could go on for months or years after the discharge. The amount of time will depend on whether the Chapter 7 trustee needs to file lawsuits against creditors or others or sell assets like real estate, vehicles, or businesses.
Once the trustee has a pool of funds, the court will ask the for what the debtor owes. The trustee will file objections with the court to any claim that is deficient or improper, and the court will hold hearings on them. The trustee mails checks to those creditors with allowed claims and will file a report after distributing funds. Only then will the court close the case.
How Can The Debtor Obtain Another Copy Of The Discharge Order
If the debtor loses or misplaces the discharge order, another copy can be obtained by contacting the clerk of the bankruptcy court that entered the order. The clerk will charge a fee for searching the court records and there will be additional fees for making and certifying copies. If the case has been closed and archived there will also be a retrieval fee, and obtaining the copy will take longer.
The discharge order may be available electronically. The PACER system provides the public with electronic access to selected case information through a personal computer located in many clerk’s offices. The debtor can also access PACER. Users must set up an account to acquire access to PACER, and must pay a per-page fee to download and copy documents filed electronically.
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What Happens In Every Bankruptcy Case
When you file a bankruptcy case, you’ll have to complete certain requirements before you can qualify to have your debts discharged . At a minimum, you’re required to:
- fill out bankruptcy paperwork with details about your financial situation, including your assets, debts, income, and expenses
- pay a filing fee
- provide 521 financial documentation to the bankruptcy trustee
- complete .
You’ll have to wait 60 days after your meeting of creditors before the court will issue your discharge order. If all of your property is exemptmeaning that you’re allowed to keep itthe court won’t have to take any further action in your case and will most likely close it.
When Is A Discharge Challenged
A bankrupt’s discharge may be opposed by creditors, the LIT or the BIA if the bankrupt has failed to meet his/her obligations or has committed an act of misconduct under the Bankruptcy and Insolvency Act of the BIA). The Court will then review the opposition and render a decision.
There are four types of discharge:
- Absolute dischargeThe bankrupt is released from the legal obligation to repay debts that existed on the day the bankruptcy was filed, with the exception of certain types of debt.
- Conditional dischargeThe bankrupt must meet certain conditions to obtain an absolute discharge. Generally, the bankrupt will be required to pay a certain amount of money over a specific period. However, the Court may also impose other conditions. Once all conditions have been met, an absolute discharge will be granted.
- Suspended dischargeAn absolute discharge that will take effect at a later date.
- Refused dischargeThe Court has the right to refuse a discharge.
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Can The Discharge Be Revoked
The court may revoke a discharge under certain circumstances. For example, a trustee, creditor, or the U.S. trustee may request that the court revoke the debtor’s discharge in a chapter 7 case based on allegations that the debtor: obtained the discharge fraudulently failed to disclose the fact that he or she acquired or became entitled to acquire property that would constitute property of the bankruptcy estate committed one of several acts of impropriety described in section 727 of the Bankruptcy Code or failed to explain any misstatements discovered in an audit of the case or fails to provide documents or information requested in an audit of the case. Typically, a request to revoke the debtor’s discharge must be filed within one year of the discharge or, in some cases, before the date that the case is closed. The court will decide whether such allegations are true and, if so, whether to revoke the discharge.
In chapter 11, 12, and 13 cases, if confirmation of a plan or the discharge is obtained through fraud, the court can revoke the order of confirmation or discharge.
Resumption Of Collection Activities
The automatic stay is a provision of bankruptcy that goes into effect at the time you file your petition. The automatic stay is like a temporary discharge, in that it prevents creditors from trying to collect money from you for your outstanding debts. If you do not get a discharge in your bankruptcy case, the effects of the automatic stay are no longer in force. As a result, your creditors can resume their collection activities, as you still legally owe your debts.
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Things To Consider Surrendering Of Secured Assets
When you claim bankruptcy, you must surrender your assets, such as your home or your vehicle. This might not make sense if youve built up a fair amount of equity. For example, if you have $200,000 of net worth in your home, it doesnt make sense to give it up. Instead of filing for bankruptcy, youre likely better off with a consumer proposal, which allows you to hold on to your assets.
An exception to this would be if you did not have sufficient equity in your home or your car. There is an allowable amount of equity by which you can maintain these assets, but it varies slightly in each province. For example, if you are the sole owner of a home in Manitoba, you are only permitted to hold onto $2500 of equity in the property. If you own a car in Alberta, the maximum value, or equity, is $5000.
Order Of Conditional Discharge
The court may rule that, as a bankrupt, you need to satisfy one or more conditions before you can be released from your debts. The condition might be to make certain additional payments over a specified time frame, or complete some duties you did not finish.
While absolute and conditional discharges have their differences, they aim to achieve the same result. The goal is to relieve the individual of bankruptcy and help them begin a new debt-free start.
While an absolute discharge produces that outcome immediately, a conditional discharge postpones that result until specific terms are met.
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Dividend Payments To Creditors
Money paid to creditors is usually called a dividend and is expressed as the number of pence in the pound paid in respect of each creditor’s claim. If a creditor has not submitted a claim form and proof of the debt they will not be included in this process.
When the trustee has collected enough money to pay a dividend, they will write to all creditors telling them how much to expect. The trustee should make every effort to ensure that the dividend is paid, there is no statutory requirement for the trustee to obtain a Form of Receipt from a creditor prior to payment of a dividend. In cases where the trustee is unable to pay the dividend to the creditors, he will lodge the funds with the Accountant in Bankruptcy in a special bank account called a consignation account. If you wish to claim any money in the consignation account, you must write to the Accountant in Bankruptcy. A charge is made for dealing with consigned money.
Planning For A Better Financial Future
Set up a savings plan. In other words, pay yourself first. Even if it is only a few dollars per pay period, try to put aside a little for emergencies as soon as you are able. For many people who have been out of work or are otherwise financially devastated, it can be hard to imagine being able to save again. Still, a small amount can add up over the long run.
Ideally, you should eventually save six months of living expenses. However, having even a modest amount set aside in savings can help when the unexpected comes up. Start small and aim for a month’s salary in savings, then work up from there. Arranging for this money to be transferred directly from your paycheck to your savings account, so you never see it, will make it easier to save.
Quick Note: Never rely on credit as an emergency fund: If you have a savings plan, you can avoid one of the most destructive financial habits: using credit as an emergency fund. It is better to take a little money out of savings to replace the flat tire or the washing machine that died suddenly than taking on new debt.
Contribute to a retirement plan. If you already have a 401k or other retirement plan, try to contribute as much to it as possible. At the very least, kick in as much as your employer matches. Of course, if you can max out your contributions, so much the better. However, as with general savings, even small contributions add up over time.
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Can Bankruptcy Discharge Be Denied
A court can deny a discharge in Chapter 7 for a number of reasons, including, among others, the debtor’s failure to provide tax documents that have been requested, destruction or concealment of books or records, violation of a court order, or an earlier discharge in an earlier case that began within eight years before the date the second petition was filed, and failure to complete a course on personal financial management. In addition, a creditor, trustee in the case, or U.S. trustee may file an objection to the debtor’s discharge.
A discharge may also be denied in Chapter 13 if the debtor doesn’t complete a course on personal financial management or if they’ve gotten a prior discharge in another Chapter 13 case within two years before the filing of the second case, with a few exceptions. A court may even revoke a discharge under certain circumstances, such as allegations that the debtor obtained the discharge fraudulently or fails to provide documents or information requested in an audit of the case.
Choose The Right Bankruptcy Filing For You
We are proud to represent our clients in four primary areas of bankruptcy relief. Called Chapters, each of these forms of bankruptcy has its own advantages and disadvantages. The four Chapters used for filing for bankruptcy, where we help clients find debt relief, include:
- Chapter 7: Straight bankruptcy, where debts are fully forgiven
- Chapter 11: Complex business bankruptcies with debt reorganizations and restructures
- Chapter 12: Debt relief and repayment plans for family farmers and family fishermen
- Chapter 13: Debt relief for income earners that can help stop foreclosures and other looming debt recovery efforts
When you decide to declare bankruptcy, your lawyer will help you choose the right Bankruptcy Chapter for your financial situation. Filing for bankruptcy is a complex, time-consuming procedure. Your lawyer can help you understand and navigate the filing process from your initial petition to final discharge.
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What Does Bankruptcy Discharge Mean
If youve had serious financial hardship in the past that prevented you from being able to repay your debts, you may have filed for personal bankruptcy. As a last resort to eliminate your debts, bankruptcy can get your creditors off your back and end the collection calls. It can also give you a clean slate and help you work toward building a better and healthier financial foundation.
Need some tips on how to manage your money successfully? Look here.
But its important to understand that you wont be considered bankrupt forever. At some point, youll be discharged from bankruptcy, at which point youll be eliminated of your responsibility to repay your debt. Failure to get discharged can present a real problem for you, which is why its important to go through the process in its entirety.
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Order Of Suspended Bankruptcy Discharge
A suspended discharge is essentially an absolute discharge that wont be effective until a specific date. A court might demand a delay in the bankruptcy outcome due to a breach of your duties or an ongoing criminal investigation. You also might face a suspended bankruptcy discharge if youve had a prior bankruptcy. In other words, sometimes, based on the situation, the court may feel you need to be bankrupt longer than the statute specifies.
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How Discharge Affects Your Home
The official receiver has 3 years to take action in relation to your home, this means it wont be affected by your discharge. Your share in your home will become yours again if they haven’t done any of the following within 3 years from the date your bankruptcy order was made:
- sold your share to someone – like your partner, friend or family member
- applied to the court for an order that you and anyone else living in your home have to leave
- applied to the court for a charging order
- come to an agreement youll pay them the value of your share
When Does The Discharge Occur
The timing of the discharge varies, depending on the chapter under which the case is filed. In a chapter 7 case, for example, the court usually grants the discharge promptly on expiration of the time fixed for filing a complaint objecting to discharge and the time fixed for filing a motion to dismiss the case for substantial abuse . Typically, this occurs about four months after the date the debtor files the petition with the clerk of the bankruptcy court. In individual chapter 11 cases, and in cases under chapter 12 and 13 , the court generally grants the discharge as soon as practicable after the debtor completes all payments under the plan. Since a chapter 12 or chapter 13 plan may provide for payments to be made over three to five years, the discharge typically occurs about four years after the date of filing. The court may deny an individual debtor’s discharge in a chapter 7 or 13 case if the debtor fails to complete “an instructional course concerning financial management.” The Bankruptcy Code provides limited exceptions to the “financial management” requirement if the U.S. trustee or bankruptcy administrator determines there are inadequate educational programs available, or if the debtor is disabled or incapacitated or on active military duty in a combat zone.
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What Happens To My Home After Chapter 7 Discharge
In Chapter 7 bankruptcy, most or all of your debts are discharged. In exchange, the trustee is entitled to sell your nonexempt property and use the proceeds to pay your unsecured creditor. That means that if your home has a significant amount of nonexempt equity, the trustee will sell it.
Herein, what happens to my house after Chapter 7?
Chapter 7 Wipes Out Mortgage DebtSpecifically, you won’t be responsible for any portion of the home loan when you surrender the house. A Chapter 7 bankruptcy discharge will wipe out an obligation to pay back a mortgage deficiency. As a result, after bankruptcy, you’ll be free of any mortgage-related liability.
Beside above, can I sell my home after Chapter 7 discharge? You can sell your house after your bankruptcy discharge. However, you must re-invest the proceeds in another home within six months. Otherwise, the trustee can sell your house and pay your creditors. Consult an attorney as to the specific facts of your case.
Hereof, do I still own my home after Chapter 7?
Most Chapter 7 bankruptcy filers can keep a home if they’re current on their mortgage payments and they don’t have much equity. However, it’s likely that a debtor will lose the home in a Chapter 7 bankruptcy if there’s significant equity that the trustee can use to pay creditors.
How long can you stay in your home after filing Chapter 7?