You Will Have A Trustee That Will Manage Your Bankruptcy
Before you apply for bankruptcy, you can choose a registered trustee to administer your bankrupt estate. If you do not choose a registered trustee AFSA may seek the consent of a registered trustee to manage your bankruptcy. If a registered trustee does not provide their consent to act then your estate will initially be administered by the Official Trustee .
Can I Be Made Bankrupt
The minimum level of debt for which someone who you owe money can force you into bankruptcy is £5,000.
The process of being made bankrupt is different.
But high street lenders rarely use this option and will prefer to work with you to find another way to pay off your debts.
You can find out more about what happens if someone tires to make you bankrupt on the GOV.UK website
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What Do You Have To Do During Your Bankruptcy
As your bankruptcy proceeds, you have a list of obligations as a bankrupt known as bankruptcy duties.
Out of these tasks, the most common include:
- Sending your trustee proof of your income every month
- Paying your trustee if you have surplus income
- Completing two credit counselling sessions
- Going to a creditor meeting or attending bankruptcy court
If you do not fulfill your duties as described, then there are serious consequences. Your trustee has the option to oppose your bankruptcy discharge and apply for a hearing in court. Failing to complete your duties means your debts will not be eliminated.
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Is There Any Way To Avoid The Or Taking My Inheritance
Normally if you inherit money or assets and you would rather it went to someone else, you can use a Deed of Variation to arrange this. But you cant use this to avoid the OR getting the money. You can only sign the Deed of Variation if you are due to get the money, but your bankruptcy means that effectively the money isnt yours so you cant pass it on to anyone else.
If you want to ensure the OR wont get the money, the only way is to suggest to the person leaving the money that they change their will to leave it to someone else, for example to your children, or a sibling. More complicated possibilities involving trusts could be set up, but these can be expensive. If there is a lot of money involved, the person should to talk to a solicitor who has experience in these matters.
What Sorts Of Debts Can Be Included In Bankruptcy
Most debts are included in bankruptcy. These include unsecured debts, such as utility bills, outstanding rent, medical and legal bills, credit cards, store charge cards, personal lines of credit, unsecured personal loans and payday loans.
Some debts are not included: outstanding child support payments, government education debts and debts incurred by fraud or your wrongdoing. In addition, there is a grey area relating to outstanding debts with Centrelink, the Australian Tax Office and some tolls or fines.
In the case of secured loans such as loans for real estate property, vehicles or hire purchases the lender has a right to repossess the asset to recover monies owed to them. If there is a shortfall between the value of the monies recovered and the outstanding loan balance, the shortfall may be included in the bankruptcy.
When it comes to joint debts, a person petitioning for bankruptcy may include their share, in which case the joint lender will become solely responsible for the debt. Likewise, guarantors assume responsibility for any debts included in a bankruptcy.
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What Are The Pros And Cons Of Filing Chapter 7 Bankruptcy
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In a Nutshell
Filing for bankruptcy offers a powerful way to eliminate debt and get a fresh start. But, as with everything there are downsides to filing bankruptcy, too. Use this article to explore the advantages and drawbacks of Chapter 7 bankruptcy.
Written byAttorney Andrea Wimmer.
Chapter 7 bankruptcy is one of the most powerful debt relief options available in the United States. It has helped many people get out of poverty and get a clean financial slate. It gives you a fresh start by erasing your debts. But filing bankruptcy is a personal decision and itâs important to fully consider whether itâs the right option for you. This article explores the pros and cons of filing Chapter 7 bankruptcy.
Navigating Your Bankruptcy Case
Bankruptcy is an unusual area of law because it’s essentially a qualification process. The laws provide instructions for completing a 50- to 60-page bankruptcy petition, and because all rules apply in every case, you can’t skip a step.
One way to keep track of your research is to use the bankruptcy forms as an outline. You’ll find links to the exemption-related bankruptcy forms and other exemption resources in the chart below. You can also look at the list of Chapter 7 and 13 bankruptcy forms to see where this topic fits in the bankruptcy scheme. And this handy bankruptcy document checklist will help you gather the things you’ll need to complete the petition.
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Bankruptcy Exemption Information |
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When Should I Declare Bankruptcy
When asking yourself Should I file for bankruptcy? think hard about whether you could realistically pay off your debts in less than five years. If the answer is no, it might be time to declare bankruptcy.
The thinking behind this is that the bankruptcy code was set up to give people a second chance, not to punish them forever. If some combination of bad luck and bad choices has devastated you financially, and you dont see that changing in the next five years, bankruptcy is your way out.
Even if you dont qualify for bankruptcy, there is still hope for debt relief. Possible alternatives include a debt management program, a debt consolidation loan or debt settlement. Each one of those choices typically require 3-5 years to reach a resolution, and none of them guarantees all your debts will be settled when you finish.
The decision shouldnt come down to how long Chapter 7 bankruptcy takes the process itself is only 4-6 months. The thing you have to remember is that bankruptcy carries significant long-term penalties. It is stuck on your credit report for 7-10 years, which can make getting loans in the future very difficult.
The flip side of that is there is a great mental and emotional lift when all your debts are eliminated, and youre given a fresh start.
How Long Does Bankruptcy Last
Bankruptcy lasts approximately 9 months, provided that it is your first bankruptcy and you complete all of the duties assigned to you. Your bankruptcy may last up to 21 months if you have to pay surplus income, which is calculated according to standards established by the Office of the Superintendent of Bankruptcy Canada and coordinated by your trustee after examining your income, expenses, and dependents in your household.
If it is your second bankruptcy, you will be bankrupt for 24 or 36 months. If you have been bankrupt more than once previously, have not complied with your duties, or have committed one or more bankruptcy offences, your bankruptcy timeline will be determined by the court.
After you have received an Absolute Discharge from your bankruptcy, you will no longer be responsible for any of the discharged debts. However, the fact that you filed a bankruptcy will appear on your credit rating for 6 to 7 years, depending on the province you live in.
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Discuss Your Bankruptcy Alternatives To Keeping Your Home
Worrying about your home and your family is natural. For most people its not the mortgage thats the problem its the credit cards, lines of credit, payday loans and other bills.
At Hoyes Michalos, we can help. In many cases you can file bankruptcy and keep your home and keep your car if you claim bankruptcy.
For over half of the people we meet with a bankruptcy is NOT necessary a consumer proposal is a better solution and even if you do file bankruptcy, we still offer alternatives.
The longer you wait, the greater the risk that you fall behind on your mortgage payments, and that will put your hard-earned assets at risk.
There are other factors to consider before deciding if a proposal is the correct option, so if you or someone you know is in a similar situation, we recommend you discuss your individual situation with a bankruptcy trustee. With offices across Ontario, we can help you review your options.
Am I Allowed To Have A Bank Account If I Declare Bankruptcy In Canada
If you have more than $999 in your account and want overdraft protection, you must notify your bank that you are bankrupt. In order to prevent creditors from taking money from you, it is recommended that you open a bank account at an institution where you do not owe money. Only use your new bank account and do not use any accounts that were active prior to your bankruptcy.
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When Your Bankruptcy Will End
You will be freed from bankruptcy after 12 months. This ends the bankruptcy restrictions and releases you from most of the debts you had when the bankruptcy order was made.
Youll normally be discharged automatically, even if:
- no payments have been made to your creditors
- youre still paying an IPA or IPO
- some assets havent been sold yet
Assets you had during bankruptcy can still be used to pay your debts once your bankruptcy has ended.
Your bankruptcy can be extended for longer than 12 months if you do not co-operate with your trustee. Check your discharge date using the Individual Insolvency Register on our website. If your discharge status is suspended indefinitely you need to contact the official receiver for an update.
What Documents Do You Need To File For Bankruptcy
Theres a heck of a lot of paperwork and forms and documents involved in bankruptcy, but lets talk about what you need to gather up at the start:
- Tax returns for the past two years or four years
- Income documents
- Mortgage information
- Vehicle information
- Retirement information
- Identification
- Other documentation showing any other debts or expenses, like alimony or child support
Yes, thats a lot. Bankruptcy is not an easy out! Also, your particular state or court system may require more. Get ready to do a lot of hunting and have a lot of patience here.
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Being Discharged From Bankruptcy
When a debtor receives a discharge order, they are no longer legally required to pay the debts specified in the order. Whats more, any creditor listed on the discharge order cannot legally undertake any type of collection activity against the debtor once the discharge order is in force.
However, not all debts qualify to be discharged. Some of these include tax claims, anything that was not listed by the debtor, child support or alimony payments, personal injury debts, and debts to the government. In addition, any secured creditor can still enforce a lien against property owned by the debtor, provided that the lien is still valid.
Debtors do not necessarily have the right to a discharge. When a petition for bankruptcy has been filed in court, creditors receive a notice and can object if they choose to do so. If they do, they will need to file a complaint in the court before the deadline. This leads to the filing of an adversary proceeding to recover money owed or enforce a lien.
The discharge from Chapter 7 is usually granted about four months after the debtor files to petition for bankruptcy. For any other type of bankruptcy, the discharge can occur when it becomes practical.
Suspended Income Tax Payments
HMRC will apply a nil tax code when youre bankrupt. This tells your employer not to take any further income tax from your wages for the rest of the tax year . The extra money in your pay that results from this can be claimed by the trustee to form part or all of an IPA or IPO. If the IPA or IPO is wholly paid out of this extra income, it will stop when you start paying tax again.
The NT will not tell your employer youre bankrupt as an NT can be applied for a number of reasons.
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Laws Governing Bankruptcy In Canada
Federal bankruptcy laws are set out in the Bankruptcy & Insolvency Act.
The BIA defines three types of insolvency proceedings available to individuals seeking a resolution to their debts:
- personal bankruptcy,
- consumer proposal,
- and a Division I proposal.
Bankruptcy can only be filed with a Licensed Insolvency Trustee. The role of the bankruptcy trustee is to ensure that the rules and laws around the bankruptcy process are applied fairly to both the debtor and creditors.
Bankruptcy legislation is what provides immediate protection from creditor actions, known as an automatic stay of proceedings. It is the stay that ensures collection agencies and creditors stop calling and allows your trustee to stop a wage garnishment.
Provincial laws also impact your bankruptcy, including legislation that defines what assets are exempt from seizure when you declare bankruptcy.
Consumer Proposals Vs Bankruptcy And Cra Debt
A consumer proposal is a popular alternative to bankruptcy because it provides debt relief from unsecured creditors, including debt forgiveness from CRA. When you file a consumer proposal with a licensed insolvency trustee you are not required to sell any of your assets to repay your debts or pay any surplus income.
To start the consumer proposal process, you will first need to schedule a consultation with a licensed insolvency trustee where you will review your finances. After reviewing your income, expenses, and total debts, the two of you will find a fair amount that you can pay each month to all of your creditors. These payments can last up to five years after which, you will be discharged from all debts covered by the proposal, including CRA debts.
Tax debt in Canada can be included in a consumer proposal and the CRA will often accept less than your full amount owing, though how much they will settle for will depend on the situation. In order to get the CRA to accept your proposal, you will have to file any and all outstanding tax returns. If you want CRA debt relief and 50% or more of your total unsecured debts are owed to the agency, you will have to get them to accept the proposal.
If a consumer proposal is not a viable option for you, then filing for bankruptcy may be your next solution. With this, your trustee would be required to file a pre-bankruptcy tax return and a post-bankruptcy tax return.
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Case Study: Back On Track After Bankruptcy
This is based on a true story.
She spent years juggling bills and loans and credit cards, as well as dealing with angry creditors and tense family relationships. With MyBudgets help, Maryanne looked at her situation from every possible angle, got expert advice on what is involved in declaring bankruptcy, and decided that bankruptcy was the right option for her.
MyBudget administered Maryannes bankruptcy petition and helped to put a budget in place that made sure Maryanne could live comfortably on her wage and pay her parents back over time. Maryanne said that it provided nearly instant relief having a caring support team to handle her creditors and pay her bills for her. By the time Maryannes bankruptcy was discharged, her debt to her parents was paid off, she had savings in the bank and was excited about her future.
If youve ever thought How does the bankruptcy process work? we hope this answered some of your questions
After reading all of this you might be wondering why youd declare bankruptcy at all? Now you know what is involved in declaring bankruptcy and the consequences of bankruptcy in Australia, you might be more keen to avoid ending up in a situation where you have no option but to declare bankruptcy. If youre concerned about your financial situation, or want to avoid bankruptcy, were happy to help.
Ready to find out more? Call 1300 300 922 to book your free budget consultation or enquire online.
What Happens When You File For Bankruptcy
Once bankruptcy is filed, there is an immediate stay of proceedings. This means unsecured creditors can no longer contact you, and cannot begin or continue lawsuits or wage garnishees.
Your Trustee will file your outstanding tax returns up to the date of bankruptcy. Any money you owe Canada Revenue Agency will be included in the bankruptcy, so you will no longer owe this money after you complete the bankruptcy. Any tax refunds or GST credits that arrive while you are bankrupt will go to the Trustee for your creditors.
During your bankruptcy, you must fulfill certain duties, such as:
- Attend a meeting of your creditors, if such a meeting is requested .
- Send the Trustee proof of your income each month.
- Make monthly payments to the Trustee, if you have surplus income .
- Attend two credit counselling sessions to learn budgetting and money management skills.
If you have never before been bankrupt, and if you have no surplus income, you will be eligible for discharge from bankruptcy in nine months. Otherwise, the bankruptcy will be longer. It is your discharge from bankruptcy that officially cancels your debts .
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