May The Debtor Pay A Discharged Debt After The Bankruptcy Case Has Been Concluded
A debtor who has received a discharge may voluntarily repay any discharged debt. A debtor may repay a discharged debt even though it can no longer be legally enforced. Sometimes a debtor agrees to repay a debt because it is owed to a family member or because it represents an obligation to an individual for whom the debtor’s reputation is important, such as a family doctor.
What Not To Do
The biggest mistake people make in bankruptcy filings is trying to game the system. All your assets may be seized in a bankruptcy and failing to disclose all of them can result in criminal charges
Just ask tennis player Boris Becker, currently looking at jail time in the U.K. for hiding assets. Do not transfer property to family or friends before you file. It will be clawed back.
Honest debtors get a fresh start, while dishonest ones can potentially go to jail.David Leibowitzhead of Lakelaw
Also don’t max out your credit resources before you file. The court will not look kindly upon it. Never use funds from retirement accounts to pay off debt.
“Truth and transparency are critical to the bankruptcy process,” said Leibowitz. “Honest debtors get a fresh start, while dishonest ones can potentially go to jail.”
What Happens To Your Bank Account
When the bankruptcy order is made, you must:
- make sure you do not use your bank account
- give your cards and cheque books to the trustee
Your bank account will be frozen. Any money in your account will be an asset and claimed by the trustee. The trustee can ask to release some money:
- for your daily living needs
- to the other person in a joint account
The bank is allowed to use money from one of your accounts to pay your debts on another account you hold with them. This is called set off.
Otherwise, money owed to the bank is a bankruptcy debt, so you cannot pay this to the bank directly. The exception is if the bank has a charge on your home .
Open a new account
You can open a new bank account after the date of the bankruptcy order but you must tell the bank or building society that youre bankrupt. Some banks will let you use your old account after theyve spoken to the trustee.
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Discover It Secured Credit Card
The Discover it® Secured Credit Card is designed for people looking to rebuild credit, making it a good choice for anyone recovering from bankruptcy. As it is a secured card, it requires a deposit of at least $200, which becomes the credit line. Deposits are refundable if you pay off your balance in full and close the credit card account .
Other perks include:
- 2% cash back at gas stations and restaurants on up to $1,000 in combined purchases each quarter. Plus, earn unlimited 1% cash back on all other purchases
- Ability to apply for pre-approval
Your Public Records On Annulment
Youll need to check the details of the bankruptcy are removed from your credit record. If an IVA has been agreed, this will be put on your file.
You will need to apply to both Land Charges and Land Registry to have your bankruptcy entry removed from any properties you still own after paying your debts. If you do not do this, the entries will remain for 5 years.
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Maintain A Job And A Home
It is vitally important that you getand keepa job as soon as possible, if you dont have one already. Finding a good place to live ranks a close second, if this is an issue. Stable residential and employment histories are necessary because they show creditors that you are reliable.
A growing number of landlords are checking credit references as a means of screening out possible unreliable tenants. If you are not able to rent an apartment, you may have to room with a friend or relative until your credit improves.
Employers may also request credit scores and histories of their potential applicants as a measure of personal responsibility. A spell of bad luck can fuel a vicious cycle that may prevent you from getting a job that pays enough for you to pay off your debts. Do what you can to push forward anyway and find a job that can be the foundation of putting the bankruptcy behind you.
How Long Does Bankruptcy Stay On Credit Report
Your payment history is one of the most important elements the major credit bureaus use to determine your credit score. Therefore, filing bankruptcy can have a huge impact on your credit report. The good news is that a bankruptcy filing does not stay on your record forever. The amount of time it takes to get it removed from your credit report depends on which of the two types of bankruptcy you file.
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Does The Debtor Have The Right To A Discharge Or Can Creditors Object To The Discharge
In chapter 7 cases, the debtor does not have an absolute right to a discharge. An objection to the debtor’s discharge may be filed by a creditor, by the trustee in the case, or by the U.S. trustee. Creditors receive a notice shortly after the case is filed that sets forth much important information, including the deadline for objecting to the discharge. To object to the debtor’s discharge, a creditor must file a complaint in the bankruptcy court before the deadline set out in the notice. Filing a complaint starts a lawsuit referred to in bankruptcy as an “adversary proceeding.”
The court may deny a chapter 7 discharge for any of the reasons described in section 727 of the Bankruptcy Code, including failure to provide requested tax documents failure to complete a course on personal financial management transfer or concealment of property with intent to hinder, delay, or defraud creditors destruction or concealment of books or records perjury and other fraudulent acts failure to account for the loss of assets violation of a court order or an earlier discharge in an earlier case commenced within certain time frames before the date the petition was filed. If the issue of the debtor’s right to a discharge goes to trial, the objecting party has the burden of proving all the facts essential to the objection.
Your Interview With The Official Receiver
If your bankruptcy is approved, youll have an interview with the official receiver. If youve presented your own bankruptcy petition, this might happen directly after the bankruptcy order is made. Alternatively, your letter from the official receiver may invite you to an interview either in person or by telephone. If offered a telephone interview you can ask to be interviewed in person, if you prefer.
If youve been made bankrupt by one of your creditors the official receiver may also contact you by telephone to find out if there is anything that needs to be sorted out urgently.
You must attend the interview and cooperate with the official receiver. If you do not, your bankruptcy could be extended beyond the normal 12 months and you could face an examination in court. The more organised you are, the more straightforward the process will be.
Before the interview, telephone the official receiver to confirm or rearrange the appointment let them know if:
- you require special facilities
- there is anything that needs to be sorted out urgently
- you need more time to gather the paperwork for the meeting
If you have been sent a questionnaire, fill it in, and note down anything you do not understand. If youre having a telephone interview, return it by the date given.
Collect together all the paperwork youve been asked to take to the interview or have with you during the telephone call.
Face-to-face interviews may take 2 to 3 hours.
After you arrive:
The examiner will:
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Chapter 7 Followed By A Chapter 13 Bankruptcy: 4 Years
Because a Chapter 13 typically involves paying most if not all what you owe creditors, you can file a Chapter 13 after a Chapter 7 sooner than trying to do consecutive Chapter 7 cases. If you receive a Chapter 7 discharge, you are eligible to attempt a Chapter 13 bankruptcy filing if at least four years has passed from the previous Chapter 7 case.
How To Plan For Bankruptcy
The novel coronavirus and COVID-19 pandemic has caused a serious economic downturnand one that may well turn out to be significantly worse than the Great Recession of 2007-2009 that hit with the bursting of the housing bubble and the subsequent collapse of many financial institutions. Given the spike in bankruptcy filings that occurred as result of the last major recession, the current pandemic-induced recession will undoubtedly result in a tsunami of bankruptcy filings. If youre watching your financial situation deteriorate and think filing for bankruptcy may be necessary, this article provides guidance on how to plan for bankruptcy.
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Capital One Platinum Secured Credit Card
Capital Ones Platinum Secured card is promoted with a rebuilding credit level meaning anyone who has defaulted on more than one loan may qualify.
The Platinum Secured card requires a deposit to establish a credit line as with most secured cards. But only a small deposit of $49, $99 or $200 is needed to earn an initial credit line of $200 depending on the terms of your offer.
Other perks include:
- No foreign transaction, replacement card or authorized user fees
- Ability to check for pre-approval without a hard credit pull
Overview: What Is Bankruptcy
Bankruptcy is a legal process for individuals or companies that are unable to pay their outstanding debts. You can go bankrupt in one of two main ways. The more common route is to voluntarily file for bankruptcy. The second way is for creditors to ask the court to order a bankruptcy.
If you decide to file for bankruptcy yourself, there are several ways to do so. You may want to consult a lawyer before proceeding so you can figure out the best fit for your circumstances.
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What Happens To Your Motor Vehicle
Your motor vehicle will be sold to pay for your bankruptcy debts, unless you need it:
- for your work or vocation
- to meet basic domestic needs where alternative transport is not practical
If the official receiver agrees you need the vehicle, it will be classed as exempt and not included in your bankruptcy. This does not apply if you own your vehicle through an ongoing hire purchase agreement .
If you are allowed to keep the vehicle you remain responsible for road tax, MOT and insurance.
If your vehicle is exempt but valuable it can be replaced with a cheaper alternative. The official receiver will use the money from the sale to either pay for the new vehicle directly or give you the money to buy one. You must provide proof of purchase for your new vehicle within 1 month. The guide price for a replacement is £1,250.
Stop the sale of your vehicle
If your vehicle is not exempt you may be able to keep it if a third party can pay to transfer it to them for you and you provide a:
- current insurance certificate
- vehicle registration document
The price paid will be the market value of the vehicle but must at least cover the agents costs for the sale of the vehicle.
If you do not want to keep the vehicle the official receiver will dispose of it.
Vehicles under finance agreements
A finance agreement can be a:
- conditional sale
- leasing agreement
If the trustee decides they will not be claiming the vehicle, they will give notice to you and the finance company.
Motability vehicles
Your Debts Are Business Related Not Personal
Note that if your business is a sole proprietorship, then theres no difference between business debt and personal debttheyre considered one and the same. However, if your business has been properly set up as a corporation or limited liability company and none of the business debt has been personally guaranteed by you, the creditors will have to be satisfied with the assets of the business and cannot go after you personally. This opens up the possibility that bankruptcy is not a good idea in this specific situation. Be sure to go over the details of your business and its debts with your bankruptcy attorney before deciding on a course of action!
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When The Bankruptcy Order Is Made
The early stages of a bankruptcy are normally handled by an official receiver. An official receiver works for the Insolvency Service and is attached to the court. They will also be your trustee unless an insolvency practitioner is appointed to take over that role. The trustee will realise any assets .
The official receiver will write to you within 2 weeks of the bankruptcy order being made, explaining what you need to know and what you must do.
Restrictions On Obtaining Credit During Bankruptcy
Obtaining credit during bankruptcy can be challenging. If you file for a Chapter 7 bankruptcy, you can apply for credit as soon as the debt is discharged. With Chapter 13 bankruptcy, you will need to receive prior approval from the court or Chapter 13 trustee. Additionally, your plan payment must be current at the time of the request.
If you would like to get new credit during your Chapter 7 or 13 bankruptcy case, you should consult an experienced Cleveland bankruptcy attorney at Luftman, Heck & Associates. We will explain your situation to you and help you understand obtaining credit during bankruptcy.
Call us today at for a free consultation.
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How To Reopen A Bankruptcy Case
You can reopen a bankruptcy case by filing an ex parte motion that describes why you want to reopen the case. An ex parte motion is a motion that the judge will review right away without notice to any other parties. You must submit a proposed order with the motion. Once the court enters the order, you must act quickly to take the measures you proposed to take in the motion.
A Bankruptcy Must Be Discharged Before You Can Apply For A New Card
You cannot apply for any new lines of creditincluding a credit cardwhile your bankruptcy proceedings are in progress without court approval. The amount of time it takes to settle and complete your bankruptcy proceedings will determine when you can apply for a credit card.
A Chapter 7 bankruptcy takes approximately four to six months after the initial filing to be completed and your debts discharged. After that, you can apply for a credit card.
A Chapter 13 bankruptcy, however, can take between three to five years as its a restructuring of your debt that you pay off over time. Only after youve made your last payment will your bankruptcy be discharged. Until then, youll have to receive approval from the court.
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What Happens To Your Information
Any previous name included in the bankruptcy petition will appear on the bankruptcy order, and in the:
- notice of your bankruptcy, which is permanently recorded in the Gazette but excluded from search engine results one year and three months after publication
- Individual Insolvency Register which will be removed within three months of your discharge
Bankruptcy Vs Credit Counseling
Bankruptcy should be your last option if you face debt that has gotten out of control. There are other possibilities for dealing with debt. For example, you could talk to your creditors, and they might be able to work out a plan for you to catch up. You could also locate a credit counseling service, an organization that assists people with burdensome debt. Bankruptcy and credit counseling both have their place, so it’s wise to know what each one can do for you.
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The Type Of Bankruptcy Counts
There are two basic types of personal bankruptcies:
- Chapter 7. This is where all of your debts are eliminated and any assets you own that are not exempt will be sold off and used toward paying your debts. This will wipe out what you owe your creditors and anything you own of any value. Chapter 7 allows for a fresh start, as once the bankruptcy is discharged or completed youll no longer have any liability to creditors. Your will be severely damaged.
- Chapter 13. With this type of bankruptcy, your debts are restructured, which means you and the creditors come to an agreement over how much of the debt you will repay within a time frame of three to five years. Any remaining portion of your debt is forgiven. Although this type of bankruptcy is less damaging to your credit, it still carries a strong negative effect.
Where Can I See Insolvency Notices In The Gazette
You can view all corporate and personal insolvency notices on The Gazette website.
The Gazette also provides a data service which gives access to official intelligence on all UK businesses, corporate and personal insolvencies. Benefits of The Gazettes data service include:
- Bespoke reports – tailored around your specific business
- Geo-targeted editions – available for specific geographical targeting
- Custom filters – specific custom attributes
- Data at regular intervals – delivered at a rate to match your business needs
For more information on The Gazettes data service, contact the team on 01603 985949 or email .
About the author
Hasib Howlader is a licensed insolvency practitioner, chartered accountant, chartered tax adviser and current Director of Hudson Weir.
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