What Happens To Your Assets After Discharge
Assets that are part of the bankruptcy stay under the trustees control when your bankruptcy ends. It can take time for all assets to be dealt with.
You must keep making any payments agreed under an IPA or IPO.
Your family home
If your family home has not been dealt with 3 years after the bankruptcy order, the interest may be given back to you.
If the interest in your family home is returned to you, the Land Registry will be told that the property is no longer part of your bankruptcy estate. The trustee will send notice to the Land Registry and the restrictions will be removed.
Your business
The restrictions on your business end when bankruptcy ends, unless the official receiver feels youve been dishonest. They can then apply to extend the restrictions
You May Make Surplus Income Payments
When you file for bankruptcy, you must do the following:
- disclose to the LIT information about all of your assets and liabilities
- advise the LIT of any property that was sold or transferred in the past few years
- surrender all your credit cards to the LIT
- attend the first meeting of creditors
- attend two counselling sessions
- advise the LIT in writing of any address changes
- if required, attend an examination at the Office of the Superintendent of Bankruptcy and
- assist the LIT as needed in administering your estate.
You may be required to make additional payments to your LIT for distribution to your creditors.
In addition to paying the LIT’s fees, you may be required to make additional payments to your LIT for distribution to your creditors. These are called surplus income payments.
Each month during the bankruptcy process, you must submit a copy of your pay stubs and proof of other income to the LIT. The LIT then calculates your surplus income.
Surplus income is the part of your earnings that exceeds the amount of income a family needs to maintain a reasonable standard of living. This amount is set by the OSB annually. The larger your family, the more you are allowed to keep the more you earn, the more you are required to contribute.
In other words, if your household income exceeds the level set by the OSB, then you must make additional payments to your LIT during your bankruptcy.
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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What Happens To Your Debts
Common dischargeable debts include credit card balances, bank loans, and lines of credit. Bankruptcy will eliminate payday loans, and bankruptcy will clear tax debts.
Student loan debt can also be included in a bankruptcy if you have been out of school for seven years.
Bankruptcy will not eliminate support payments and court fines.
Bankruptcy does not affect secured debts like a mortgage or car loan. You will be required to keep making your monthly payments to secured creditors unless you voluntarily give up those assets as part of your bankruptcy.
Your creditors are entitled to file a claim against the money in your bankruptcy estate. Once your trustee approves this claim, they will be entitled to their pro-rata share of any money available in your bankruptcy. Trustee fees are included in your bankruptcy costs and come out of the monies paid to your creditors.
What Is A Trustee And What Is A Trustees Role
A Licensed Insolvency Trustee is the only professional who can administer a bankruptcy in Canada.
Licensed Insolvency Trustees are federally licensed and regulated by the Office of The Superintendent of Bankruptcy. Trustee fees are regulated under the Bankruptcy and Insolvency Act and are moderate, so the cost of bankruptcy is tends to be reasonable.
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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
What Forms Do I Have To Fill Out For Bankruptcy Filing
The forms required for bankruptcy filing vary from case to case. First of all, there is a form that calculates the means test. There are also forms specific to Chapter 7 or Chapter 13 filing. Finally, there are additional forms, called schedules, that record data about creditors, debt, income, assets, expenses, and overall financial affairs. The US Bankruptcy Court District of Maryland provides an online library of forms.
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When Is Bankruptcy A Poor Decision
Bankruptcy is not a solution for all your financial difficulties. If your debt has accumulated because of your overspending habits, then bankruptcy will hardly eradicate the underlying problem. Additionally, there are some demerits to filing bankruptcy which means it may not the best solution for resolving your debt problems. These include:
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What Bankruptcy Can’t Do
Bankruptcy doesn’t cure all debt problems. Here’s what it can’t do for you.
Prevent a secured creditor from foreclosing or repossessing property you can’t afford. A bankruptcy discharge eliminates debts, but it doesn’t eliminate liens. A lien allows the lender to take property, sell it at auction, and apply the proceeds to a loan balance. The lien stays on the property until the debt gets paid. If you have a secured debta debt where the creditor has a lien on your propertybankruptcy can eliminate your obligation to pay the debt. However, it won’t take the lien off the propertythe creditor can still recover the collateral. For example, if you file for Chapter 7, you can wipe out a home mortgage. But the lender’s lien will remain on the home. As long as the mortgage remains unpaid, the lender can exercise its lien rights to foreclose on the house once the automatic stay lifts.
Eliminate child support and alimony obligations. Child support and alimony obligations survive bankruptcy, so you’ll continue to owe these debts in full, just as if you had never filed for bankruptcy. And if you use Chapter 13, you’ll have to pay these debts in full through your plan.
Eliminate most tax debts. Eliminating tax debt in bankruptcy isn’t easy, but it’s sometimes possible for older unpaid tax debts. Learn what’s needed to eliminate tax debts in bankruptcy.
Eliminate other nondischargeable debts. The following debts aren’t dischargeable under either chapter:
Is Filing Bankruptcy Bad Can It Be Good
Youll listen to a great many people effectively say: bankruptcy is bad. Yet why? Why is the general consensus that filing for bankruptcy is a negative thing? While it is true that when you declare bankruptcy or a consumer proposal it is evidence of difficulty with your finances, thats not the whole story.
A large part of the reason that people state bankruptcy is bad is that they do not understand the procedure. No two bankruptcy instances are alike. People are forced into bankruptcy for a whole host of different factors, most of which are outside their control and for that reason, not their fault.
What Happens to a company when it goes to ?
The BIA regulates exactly how companies can liquidate or restructure and recover from crippling debt. An insolvent company may make use of Part III Division I of the BIA to reorganize its business and try to end up being profitable again. Management remains in place to run the daily activities of the company. Any significant change in the business organization should need to be approved by the Trustee, the bankruptcy court, or both.
Under a pure liquidation bankruptcy filing, the company stops operations and goes completely dark. The Trustee is assigned to sell the firms possessions and the money is used to pay for the bankruptcy administration and to make a distribution to creditors. The priority of payouts is governed by the BIA.
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What Does It Mean To Declare Bankruptcy
It gives debtors a second chance at consumer credit, and it gives creditors some repayment of the debt. On successful completion of the bankruptcy process, the debtor is relieved of the debt obligations that were filed.
In most cases, the debtor begins a bankruptcy proceeding with an attorney by filing a petition on behalf of himself. In some cases, the debtor files on behalf of all debtors. In either case, all of the debtors assets are evaluated, and these assets may be used to repay all or a portion of the outstanding debt.
Bankruptcy is a term for the federal court procedure that helps individual consumers and business people, as well as business organizations, get out of debt while paying creditors what they can. Bankruptcies can be categorized into two general types: liquidations and reorganizations.
In the United States, there are several kinds of bankruptcy filings, each classified by a code. Chapter 7 is the code dealing with the liquidation of assets. Chapter 11 covers individual or company reorganizations. Chapter 13 deals with debt repayment with lowered debt agreements or some kind of payment plans. Chapter 12 is similar to Chapter 13 except it applies only to those who have at least 80% of their debts due to a family farm.
Rules for filing bankruptcies and associated fees differ from state to state, depending on complexity.
Heres a look at three of the most common types of bankruptcies
What Happens To My Regular Income If I Declare Bankruptcy In Canada
Your wages are not affected by your bankruptcy, but part of your duties during bankruptcy includes providing your trustee with your household monthly earnings and expenditures. Additionally, if your income changes or you gain or lose a dependent, you must inform your trustee.
You may be required to make monthly payments to your trustee. These are called surplus income payments. Your trustee determines whether you have to make surplus income payments based on your average earnings over the bankruptcy and the number of people in your household.
Watch the video below to learn more about surplus income payments.
Video transcript: Meet Stephanie, the mother of a young son, James, who is just about to enter Primary School. Recently, Stephanie has overextended her credit and, despite her best efforts, is unable to pay her bills. Realizing that she needed to speak to an expert, Stephanie found a Licensed Insolvency Trustee located in her area and has gone to meet with her. After speaking to the trustee, Stephanie has determined bankruptcy was the most appropriate option for her.
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Who Declares Bankruptcy
Most individuals and business who file for bankruptcy have far more debts than money to cover them and dont see that changing anytime soon. In 2020, bankruptcy filers owed $86 billion and had assets of $56 billion. Most of those assets were real estate holdings, whose value is debatable.
On the other hand, bankruptcy can often be used as a financial planning tool when you do have enough money to repay debts, but need to restructure the terms. This is often in cases when people need to repay mortgage arrears or taxes in a structured repayment plan.
What is surprising is that individuals not businesses are the ones most often filing for bankruptcy. They owe money for a mortgage, credit card debt, auto loan or student loan perhaps all four! and dont have the income to pay for it.
There were 774,940 bankruptcy cases filed in 2019, and 97% of them were filed by individuals. Only 22,780 bankruptcy cases were filed by businesses in 2019.
The other surprise is that most of the people filing bankruptcy were not particularly wealthy. The median income for those who filed Chapter 7, was just $31,284. Chapter 13 filers werent much better with a median income of $41,532.
However, in the end, there is a price to pay and youll pay it for 7-10 years.
Cover Your Four Walls
When youre making a budget that will work for you right now, where do you start? Whats the main stuff you need to focus on covering? Start with what we call your Four Walls: food, utilities, shelter and transportation. These are the main essentials.
Keep everyone fed, the lights on, a roof over your heads, and gas in the car to get to work. If these Four Walls are only things you can pay for while youre getting out of debt, thats called survival mode, and that may be what you need to jump into right now.
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What Happens To My Credit If I Declare Bankruptcy
When you declare bankruptcy, it’s a sign that you are no longer paying your debts as originally agreed, and it can seriously damage your credit history. That said, the two types of bankruptcy aren’t treated the same way. Because chapter 7 bankruptcy completely eliminates the debts you include when you file, it can stay on your credit report for up to 10 years.
While chapter 13 bankruptcy is also not ideal from a credit standpoint, its setup is viewed more favorably because you are still paying off at least some of your debt, and it will remain on your credit report for up to seven years.
Shortly after your bankruptcy is discharged by the courtmeaning you no longer owe the debts you’ve included in your filingit may be difficult to get approved for credit, especially with favorable terms. There are some lenders, however, who specifically work with people who have gone through bankruptcy or other difficult credit events, so your options aren’t completely gone.
Also, the credit scoring models favor new information over old information. So with positive credit habits post-bankruptcy, your credit score can recover over time, even while the bankruptcy is still on your credit report.
What Happens When You File For Bankruptcy
If bankruptcy is the option you choose, you will work with the LIT to complete the required forms. The LIT will then file these documents with the OSB and you will be formally declared bankrupt.
From that point on, the LIT will deal directly with your creditors on your behalf. Once you have been declared bankrupt
- you will stop making payments directly to your unsecured creditors
- any garnishments against your salary will stop and
- any lawsuits against you by your creditors will also be stopped
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Role Of The Case Trustee
When a chapter 7 petition is filed, the U.S. trustee appoints an impartial case trustee to administer the case and liquidate the debtors nonexempt assets. 11 U.S.C. §§ 701, 704. If all the debtors assets are exempt or subject to valid liens, the trustee will normally file a no asset report with the court, and there will be no distribution to unsecured creditors. Most chapter 7 cases involving individual debtors are no asset cases. But if the case appears to be an asset case at the outset, unsecured creditors must file their claims with the court within 90 days after the first date set for the meeting of creditors. Fed. R. Bankr. P. 3002. A governmental unit, however, has 180 days from the date the case is filed to file a claim. 11 U.S.C. § 502. In the typical no asset chapter 7 case, there is no need for creditors to file proofs of claim because there will be no distribution. If the trustee later recovers assets for distribution to unsecured creditors, the Bankruptcy Court will provide notice to creditors and will allow additional time to file proofs of claim. Although a secured creditor does not need to file a proof of claim in a chapter 7 case to preserve its security interest or lien, there may be other reasons to file a claim. A creditor in a chapter 7 case who has a lien on the debtors property should consult an attorney for advice.