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 dont 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.
Bankruptcy In The United States
Like the economy, bankruptcy filings in the U.S. rise and fall. In fact, they are like dance partners where one goes, the other usually follows.
Bankruptcy peaked with just more than two million filings in 2005. That is the same year the Bankruptcy Abuse Prevention and Consumer Protection Act was passed. That law was meant to stem the tide of consumers and businesses too eager to simply walk away from their debts.
The number of filings dropped 70% in 2006, but then the Great Recession brought the economy to its knees and bankruptcy filings spiked to 1.6 million in 2010. They retreated again as the economy improved, but the COVID-19 pandemic easily could reverse the trend in 2021. It seems inevitable that many individuals and small businesses will declare bankruptcy.
Talk To A Financial Coach
You dont have to walk this alone. Read that again: You dont have to walk this alone. Get with a financial coach and talk about your situation. They arent here to judgetheyre here to help.
A financial coach can help you figure out a personalized plan of action for your specific situation. And yes, talking about money can be terrifying, but if you declare bankruptcy, your financial privacy will be out the window immediately. Opening up to a trustworthy financial coach now can help you avoid having to open up to a whole courtroom of people in bankruptcy.
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Bankruptcy Is A Powerful Tool For Debtors But Some Kinds Of Debts Can’t Be Wiped Out In Bankruptcy
By Cara O’Neill, Attorney
If you’re facing severe debt problems, filing for bankruptcy can be a powerful remedy. It stops most collection actions, including telephone calls, wage garnishments, and lawsuits . It also eliminates many types of debt, including credit card balances, medical bills, personal loans, and more.
But it doesn’t stop all creditors, and it doesn’t wipe out all obligations. For instance, you’ll still have to pay your student loans and arrearages for child support, alimony, and most tax debts. Read on to learn more about:
- what you can expect in both Chapter 7 and Chapter 13
- the benefits offered by Chapter 13 alone, and
- things that can’t be accomplished by filing for bankruptcy.
If you’d like step-by-step guidance through the bankruptcy process, read What You Need to Know to File for Bankruptcy in 2021.
Debts Never Discharged In Bankruptcy
While the goal of both Chapter 7 and Chapter 13 bankruptcy is to put your debts behind you so that you can move on with your life, not all debts are eligible for discharge.
The U.S. Bankruptcy Code lists 19 different categories of debts that cannot be discharged in Chapter 7, Chapter 13, or Chapter 12 . While the specifics vary somewhat among the different chapters, the most common examples of non-dischargeable debts are:
- Alimony and child support.
- Certain unpaid taxes, such as tax liens. However, some federal, state, and local taxes may be eligible for discharge if they date back several years.
- Debts for willful and malicious injury to another person or property. âWillful and maliciousâ here means deliberate and without just cause. In Chapter 13 bankruptcy, this applies only to injury to people debts for property damage may be discharged.
- Debts for death or personal injury caused by the debtorâs operation of a motor vehicle while intoxicated from alcohol or impaired by other substances.
- Debts that you failed to list in your bankruptcy filing.
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How Chapter 7 Works
A chapter 7 case begins with the debtor filing a petition with the bankruptcy court serving the area where the individual lives or where the business debtor is organized or has its principal place of business or principal assets. In addition to the petition, the debtor must also file with the court: schedules of assets and liabilities a schedule of current income and expenditures a statement of financial affairs and a schedule of executory contracts and unexpired leases. Fed. R. Bankr. P. 1007. Debtors must also provide the assigned case trustee with a copy of the tax return or transcripts for the most recent tax year as well as tax returns filed during the case . 11 U.S.C. § 521. Individual debtors with primarily consumer debts have additional document filing requirements. They must file: a certificate of credit counseling and a copy of any debt repayment plan developed through credit counseling evidence of payment from employers, if any, received 60 days before filing a statement of monthly net income and any anticipated increase in income or expenses after filing and a record of any interest the debtor has in federal or state qualified education or tuition accounts. Id. A husband and wife may file a joint petition or individual petitions. 11 U.S.C. § 302. Even if filing jointly, a husband and wife are subject to all the document filing requirements of individual debtors.
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.
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
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Bankruptcy: How It Works Types & Consequences
Bankruptcy is a legal process overseen by federal bankruptcy courts. It’s designed to help individuals and businesses eliminate all or part of their debt or to help them repay a portion of what they owe.
Bankruptcy may help you get relief from your debt, but it’s important to understand that declaring bankruptcy has a serious, long-term effect on your credit. Bankruptcy will remain on your credit report for 7-10 years, affecting your ability to open credit card accounts and get approved for loans with favorable rates.
Can You Apply For Bankruptcy Without A Lawyer
Yes, you can file for bankruptcy without a lawyer. Simply follow the steps for filing for bankruptcy in Australia .
Once you have been declared bankrupt, you will be assigned a trustee, who will manage your assets and finances until your bankruptcy is discharged.
You may, however, find it worthwhile to get professional advice and support with your bankruptcy application.
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Bankruptcy Law Can Resolve Tax Debts
Dealing with the CRA can be stressful when you have unpaid income taxes, source deductions, or HST installments. They have strong collection powers and can act quickly to collect on unpaid taxes.
Bankruptcy law is federal legislation. As a result, both a bankruptcy and consumer proposal can successfully resolve outstanding tax debt.
It is important, however, to contact a Licensed Insolvency Trustee before CRA has placed any lien on your property.
Home Mortgage And Other Property Liens
If you have a lien on property, such as a home mortgage, you cannot have the mortgage discharged in bankruptcy.
State laws vary, but you can generally keep your home in bankruptcy if you keep making the payments and if you do not have more equity in the home than you are allowed to keep by state law.
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Stop Collection Calls After Your Bankruptcy Case
If a creditor calls you after you file bankruptcy, providing your case number and the filing date will likely stop the calls cold. Finding your filing date is easy to do. Pull out any bankruptcy document from the court. The filing date will appear at the top of the page next to your case number.
A creditor can quickly verify your bankruptcy using the information, and if the calls don’t stop, the creditor will be subject to sanctions. Find out more in What happens if a creditor tries to collect a debt during my bankruptcy?
Which One Should I Choose
Chapter 7 is, by far, the more popular form because its cheaper, quicker and effective at relieving responsibility for debt if you qualify! And thats a big if. You must pass a means test, meaning your disposable income is under the median income in your state. If you dont qualify for Chapter 7, you can always fall back on Chapter 13.
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Can The Credit Card Companies Sue Me After I File For Bankruptcy
No. Once you file for bankruptcy protection, bankruptcy’s automatic stay prohibits most creditors from continuing collection efforts against you. The stay extends to credit card companies and prohibits them from suing you, sending you collection letters, calling you, or engaging in other collection activities. Learn more about bankruptcy’s automatic stay.
If You Dont Live In England Or Wales
You can declare yourself bankrupt in England or Wales if you live outside the UK, provided you lived in England or Wales or have had a business there at some point in the last three years. The Bankruptcy Order made in England and Wales may not be recognised in other countries outside the UK.
You cant declare yourself bankrupt in England or Wales if you live in Scotland or Northern Ireland.
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If You Owe Money To People Or Companies In The Eu
Bankruptcy might not be right for you if you owe money to people or businesses in the EU. These debts might not be covered by bankruptcy.
Your creditors could keep asking you for money, for example by calling you and sending you letters.
If you live in the EU, they could take you to court in the EU.
EU creditors still have to sue here in the UK rather than abroad in the EU, even if they have an existing judgment. The UK will recognise EU judgements entered or started before 31 December 2020.
If you live in the UK but have a home in the EU with a mortgage from an EU lender, the lender could take you to court in the EU.
What Happens When You Declare Bankruptcy
When you declare bankruptcy, you will be released from most of your debts and your creditors will no longer be knocking on your door.
You will still be required to make your repayments on your secured debts such as your car or home loan. If you cannot make these payments, your house or car will most likely be repossessed by the bank.
You will still have to pay your child support alimony payments, as your bankruptcy status will not affect these.
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What Debt Cant Be Discharged In Bankruptcy
Although you can file for bankruptcy on most unsecured loans, you usually wont find much luck with other types of debt.
Most debt owed to the government is not dischargeable, said Hernandez. HOA dues are not dischargeable, taxes are not dischargeable student debt is not dischargeable.
Or at least, thats usually the case. Bankruptcy is a complex process, and few types of debt have hard and fast rules. For instance, there are certain instances when HOA dues, taxes and even student loans can be discharged, though they typically dont qualify.
Here are a few types of debt where discharge through bankruptcy is difficult, if not impossible:
- Student loans
- Money owed with certain kinds of taxes
- Child support or alimony payments
- Fines you owe for breaking the law
Why Declare Bankruptcy
The obvious answer for why you should declare bankruptcy is that you are drowning financially and no one not banks, not online lenders, not family or friends will throw you a lifeline.
The millions of people who lost their jobs or businesses because of the coronavirus, have some hope because of bankruptcy. They still had bills to pay, and in many cases, no way to handle them. Thats what bankruptcy was meant to address. Its not a bailout. It was created to give people a chance to get back on their feet financially and restore their peace of mind.
If your bills have grown to levels your income simply cant handle, having your debts discharged through bankruptcy is a safe, legal and practical choice.
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What If Ive Co
When you file for bankruptcy, it does not eliminate the debt when someone has co-signed or guaranteed the loan for you. If your creditor sees that youre no longer able to make payments, they will likely pursue the person who co-signed or guaranteed your loan, and that person will be responsible for repaying your debt. If youre considering bankruptcy as an option for resolving your debt, you will want to notify anyone who has co-signed or guaranteed any of your loans.
In this case, it might be possible to file a joint consumer proposal in order to pay off the co-signed debt. If you have questions, a Licensed Insolvency Trustee will explain all your options you may request a call to find out more.
How Bankruptcy Helps Your Debt Issues
The entire goal of claiming personal bankruptcy is to get debt relief when your debt reaches a point where you will never pay it off on your own.
The good news is bankruptcy eliminates almost all unsecured debts, including credit card debts, lines of credit, payday loans, bank loans, installment loans, and tax debts.
However, doesnt wipe clean all your debts. What happens when you apply for bankruptcy in Canada depends on the types of debt you have.
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Your Cra Debt Options
If you are having CRA debt issues, speaking with a licensed insolvency trustee to help review your options is the first step. They can see what the best solution is for you, which may include a consumer proposal or a bankruptcy. When successfully entering into either a bankruptcy or a consumer proposal, this stops any further actions against you by the CRA.
If you owe the CRA money, dealing with CRA tax debt should be your top priority. Not only can the agency use widespread collection actions, but it can also withhold GST and Child Tax credits or even remove money from your bank account leaving you out of luck when it comes to meeting other obligations like mortgage payments.
Dont delay if you find yourself in tax debt. There is a solution to all types of debt.
If you live in the GTA, book a free consultation with the caring professionals at David Sklar & Associates. We are here to help assist you in making the best decision for you.
Is Chapter 7 Bankruptcy Right For You
Make sure you know the difference between Chapter 7 bankruptcy vs Chapter 13 bankruptcy. Chapter 7 makes sense when:
You dont have many assets.
Your problem debts total more than 50% of your annual income.
Your problem debts can be discharged, or forgiven, by Chapter 7. These include debts such as medical bills, credit card debt and personal or payday loans.
It would take five years or more to pay off your debt, even if you took extreme measures.
Some debts typically cant be erased in bankruptcy, including recent taxes, child support and student loans. Bankruptcy still may be an option for you, though, if erasing other kinds of debt would free up enough money to pay the debts that cant be erased.
The other common form of consumer bankruptcy, Chapter 13, may be better if you have more assets or secured debts, and can repay some or all of what you owe.
Other debt relief options are available, too, such as a debt management plan through a agency. Take advantage of the free initial advice that credit counselors and many bankruptcy attorneys offer before deciding on a path.
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How To File For Bankruptcy
Filing for bankruptcy is a legal process that either reduces, restructures or eliminates your debts. Whether you get that opportunity is up to the bankruptcy court. You can file for bankruptcy on your own, or you can find a bankruptcy lawyer, which most experts regard as the prudent avenue to pursue.
Bankruptcy costs include attorney fees and filing fees. If you file on your own, you will still be responsible for filing fees. If you cant afford to hire an attorney, you may have options for free legal services. If you need help finding a lawyer or locating free legal services, check with the American Bar Association for resources and information.
Before you file, you must educate yourself on what happens when you file for bankruptcy. Its not simply a matter of telling a judge Im broke! and throwing yourself at the mercy of the court. There is a process a sometimes confusing, sometimes complicated process that individuals and businesses must follow.
The steps are: