Do Not File The Wrong Form
While you are filing for bankruptcy, you will have to go through a lot of paperwork and fill many forms, such as petitions, bonds, financial statements, and other essential documents. If you have not hired an attorney for yourself, its your responsibility to understand the terms and file the correct bankruptcy form.
Bankruptcy is a long process, and it does not end very easily. It takes almost a year to complete all the credentials. If you owe a lot of assets or cash, you will find it a lengthy and challenging job.
Are You Getting A Refund
Refunds that are issued as a result of returns for years prior to the year of bankruptcy are considered to be the property of the estate in bankruptcy. As a result, these refunds will be sent to the trustee. Any refunds issued in relation to returns for years subsequent to the year of bankruptcy will be sent to you, unless the trustee has obtained a court order.
For the year of bankruptcy, any issued refund related to the pre-bankruptcy return will be sent to the trustee. Issued refunds related to the post-bankruptcy return will also be sent to the trustee if your bankruptcy assignment date is July 7, 2008, or later. Post-bankruptcy refunds that are issued for bankruptcies with an assignment date prior to that will be sent to you, unless the trustee has obtained a court order or has provided us with an Authorization and Direction letter.
What Happens To Your Assets When You File Chapter 7 Bankruptcy
The vast majority of chapter 7 cases are no asset cases. However in an asset case, after you surrender your nonexempt property, a bankruptcy trustee will take the property, sell it, and use the proceeds to pay claims pursuant to the statutory scheme. If the value of an asset has been claimed as exempt then the trustee will have to pay the cash amount of the exemption to you. As long as you have met all other bankruptcy requirements, the court will grant your bankruptcy discharge.
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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.
Before You File Evaluate Your Situation
When should I file for bankruptcy? This is a question most people under financial distress ask. You should probably consider other options before going this route. These options include:
- Trying to negotiate your debt or make a payment plan with your creditor
- Sticking to a budget
If, however, other options don’t seem feasible, filing for bankruptcy may give you the ability to get a fresh start.
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Is A Lawyer Necessary
Unlike corporations and partnerships, individuals can file for bankruptcy without an attorney. It’s called filling the case “pro se.” But because filing for bankruptcy is complex, and must be done correctly to succeed, it’s generally unwise to attempt it without the help of an attorney experienced in bankruptcy proceedings.
Even the Internal Revenue Service is sometimes willing to negotiate. You may be able to reduce the amount you owe in taxes or spread your payments out over time.
Filing For Bankruptcy Is Always An Optionbut Is It The Right One For You
If your financial situation has you feeling like there is no light at the end of the tunnel, you may be considering filing for bankruptcy, something that nearly 800,000 individuals and businesses did in 2017, according to the American Bankruptcy Institute, and thats in a year when the economy was considered good. While both individuals and corporations can file for bankruptcy, according to Debt.org, just 3 percent of bankruptcies are filed by businesses and 97 percent are by individuals. Though filing for bankruptcy will help relieve you of debt, it isnt a get out of jail free card for your finances. Here is everything you need to know before filing for bankruptcy, from what it entails and how it will impact your credit to how many times you can actually file for bankruptcy.
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Dealing With Your Car Loan
If you own a car that you still owe on, youâll have to let the bank and the court know what you want to do with it one one of your bankruptcy forms.
If you want to surrender the car to the lender and discharge the debt, you donât have to do anything other than stop making your payments. The bank will either file request with the bankruptcy court to ask permission to retake the car, or wait until your discharge is granted before picking it up.
If you want to keep the car, you can either reaffirm the loan or redeem the car. If youâre reaffirming your loan, the bank will send you a reaffirmation agreement after your case is filed. You have to complete and sign the agreement and return it to the bank within 45 days from your 341 meeting. The bank files the signed agreement with the court for approval.
To redeem the vehicle you have to file a motion with the court and, once granted, buy the car from the bank for its current value. This gets you out of having to pay the amount left on the loan, but payment has to be made in one lump sum.
Filing for bankruptcy takes some preparation. Hiring a good bankruptcy attorney is one way to file. But if you can’t afford the attorney fees to hire one and you need a fresh start, Upsolve may be able to help. If you’re eligible, our free web app will walk you through the process and help you prepare your forms for filing with the court.
Check out the video below â¬ï¸ to see how it works!
What Is Chapter 13 Bankruptcy
Chapter 13 bankruptcy is a way to reorganize your debt. It involves repaying none, some or all of your debt over the course of three to five years. One important difference between Chapter 13 and Chapter 7 bankruptcy is that in Chapter 13, your debts arent discharged and youre still liable to pay them.
With Chapter 13, most or all of your creditors are lumped together into one large pool. You then make payments each month to a lawyer called a trustee whos assigned to your case. The trustee distributes your payment to the creditors.
In Chapter 13, you can reduce the amount owed on secured loans, reduce interest rates, re-amortize loans for a lower monthly payment, remove certain liens, extend the time to pay back taxes, reduce the amount owed on unsecured loans sometimes down to zero and legally break leases, says bankruptcy attorney Dai Rosenblum of Butler, Pa. Because a Chapter 13 filing can extend up to five years, Rosenblum says many people use it to catch up on their mortgage.
When you proceed with a Chapter 13 case, you must file a plan detailing how some, or all, of the debts will be repaid over time. In addition, you or your attorney, in conjunction with the trustee for your case, will determine a reasonable amount that you can afford to pay back to creditors. That amount is based on your assets, monthly income and monthly expenses.
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What Bankruptcy Typically Looks Like
If you do end up filing for bankruptcy, there are generally two types that individuals file: Chapter 7 and Chapter 13.
A Chapter 7 bankruptcy is all about selling anything valuable you own a second vehicle, a vacation home, collectibles, stocks, bonds to pay off your debts. Generally, this type of bankruptcy wipes out all of your outstanding debts once a judge approves your filing in court. The whole process typically takes about three to five months. Chapter 7 bankruptcies are best suited for those who cannot pay back all, or a significant portion, of their balances. Tadross says that he typically recommends clients file for Chapter 7 bankruptcy if they have an unmanageable amount of unsecured debt, such as medical or credit card.
A Chapter 13 bankruptcy, referred to as a reorganization bankruptcy, is designed for those with a regular income to create a plan to repay all, or part, of their debts in installments. It works well if you are so far behind on your home mortgage payments that you may be facing foreclosure or eviction. With this type of bankruptcy, you generally don’t have to sell off your property to pay your lenders, but instead work to pay off your debts through a court-approved consolidated repayment plan that runs for a set period of time, typically three to five years. At the end of that period, any remaining unpaid debts are discharged.
If You Have An Opportunity To Modify Your Mortgage
These days, many people file for bankruptcy to delay a foreclosure. While bankruptcy can be a good solution in this situation, many people file much earlier than they need to, which makes it more difficult to obtain a mortgage modification. Once you file for bankruptcy, many lenders will refuse to enter into or continue negotiations over your mortgage. Because your bankruptcy will cancel the promissory note part of your mortgage , technically there will be nothing left to negotiate. If you might want to seek a mortgage modification in the future, you probably should avoid bankruptcy — at least until you know which way the modification winds are blowing.
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Youre Facing Home Foreclosure And/or Car Repossession
Bankruptcy can issue a stay on any repossession or foreclosure activity, just like it can for credit card collections. But this stays a little more complicated.
Money you owe on homes and cars may be a secured debt, or a debt where a creditor can repossess the property. This is the case if a creditor has a lien on your home or car. A lien is basically a claim on your property saying the creditor can take it back if you dont make payments. You may have to read the fine print or consult a professional if youre not sure whether creditors have a lien on your home. Bankruptcy can erase what you owebut it cant keep creditors with liens from repossessing property.
Dont panic! In many cases you can keep your home even after you file. One type of personal bankruptcy, Chapter 13 bankruptcy, gives you time to catch up on mortgage payments. The property you get to keep also depends on your states bankruptcy exemption lawseach state has different rules about which properties are exempt from creditor claims.
Will Bankruptcy Benefit You
With so many factors involved in the decision-making process, a Yes or No answer isnt possible, but here is a good guideline to use in making a final decision.
If you cant find a way to get out of debt in the next five years and have diligently researched solutions then yes, bankruptcy can benefit you.
But weigh the pros and cons and remember one other thing: You cant go to jail just because you owe someone money.
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Will I Lose My House If I File Bankruptcy In Canada
If you declare bankruptcy, there are various ways and conditions in bankruptcy that you will NOT lose your house.
Everybody who owns a house and also experiences financial issues is worried about losing their house. Losing your home is possibly among the most terrible concerns people with a huge debt load that is crushing them have. This is exactly how it functions if you file for personal bankruptcy in Ontario.
In Ontario, the provincial regulation that describes what is excluded from seizure is called the Execution Act, R.S.O. 1990, c. E.24. For a full checklist of all bankruptcy Ontario exemptions, please review my Brandons Blog, BANKRUPTCY IN ONTARIO CANADA SECRETS EXPOSED.
The exemption in Ontario for your house is $10,000 of equity. The present thinking is that if your equity is $10,000 or less, if you go bankrupt, then your entire equity is excluded from seizure by the Trustee. Nonetheless, if your equity is $10,001 or greater, your whole equity in your home is NOT exempt and also is readily available to your Trustee for the benefit of your creditors.
Keep in mind that we are talking about your equity. In determining your equity, we first have to determine the market value of the house. We then deduct any mortgages or other loans registered against the property. The net result of this calculation represents your equity. If you own the home jointly with your spouse, then it is half of that number that is your equity. The other half belongs to your spouse.
How To File Bankruptcy The Bankruptcy Process
Filing for bankruptcy does not have to be a scary process. In fact, the act of declaring bankruptcy is a positive step towards eliminating overwhelming debts.
Bankruptcy in Canada is a legal process in which a debtor assigns non-exempt assets for the benefit of his creditors in exchange for which he will be discharged from most debts. It is regulated by the Bankruptcy and Insolvency Act. The purpose of the Act is to permit an honest, but unfortunate, debtor to obtain a bankruptcy discharge from his or her debts, subject to reasonable conditions.
Bankruptcy in Canada must be filed through a Licensed Insolvency Trustee. The trustees role in the process is to act as a sort of referee, ensuring that both the debtor and the creditors, are treated fairly and evenly.
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Why Would Someone File For Bankruptcy
Basically, once debt gets to a point where it is impossible to pay backdue to the high principal as well as soaring interest ratesthat is when to consider bankruptcy as an option. The most common reason is extremely overextended credit, but there are also other factors that can lead to the decision to file for bankruptcy, such as unemployment, large medical bills, or even marital problems, shares Gonzalez. Sadly, most bankruptciesover 60 percentare attributed to financial downfall due to a medical condition.
Do They Take Your Taxes When You File Chapter 7
A tax refund is an asset in both Chapter 7 and Chapter 13 bankruptcy. It doesnt matter whether youve already received the return or expect to receive it later in the year. As with all assets, when you file for bankruptcy, you can keep your return if you can protect it with a bankruptcy exemption.
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Filing For Chapter 13 Bankruptcy
For people who have property they want to keep, filing a Chapter 13 bankruptcy may be the better choice.
A Chapter 13 bankruptcy is also known as a reorganization bankruptcy. Chapter13 enables people to pay off their debts over a period of three to five years. For individuals who have consistent, predictable annual income, Chapter 13 offers a grace period. Any debts remaining at the end of the grace period are discharged.
Once the bankruptcy is approved by the court, creditors must stop contacting the debtor. Bankrupt individuals may then continue working and paying off their debts over the coming years, and still keep their property and possessions.
Who Qualifies For Chapter 7 Bankruptcy
Chapter 7 bankruptcy, also called straight or liquidation bankruptcy, can wipe out many types of unsecured debt. Not just anyone can file for Chapter 7 bankruptcy, though. Here are some of the requirements to pursue Chapter 7 bankruptcy.
- The average of your monthly income in the previous six months must be lower than the median income for the same-sized household in your state otherwise, you must pass what’s known as a means test. This test determines whether your disposable income is high enough to make partial payments to unsecured creditors. If you fail the means test, don’t despair: You still might qualify for Chapter 13 bankruptcy.
- You can’t have filed for Chapter 7 bankruptcy in the previous eight years.
- You can’t have filed for Chapter 13 bankruptcy in the previous six years.
- If you attempted to file for Chapter 7 or 13 bankruptcy but your case was tossed out, you must wait 181 days or more before refiling.
- You typically must finish an individual or group credit counseling course offered by an approved credit counseling agency within 180 days before you file for bankruptcy.
- Even if you’re eligible to file for bankruptcy, a judge could throw out your case if it’s found you’re attempting to defraud creditors. An example: You run up charges on a credit card with the goal in mind of declaring bankruptcy to steer clear of paying the debt.
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