Exposure To The Mortgage Market
Lehman borrowed significant amounts to fund its investing in the years leading to its bankruptcy in 2008, an intricate process known as leveraging or gearing. A significant portion of this investment was in housing-related assets, making it vulnerable to a downturn in that market. One measure of this risk-taking was its leverage ratio, a measure of the ratio of assets to owners equity, which increased from approximately 24:1 in 2003 to 31:1 by 2007. While generating tremendous profits during the boom, this vulnerable position meant that just a 34% decline in the value of its assets would entirely eliminate its book value of equity. Investment banks such as Lehman were not subject to the same regulations applied to depository banks to restrict their risk-taking.
In August 2007, Lehman closed its subprime lender, BNC Mortgage, eliminating 1,200 positions in 23 locations, and took a $25-million after-tax charge and a $27-million reduction in goodwill. The firm said that poor market conditions in the mortgage space “necessitated a substantial reduction in its resources and capacity in the subprime space”.
Attend Your 341 Meeting
Your 341 meeting, or meeting of creditors, will take place about a month after your bankruptcy case is filed. Youâll find the date, time, and location of your 341 meeting on the notice youâll get from the court a few days after filing bankruptcy. Due to the COVID-19 pandemic, all 341 meetings are held either by video conference or via telephone until at least October.
The main purpose of the 341 meeting is for the case trustee to verify your identity and ask you certain standard questions and most last only about 5 minutes. Your creditors are allowed to attend and ask you questions about your financial situation, but they almost never do.
ââ You must bring your government-issued ID and social security card to the meeting. If you donât bring an approved form of both, the trustee canât verify your identity and the meeting cannot go forward. You should also bring a copy of your bankruptcy forms to the meeting, along with your last 60 days of pay stubs, your recent bank statements, and any other documents that your trustee has asked for. ââ
Briefly The Steps In A Personal Bankruptcy In Canada Are:
Contact a licensed and regulated trustee for a consultation. Most trustees will offer this consultation for free without any obligation.
Meet with the trustee for your first confidential evaluation.
At this meeting you will review all of your options with the trustee and work together to asses whether bankruptcy is the right choice for you;
Return to meet with the trustee to completely go over all of the bankruptcy papers and over the steps in a bankruptcy again.
At this meeting you will also sign the paperwork to declare bankruptcy;
The paperwork is sent to the Superintendent of Bankruptcy by the trustee and a notice of your bankruptcy filing is sent to your creditors by the trustee;
Now that you are bankrupt your creditors will be barred from contacting you and you will no longer have to make any payments on your unsecured debts; if you decided to keep your mortgage going or your car you will have to continue making the required payments to keep the loans up to date;
During the bankruptcy, which is usually 9 months long, you will have to complete your duties, such as reporting to your trustee your income and making an expense statement, and attending two separate counselling meetings with the trustee so he can teach you tricks and tips for managing your finances in the future so you can stay debt free and save for a retirement;
You will receive your discharge papers, your debts will no longer exist, and you can begin taking steps to rebuild your credit rating.
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Bankruptcy By The Numbers In 2020
Whats interesting about the 30% decline in bankruptcies in 2020 is how that figure covers all kinds of bankruptcy. When you drill down into the types, the picture gets even more fascinating. People who need to file person bankruptcy tend to go primarily with a Chapter 7 or a Chapter 13 type of case. In 2021 Chapter 7 bankruptcy filings fell by 21.6% in 2020 compared to 2019. And Chapter 13 filings fell by a whopping 46% in 2020. Chapter 11 filings, however, which is a type often used by businesses, were up by 29% in 2020. This is not surprising when you think about how many businesses have had to close permanently because of the pandemic.
The question remains, will there be a sharp rise in bankruptcy filings caused by the pandemic recission? The only real way to answer this question right now is that we just have to wait and see. If the next round of federal stimulus and assistance keep those who are struggling afloat while the roll-out of coronavirus vaccines ramps up, a significant number of people might make it through the recession without having to declare bankruptcy. But there will undoubtedly be some number of people who will still struggle and will have to file for bankruptcy. We just dont know how many yet.
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.
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When You Need To Buy A Car During Bankruptcy
Something that happens far more often than you might think is this: You file for bankruptcy and soon after filing you discover you need to replace your car. What to do? You know your credit is bottoming out or you wouldnt be filing for bankruptcy in the first place. The first thing you need to do is get on the phone with your bankruptcy attorney. Explain your situation and they will let you know if its a good idea for you to seek financing at that point in your bankruptcy process.
You might think it would be impossible for you to get any kind of car loan, but there are lenders who do have specific programs for people who need to finance a used car purchase while their bankruptcy is still open or after it has been discharged. At Day One Credit, weve spent years developing an extensive network of relationships with lenders who will work with bankruptcy customers. And you dont have to wait to apply for financing through us. As soon as you have a Chapter 7 case number or a Chapter 13 approved payment plan and the written permission of your bankruptcy trustee, we can help you find the bankruptcy car loan that fits your situation. You can get started right away on seeking a bankruptcy car loan, find out more information on our Common Questions page, or give us a call at 855-475-4725 to find out more about your options!
Your Income Isnt Going To Go Up And Youve Spent Your Savings
Sometimes people who are struggling to keep up with their debts think they can hold out for more income, whether its getting a better-paying job or taking on an additional job . But you need to be realistic about this. If the reality is that your income is not going to be going up any time soon, or only by a little bit, then your overall situation isnt really going to change, which might mean a better approach is seeing its time to file bankruptcy. If you look ahead and come up with a real plan to pay off your debts but its going to take longer than five years to do it, bankruptcy might be a better option. What often goes along with this is running through all your savings to maintain debt payments and living expenses. If all the savings are gone and you still have more debt than you can manage, it may be time to file bankruptcy. If you havent already started spending your savings, then dont! Protect your long-term financial health and that of your family by exploring bankruptcy as an option.
When one or more of the signs listed above apply to you, then it may be time to file bankruptcy. Youll need the help of a qualified bankruptcy attorney to ensure its the right option for you and to make it happen. Day One Credit is pleased to recommend any of the lawyers listed on our Bankruptcy Attorney Page.; Alternatively, also check out our post on how to choose a good bankruptcy lawyer.
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How A Person Goes Into Bankruptcy
There are two ways a person can go into bankruptcy.
The first and more common way is to have the person make an assignment in bankruptcy.
This means that you voluntarily place yourself into bankruptcy.
The second, and rarely used, way is for creditors to ask the court to make an order that a person is bankrupt.
In both these cases a trustee in bankruptcy is required to administer the bankruptcy and you will need to make an appointment to see one.
Meeting With the Trustee
Before you meet with the trustee, he or she will likely ask you to fill out a form setting out your pertinent financial information.
This makes the meeting more productive.
The first meeting is free and last approximately an hour.
The trustee or an administrator will review your financial information, discuss any options, explain how bankruptcy or a proposal works, and answer your questions.
The meeting is non-judgemental and is conducted in a pressure-free manner.
What Happens Next?
The debtor usually thinks things over a day or two before making up his or her mind.
Once you decide to go bankrupt, you will contact the trustees office and tell them to proceed.
It only takes a day or two for the trustee to prepare the documents before you go to the trustees office to sign them.
The trustee will immediately file the documents with the Office of the Superintendent of Bankruptcy.
You are bankrupt when the documents are filed.
Stay of Proceedings
How The Ontario Executions Act Can Help You Save Your Home
In 2015, the Ontario Executions Act was updated to define how much equity you could have in your home that would qualify for an exemption. If you have $10,000 or less of equity in your home, then you are not at risk of losing your home when you file for bankruptcy.
Equity is defined as the current market value of your home, minus the remaining balance on your mortgage, as well as any tax arrears and liens on the property. Lets say your home is worth $200,000. Your mortgage balance is $190,000 and you owe $1,000 in tax arrears, then you have $9,000 worth of equity. In this case, you would not be at risk of losing your home.
On the other hand, if your home is worth $200,000 and the remaining balance on your mortgage is $150,000 and you have no tax arrears, then you have $50,000 worth of equity. Your home would then be at risk of being seized and sold by the bankruptcy trustee.
Its important to consider your home and its equity before you file for bankruptcy. If you have equity in your home, then you may want to explore other options other than bankruptcy. Its in your best interest to avoid filing if youll lose your home.Explore Options to Avoid Bankruptcy ;
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You Have Assets You Want To Protect
In most cases, you can protect certain essential assets from the bankruptcy process, typically including the car you need to drive, the house you need to live in, retirement accounts, household items, and so on . But keep in mind that a Chapter 7 bankruptcy is also called a liquidation bankruptcy. The reason for this is because the bankruptcy trustee is going to be looking to see if you have assets that could be sold off to pay off at least some portion of what you owe to creditors. For example, you may own land that has been in your family for generations, but if you dont live on that land, its probably not going to be protected and could be sold off by your bankruptcy trustee to pay creditors. If you dont have any substantial assets, a Chapter 7 filing might be the way to go, especially if the bulk of your debts are unsecured, such as credit card debt. Again, we strongly recommend you spend time talking to a qualified, reputable bankruptcy attorney with your questions about assets you might run the risk of losing in a bankruptcy case.
Filing For Bankruptcy Close To Home
For most people, the correct filing place is close to homethe federal district in which you have lived for the 180 days immediately before filing . However, some districts cover large areas so the bankruptcy court might not be as close to your home as you’d like.
Most large districts have multiple locationssome of which accept bankruptcy filings, but not all. You can call your bankruptcy court or visit the court’s website using the instructions in “Finding the Bankruptcy Court” above, to find a closer satellite location.
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The Bankruptcy Filing Process
There are a number of legally required steps involved in filing for bankruptcy. Failing to complete them can result in the dismissal of your case.
Before filing for bankruptcy, individuals are required to complete a credit counseling session and obtain a certificate to file with their bankruptcy petition. The counselor should review your personal situation, offer advice on budgeting and debt management, and discuss alternatives to bankruptcy. You can find the names of government-approved credit counseling agencies in your area by calling the federal bankruptcy court closest to you or by visiting its website.
Filing for bankruptcy involves submitting a bankruptcy petition and financial statements showing your income, debts, and assets. You will also be required to submit a means test form, which determines whether your income is low enough for you to qualify for Chapter 7. If it isnt, you will have to file for Chapter 13 bankruptcy instead. You will also need to pay a filing fee, though it is sometimes waived if you can prove you cant afford it.
You can obtain the forms you need from the bankruptcy court. If you engage the services of a bankruptcy lawyer, which is usually a good idea, they should also be able to provide them.
Assuming the court decides in your favor, your debts will be discharged, in the case of Chapter 7. In Chapter 13, a repayment plan will be approved. Having debt discharged means that the creditor can no longer attempt to collect it from you.
Speak To An Experienced Bankruptcy Attorney Today
This article is intended to be helpful and informative. But even common legal matters can become complex and stressful. A qualified bankruptcy lawyer can address your particular legal needs, explain the law, and represent you in court. Take the first step now and contact a;local bankruptcy attorney to discuss your specific legal situation.
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Get A Free Debt Assessment
To start the bankruptcy process, first, you contact a Hoyes, Michalos & Associates licensed insolvency trustee who will assess your financial situation and explain the debt relief options available to you, including bankruptcy and alternatives to bankruptcy. After that, if you still want to declare bankruptcy, the trustee will help you complete several bankruptcy forms for signing. You are considered a bankrupt only when the trustee files the bankruptcy paperwork with the Official Receiver.
Rules pertaining to declaring bankruptcy and the bankruptcy process allow for filing a joint assignment. A joint bankruptcy assignment allows debtors, involved in a close financial relationship, to file for bankruptcy and to see their files dealt with as one file. This is available to debtors if their debts are substantially the same and the bankruptcy trustee believes it is in the best interest of the debtors and creditors.
Your Income Substantially Exceeds Your Expenses
The tipping point in favor of filing for bankruptcy is when your necessary monthly expenses total to more than your monthly net income. This may seem obvious, but its not always clear to some people who have mountains of debt but could pay it off if they just stuck to a plan. When it looks like a long road to pay those debts down, some would rather just walk away from the debt. But if you have substantial income left over after paying all necessary expenses, then you dont need to file for bankruptcy, you just need to buckle down and get pay it off over time. Keep in mind its not about amount of debt you have, its about your debt relative to your income. $10,000 of debt may seem like very little, but its a lot if you have no income and no prospects for getting a job or increasing your income. Another option is to enlist the help of a credit counseling or debt management programjust be sure to do your homework and make sure its legitimate and has good reviews from independent sources.
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