Chapter 7 Vs Chapter 13 Bankruptcy
The main difference between Chapter 7 and Chapter 13 bankruptcy is that in Chapter 13 bankruptcy, you don’t immediately erase any debts. You propose a repayment plan based on your ability to repay certain debts. The bankruptcy trustee and all creditors review the Chapter 13 plan and, if itâs acceptable to all involved, the court confirms your repayment plan, which lasts three to five years.
Most people file Chapter 13 bankruptcy instead of Chapter 7 for two reasons. First, they fail the means test due to their high income and donât qualify for Chapter 7 bankruptcy. Second, they own a home they want to keep thatâs not covered by the Chapter 7 bankruptcy exemptions.
If you’re considering filing Chapter 13 because you don’t pass the means test, look at the reasons you aren’t passing. The lookback period for the means test is 6 months, so if you recently experienced a drop in household income, you might qualify for Chapter 7 in the near future.
Understanding D& o Insurance Limitations In Bankruptcy
A typical D& O insurance policy offers three main types of protection:
May An Employer Terminate A Debtor’s Employment Solely Because The Person Was A Debtor Or Failed To Pay A Discharged Debt
The law provides express prohibitions against discriminatory treatment of debtors by both governmental units and private employers. A governmental unit or private employer may not discriminate against a person solely because the person was a debtor, was insolvent before or during the case, or has not paid a debt that was discharged in the case. The law prohibits the following forms of governmental discrimination: terminating an employee discriminating with respect to hiring or denying, revoking, suspending, or declining to renew a license, franchise, or similar privilege. A private employer may not discriminate with respect to employment if the discrimination is based solely upon the bankruptcy filing.
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Issues With Reaffirming Debts
If your current money balance is not enough to pay the debt to be reaffirmed, there is a presumption of undue hardship. The court may decide not to approve the reaffirmation agreement. Unless you are represented by an attorney, the bankruptcy judge must approve the reaffirmation agreement.
If you are represented by an attorney for the reaffirmation agreement, the attorney must certify in writing that they have advised you about:
- The legal effect and consequences of the agreement
- What happens if you default under the agreement
The attorney must also certify that:
- You were fully informed and voluntarily made the agreement
- Reaffirmation of the debt will not create an undue hardship for you or your dependents
The Bankruptcy Code requires a reaffirmation hearing if you have not been represented by an attorney during the agreement’s negotiating, or if the court disapproves of the reaffirmation agreement.
You may repay any debt voluntarily, however, whether or not a reaffirmation agreement exists. If you plan to repay debt, you may want to consider a Chapter 13 bankruptcy repayment plan.
If Youre Having Trouble With Your Mortgage Payment
Its probably best to start by talking about what to do if youre having trouble with your mortgage. Its our expertise, but also for many people, its their single biggest monthly expense. If you find yourself struggling, you have a few options for mortgage help.
The most preferable option for most people might be to look at a modification. A mortgage modification involves temporarily or permanently lowering your interest rate and/or extending your term so that you can more easily afford your monthly payment.
If youve been over things with your servicer and can afford to make a payment at all, one option might be a short sale. In this scenario, you might know you cant sell your home for what you owe on your mortgage. However, if you can prove hardship, your lender might be willing to let you do a short sale where they work with you to sell the property for less than what you are.
Depending on state law, a lender may be able to go to court and get a judgement against you for the difference between what the property sells for and what you actually owe, so thats something to be aware of.
Finally, your lender could approve a deed in lieu of foreclosure. Under this arrangement, you sign the property over to your lender and they then sell the home. In exchange for keeping the home in good shape, your lender may forgive some or all of the difference between what you actually owe and what the property can be sold for.
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Has There Been A Change To The Cipf Explanatory Statement With The Adoption Of The Current Cipf Disclosure Policy That Came Into Effect On February 10 2021
The two versions of the CIPF Explanatory Statement set out in the prior CIPF Disclosure Policy remain unchanged and available for use by member firms under the Current Policy.
However, in the Current Policy, CIPF has added the version of the CIPF Explanatory Statement provided in IIROC Notice 18-0242 Service arrangements between Dealer Members and Portfolio Managers . All member firms now have the option of using this version of the CIPF Explanatory Statement, which was previously only available for inclusion in account statements where a member firm had a service arrangement with a portfolio manager.
Student Loans Do Not Go Away In Bankruptcy
As noted in the above list, educational loans are generally not discharged by a Chapter 7 bankruptcy. However, they may be removed if the court finds that paying off the loan will impose an “undue hardship” on the debtor and their dependents.
To qualify for a hardship discharge of a student loan, you must demonstrate that you cannot make payments at the time the bankruptcy is filed, or in the foreseeable future.
You must apply for the hardship discharge before any discharge of other debts is granted. Application for a hardship discharge is not included in the standard bankruptcy fees. It must be paid for after the case is filed.
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Important Steps Directors And Officers Need To Take To Help Ensure That Their D& o Insurance Will Protect Them When They Need It Most
With daily headlines on corporate scandals and the subprime lending meltdown, serving as a director or officer of a company can be a risky undertaking. D& O insurance is supposed to mitigate that risk by protecting the personal assets of directors and officers. Unfortunately, the protection provided by D& O policies varies significantly especially when it comes to protecting directors and officers in a bankruptcy situation.The lack of a standard D& O policy is further complicated by inconsistent court rulings about whether a D& O policys proceeds should be considered property of the bankruptcy estate. If it is, a bankruptcy court may limit or bar coverage otherwise provided under a D& O insurance policy.To reduce these perils, directors and officers need to actively participate in the purchase and negotiation of their D& O insurance policies each year. Because the language in D& O policies varies significantly, it is essential that directors and officers understand how a bankruptcy court may apply the language in their policies. Directors and officers should consider retaining an attorney with expertise in D& O insurance to assist them in this process. Such an attorney can help directors and officers review their protection and negotiate meaningful improvements to their coverage.
Criminal/penal Case Court/osbnos: 31
A husband sold the family home to his wife. The wife immediately remortgaged that home. After four months, she stopped making mortgage payments on it. Soon after that, the family moved to a new home that they bought in their daughter’s name. The daughter made a $228,000 down payment on the home using money her father gave her. When the wife filed for bankruptcy, she reported her previous house as an asset. In addition to the mortgage debt on that previous house, she owed $169,000 in other debts. The husband filed for bankruptcy 10 months after the wife, declaring debts of $270,000. The husband said that he had given the house to his wife as part of their separation agreement, along with $100,000. Then the husband changed his account of the events and said that he had sold the house to someone else and given $100,000 of the proceeds to his wife as part of a separation agreement. An investigation concluded that the down payment on the second home likely came from the wife’s purchase and remortgaging of the first home in an attempt to shield that money from bankruptcy proceedings. The investigation also found that both spouses accumulated most of their debt in the seven months before they filed for bankruptcy. Each had obtained more than $130,000 in cash advances, as well as bought goods on credit.
Summary of offences of the bankruptsFootnote 2
My Account Statement From My Broker Shows That The Securities In My Account Are Held In Segregation Will Those Securities Be Returned To Me In The Event Of The Insolvency Of The Broker
Not necessarily. It is possible that those securities will not be available to be returned to you if the broker becomes insolvent. The particular circumstances of insolvencies can vary widely. For example, one of the laws that may apply to an insolvency of an investment dealer in Canada is Part XII of the Bankruptcy and Insolvency Act . If Part XII applies, all client cash and securities held by the insolvent firm for its clients at the time of bankruptcy, other than customer name securities , would be included in a single customer pool. Any shortfall of client cash or securities would be allocated proportionately from the customer pool across all clients after payment of bankruptcy administration costs.
CIPF protection will apply if the property being held on a clients behalf is not available to be returned to the client. Certain limitations apply. Please see What Does CIPF Cover? for more information on what is covered and not covered.
Waiting Periods For Other Bankruptcies
While the legal implications behind debt discharge or dismissal outside of Chapters 7 and 13 bankruptcies are beyond the scope of this article, we can share the waiting periods for getting a new mortgage if youve filed Chapter 11 or 12 bankruptcies in the past.
For Chapter 11 bankruptcies, you can get a mortgage through the FHA or VA as long as you otherwise qualify and the bankruptcy was discharged or dismissed 2 years prior to application. The waiting period for conventional loans is 4 years and 7 years for jumbo loans.
For a Chapter 12 bankruptcy, conventional loan policy again differentiates between discharge and dismissal. If the bankruptcy is discharged, that has to have happened more than 2 years prior to application and it has to be filed more than 4 years ago. When the bankruptcy is dismissed, the waiting period is 4 years.
With an FHA loan, the bankruptcy only needs to be discharged or dismissed before you apply. Meanwhile, the VA has a 3-year waiting period prior to application.
Filing for bankruptcy is a big decision that has a lot of implications for your current and future financing. Make sure you discuss your options with a lawyer or your financial advisor before you stop making payments or file for bankruptcy.
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Are Mutual Funds Eligible For Cipf Coverage
Yes, if the mutual fund securities are held by a member firm on behalf of an eligible client, the clients mutual fund securities are protected by CIPF.
Investing in a mutual fund gives an investor units or shares in the fund. If the member firm holding your mutual fund units or shares becomes insolvent, CIPFs role is to ensure that the units or shares being held by the member firm for you are returned to you, within certain limits. However, CIPF does not guarantee or protect the value of your mutual fund investment.
Since investors can purchase mutual fund securities directly from the mutual fund itself, these securities may be held by the mutual fund for the investor. In this situation, where a CIPF member firm is not holding these securities on behalf of a client, CIPF coverage does not apply.
Please see the glossary on this website for more information about mutual funds.
What Debt Can And Cant Be Erased
Chapter 7 bankruptcy can erase the following common debts:
Personal loans and payday loans
Judgments from credit cards and debt collection agencies
These debts are known as âdischargeableâ debts.
The moment someone files bankruptcy, a rule called the âautomatic stayâ goes into effect. This temporarily stops anyone from collecting any debts you owe them.
Chapter 7 bankruptcy cannot erase the following types of debts:
Child support and alimony
Recent tax debts and other debts you owe the government like fines
Student loans can usually not be erased
These debts are known as non-dischargeable debts.
Secured debts are debts that are backed by property, such as a mortgage backed by a house or a car loan backed by a car. If you want to keep your property that secures a debt, you cannot erase the debt in Chapter 7 bankruptcy. Before you file, you must also make sure youâre current on your debt payments. If youâre willing to give up the property, then Chapter 7 bankruptcy can erase secured debts.
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Does The Spouse Of A Married Person Also Have To File Bankruptcy
No. In some cases where only one spouse has debts, it may make sense for only one spouse to file. Further, if the debts of the other spouse are not dischargeable it may not make sense for that spouse to file.
Both spouses are responsible for the debts acquired together while they are married. If you file for a bankruptcy on these joint debts, your creditors can pursue your spouse for payment. If you are living together, it may be wise for you to jointly file for bankruptcy.
If the debt belongs to you alone, the creditor cannot pursue your spouse for the debt after you file for bankruptcy. Before you make a decision on whether the debt is a joint debt or yours alone, you may want to ask an attorney.
If you co-signed for a debt with an unmarried partner or someone else, you cannot file jointly for bankruptcy. However, you can file separately.
You can protect a friend or relative who co-signed with you by filing for Chapter 13 bankruptcy. When you file under Chapter 13, creditors are not allowed to pursue your co-signers as long as you are keeping up the payments under the plan. As long as you pay the creditor as proposed by the plan, the creditors will not pursue the friend or relative who co-signed with you.
Read the Law: 11 U.S.C. § 1301
Can I Use Bankruptcy To Stop Foreclosure On My Home Or To Stop Other Actions By Creditors
Yes, actions against your assets or property will stop immediately . Filing for bankruptcy means that the court grants you an “automatic stay”. An automatic stay is an Order that arises from the Court and that Order stops your creditors from whatever actions they have been taking to collect from you. Creditors must immediately stop actions such as:
- repossessing your car,
- taking money from your bank account,
- cutting off your utilities, or
- taking actions to gain possession of other property on which you owe money.
The stay will prevent your creditors from taking action until the court lifts the stay. The stay is automatically lifted if the case is closed, dismissed or discharged.
Read the Law: 11 U.S.C. § 362
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Do The Courts Ever Deny A Chapter 7 Bankruptcy
It can happen. Most individual debtors receive a discharge under Chapter 7.
However, if the courts find that an individual concealed money or other assets, fraudulently transferred assets that should have been used to pay off debts, or otherwise broke the law, the entire bankruptcy case may be denied.
What Only Chapter 13 Bankruptcy Can Do
Chapter 7 and 13 each offer unique solutions to debt problems. The two bankruptcy types work very differently. For instance, how quickly your debt will get wiped out will depend on the chapter you file:
- Chapter 7 bankruptcy. This chapter takes an average of three to four months to complete. Learn more about erasing your debt in Chapter 7 bankruptcy.
- Chapter 13 bankruptcy. If you file for Chapter 13 rather than Chapter 7, you’ll likely have to pay back some portion of your unsecured debts through a three- to five-year repayment plan. However, any unsecured debt balance that remains after completing your repayment plan will be discharged. Find out how to pay off or discharge your debts in Chapter 13 bankruptcy.
Chapter 7 is primarily for low-income filers, and therefore, it won’t help you keep property if you’re behind on payments. But, if you have enough income to pay at least something to creditors, then you’ll be able to take advantage of the additional benefits offered by Chapter 13.
Here are some of the things that Chapter 13 can do.
Stop a mortgage foreclosure. Filing for Chapter 13 bankruptcy will stop a foreclosure and force the lender to accept a plan that will allow you to make up the missed payments over time. To make this plan work, you must demonstrate that you have enough income to pay back payments and remain current on future payments. Learn more about your home and mortgage in Chapter 13 bankruptcy.
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