How Do You File Chapter 7 Bankruptcy
You can probably complete the process within six months. Youll have to follow several steps.
Find an attorney:Before diving into the various forms required to file Chapter 7, find a qualified bankruptcy attorney to help. Its hard to find money for a lawyer when you need debt relief, but this is not a DIY situation. Missing or improperly completed paperwork can lead to your case being thrown out or not having some debts dismissed.
File paperwork: Your attorney will help with filing your petition and other paperwork. But its on you to gather all relevant documentation of your assets, income and debts. An automatic stay goes into effect at this point, meaning that most creditors cannot sue you, garnish your wages or contact you for payment.
Trustee takes over: Once your petition is filed, a court-appointed bankruptcy trustee will begin managing the process.
Meeting of creditors: The trustee will arrange a meeting between you, your lawyer and your creditors. Youll have to answer questions from the trustee and creditors about your bankruptcy forms and finances.
Your eligibility is determined: After reviewing your paperwork, the trustee will confirm whether youre eligible for Chapter 7.
Secured debts: To resolve your secured debts, the property held as collateral may be ordered returned to the creditor. Or you may be able to redeem the collateral or reaffirm the debt .
How Does Bankruptcy Work
Bankruptcy is a method to eliminate or at least reduce your debt when bills pile up beyond your ability to repay them. It should be viewed as a last resort to be considered only when all other potential courses of action to get back on track have been exhausted.
Individuals filing for bankruptcy mostly use either Chapter 7 or Chapter 13. The biggest difference between the two is what happens to your property:
- Chapter 7, which is known as liquidation bankruptcy, involves selling some or all of your property to pay off your debts. This is often the choice if you don’t own a home and have a limited income.
- Chapter 13, also known as a reorganization bankruptcy, gives you the chance to keep your property if you successfully complete a court-mandated repayment plan that lasts between three and five years.
Depending on where you live and your marital status, some of your property may be exempt from being sold when you file Chapter 7 because of state-specific and federal exemptions. With exemptions, whether they be your home equity, retirement accounts or even personal possessions such as jewelry, you receive the allowed exemption amounts, and the rest of the proceeds will be used to pay off debts. You can read more about potential exemptions, and check out this chart for a quick rundown on the two types:
| Chapter 7 |
|---|
- Child support or alimony
- Student loans
Avoid Bankruptcy Fraudconsult With A Bankruptcy Lawyer
Rest assured that it’s unlikely for a debtor to face fraud allegations without warning. Most filers are fully aware of their past actions and know to expect a possible fraud accusation. If this is a concern, consult with a knowledgeable bankruptcy attorney.
Other individuals considering filing for bankruptcy can take steps to avoid fraud allegations by transparently disclosing financial information. For instance, a debtor should be prepared to list all income, property, creditors , and prior transactions . You can learn what you’ll disclose by reviewing the official bankruptcy paperwork.
Don’t Miss: How To Buy A New Car After Bankruptcy
About Licensed Insolvency Trustees
In a bankruptcy, people or companies who can no longer pay their debts give all of their non-exempt property to a Licensed Insolvency Trustee who then sells it and distributes the money to creditors. Bankruptcy can be voluntary or forced by a creditor through the Courts.
Roughly 90 percent of bankruptcies in Canada are consumer bankruptcies where the business-related debts make up less than 50 percent of the bankrupt’s total debts.
When the bankrupt’s realizable assets do not exceed $15,000, the bankruptcy may be processed under summary administration. Almost all consumer bankruptcies are processed this way.
Bankruptcies processed as summary administrations are simpler for example, they don’t require a meeting of creditors. If your debtor’s bankruptcy is to be handled as a summary administration, you will find a notation saying so near the top of the documents you receive.
As soon as the debtor is declared bankrupt, creditors can no longer start or continue legal proceedings against the debtor without the Court’s permission.
If you are a secured creditor, however, you can take possession of the asset on which you hold a security unless the Court, under certain conditions, orders otherwise. For example, a bank holding a security on a car may take possession of the car and sell it even if the debtor has declared bankruptcy.
Myth #: You Will Never Get Credit Again If You File For Bankruptcy
Not true. Although a bankruptcy can stay on your credit report for up 10 years from the date of filing, you can start rebuilding your credit as soon as your bankruptcy is closed and discharged. Many of our clients purchase new homes, vehicles, and even qualify for credit cards a few months after the bankruptcy is concluded. In fact, many creditors will start offering credit right after the discharge. With proper planning and counseling, you can get new credit much sooner than expected.
You May Like: How Many Times Has Trump Declared Bankruptcy
What Happens To Your Credit Rating After Discharge
The official receiver wont tell the credit agencies when your bankruptcy ends. You may need to ask the credit agencies to update their records to include details of your discharge.
The bankruptcy can stay on your record for 6 years after the date of the bankruptcy order.
Read more on this in the Information Commissioners Office Credit explained document.
Certain Consumers In Bankruptcy
1. Consumer’s representative. If an agent of the consumer, such as the consumer’s bankruptcy counsel, submits a request under § 1026.41 or , the request is deemed to be submitted by the consumer.
2. Multiple requests. A consumer’s most recent written request under § 1026.41 or that the servicer cease or continue, as applicable, providing a periodic statement or coupon book determines whether the exemption in § 1026.41 applies.
3. Effective upon receipt. A consumer’s written request under § 1026.41 or is effective as of the date of receipt by the servicer.
4. Bankruptcy case revived. If a consumer’s bankruptcy case is revived, for example, if the court reinstates a previously dismissed case or reopens a case, § 1026.41 may apply again, including the timing requirements in § 1026.41.
Don’t Miss: Trump How Many Bankruptcies
Types Of Corporate Bankruptcy
The type of bankruptcy proceedingsChapter 7 or Chapter 11generally provides some clue as to whether the average investor will get back all, a portion, or none of their financial stake. But even that will vary on a case-by-case basis. There is also a pecking order of creditors and investors, which dictates who gets paid back first, second, and last . In this article, well explain what happens when a public company files for protection under Chapter 7 or Chapter 11 and how that affects its investors.
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.
Read Also: Can Restitution Be Discharged In Bankruptcy
Global Financial Crisis Of 2008
As the Financial Times noted during the fall of 2008, the 2005 changes made clear that certain derivatives and financial transactions were exempt from provisions in the bankruptcy code that freeze a failed companys assets until a court decides how to apportion them among creditors. This radically altered the historic process of paying off creditors and did so just a few years prior to trillions of dollars in assets going into liquidation as a consequence of bankruptcies following from the global financial crisis of 2008.
Some observers have argued that this contributed to the financial crisis of 2008 by removing the incentive that creditors would normally have to keep a borrower out of bankruptcy. Institutions who provided short-term funding to financial firms such as Bear Stearns and Lehman through repo lending could abruptly withdraw that funding even if it risked pushing the firms into bankruptcy, because they did not have to worry about tying up their claims in bankruptcy court, due to the new safe harbor provisions of BAPCPA.
On October 4, 2009, FDIC Chair Sheila Bair proposed imposing a haircut on secured lenders in the event of a bank default, in order to prevent this kind of short-term funding run on a troubled bank. This would ensure that market participants always have some skin in the game, and it would be very strong medicine indeed, Bair said.
Your Obligations When You’re Bankrupt
You must:
- give the Official Receiver details of your finances, assets and creditors
- look after your assets and hand them over to the Official Receiver with the relevant paperwork, such as bank statements and insurance policies
- tell your trustee about any new assets or income during your bankruptcy
- stop using credit cards and bank or building society accounts
- not get credit over £500 without telling the creditor that you’re bankrupt
- not make payments direct to your creditors
You may be able to open a basic bank account once you are bankrupt.
Even after the bankruptcy period, you may find it difficult to get credit. The Official Receiver does not send any form of notice to credit reference agencies.
Details of your bankruptcy are also kept on the Insolvency Register which is maintained by the Bankruptcy and Chancery Office at the High Court and contains records of all insolvencies in Northern Ireland for the last ten years.
Don’t Miss: How Many Times Has Trump Filed Bankrupcy
What Does It Cost To File For Bankruptcy
It currently costs $338 to file for bankruptcy under Chapter 7 and $313 to file for bankruptcy under Chapter 13 . The filing fee is paid to the Bankruptcy Court and must be paid in cash, bank draft, certified check or money order.
If you cant pay the filing fee all at once, the court may allow you to pay this filing fee in installments. You must file an application requesting permission to make installment payments. If you cannot pay the filing fee in installments, have a very low income and do not have a lot of valuable property, you may request that the court waive the filing fee. Although occasionally there are some exceptions, generally if you hire an attorney you will have to pay the attorney and the filing fee.
Chapter 12 And Chapter 13 Consumers
1. Pre-petition payments and post-petition payments. i. For purposes of § 1026.41, pre-petition payments are payments made to cure the consumer’s pre-bankruptcy defaults, and post-petition payments are payments made to satisfy the mortgage loan’s periodic payments as they come due after the bankruptcy case is filed. For example, assume a consumer is $3,600 in arrears as of the bankruptcy filing date on a mortgage loan requiring monthly periodic payments of $2,000. The consumer’s most recently filed bankruptcy plan requires the consumer to make payments of $100 each month for 36 months to pay the pre-bankruptcy arrearage, and $2,000 each month to satisfy the monthly periodic payments. Assuming the consumer makes the payments according to the plan, the $100 payments are the pre-petition payments and the $2,000 payments are the post-petition payments for purposes of the disclosures required under § 1026.41.
2. Post-petition fees and charges. For purposes of § 1026.41, post-petition fees and charges are those fees and charges imposed after the bankruptcy case is filed. To the extent that the court overseeing the consumer’s bankruptcy case requires such fees and charges to be included as an amendment to a servicer’s proof of claim, a servicer may include such fees and charges in the balance of the pre-petition arrearage under § 1026.41 rather than treating them as post-petition fees and charges for purposes of § 1026.41.
Read Also: Filing For Bankruptcy In Texas Without A Lawyer
How Do I Find Out If A Person Or A Business Has Declared Bankruptcy
The easiest way to find out if a person or a business has declared bankruptcy is to do an online search of bankruptcy and insolvency records. The records contain basic debtor information for all bankruptcies and proposals registered in Canada since 1978.
There is a minimum charge of $8 per search and you can pay by credit card .
How Your Creditors Are Paid
The official receiver will take control of your assets unless an insolvency practitioner is appointed. An insolvency practitioner is usually an accountant or solicitor.
The person who takes control of your assets is known as the trustee. The law says you must cooperate fully with them.
The trustee will sell your assets and tell the creditors how the money will be shared. Creditors must then make a formal claim. You cant make payments directly.
If you have assets, money from the sale of these will be used to pay the costs of the bankruptcy process before creditors are paid. If your case is administered by the official receiver the following fees will all be deducted from the money realised:
- an administration fee of £1,990 if you applied for your own bankruptcy or £2,775 if someone else applied
- a general fee of £6,000
- 15% of the total value of assets realised
- a fee charged at an hourly rate where money is paid to creditors
If there are insufficient assets in your case the official receiver will still process your bankruptcy.
Next, money will be used for:
- certain debts in relation to employees, if you had any
- your other creditors
- interest on all debts
Any money left over will be returned to you. If everyone is paid in full you can apply to have your bankruptcy cancelled .
Recommended Reading: How Many Bankruptcies Has Donald Trump Filed
What Happens To Your Motor Vehicle
Your motor vehicle will be sold to pay for your bankruptcy debts, unless you need it:
- for your work or vocation
- to meet basic domestic needs where alternative transport is not practical
If the official receiver agrees you need the vehicle, it will be classed as exempt and not included in your bankruptcy. This does not apply if you own your vehicle through an ongoing hire purchase agreement .
If you are allowed to keep the vehicle you remain responsible for road tax, MOT and insurance.
If your vehicle is exempt but valuable it can be replaced with a cheaper alternative. The official receiver will use the money from the sale to either pay for the new vehicle directly or give you the money to buy one. You must provide proof of purchase for your new vehicle within 1 month. The guide price for a replacement is £1,000.
Stop the sale of your vehicle
If your vehicle is not exempt you may be able to keep it if a third party can pay to transfer it to them for you and you provide a:
- current insurance certificate
- vehicle registration document
- a valid MOT
The price paid will be the market value of the vehicle but must at least cover the agents costs for the sale of the vehicle.
If you dont want to keep the vehicle the official receiver will dispose of it.
Vehicles under finance agreements
A finance agreement can be a:
- hire purchase
- conditional sale
- leasing agreement
If the trustee decides they wont be claiming the vehicle they will give notice to you and the finance company.
Payments From Your Income
If you can afford it, the trustee will ask you to make regular payments towards your debts from your income through an income payment agreement . You enter an IPA voluntarily, but theres a written binding agreement between you and the trustee.
If your main or only income is state benefits, the trustee will not normally try to get an IPA.
If you cant agree on payment amounts for an IPA, the trustee can apply for an income payment order . If you dont meet these payments, the trustee can then apply to extend your bankruptcy.
The payments will come from surplus income .This is money you have left after paying your living expenses. Normally you will have to pay all of this surplus income as your IPA payment.
Payments normally last for 3 years . The court wont make an IPO if it leaves you without enough money to meet everyday needs.
The official receiver may use private debt collection agencies to collect the payments.
A fee will be charged in all bankruptcy cases where an IPA or IPO is set up. The fee is set at £150 which will cover the specific costs incurred by the Official Receiver of arranging and setting up your IPA / IPO and will be collected from the first payments you make into the arrangement. This fee is only chargeable on cases where a bankruptcy application was made or a petition presented on or after the 21 July 2016.
Don’t Miss: Bankruptcy Lawyer Software
Myth #: Personal Bankruptcy Will Ruin Your Family
Lots of things lead to family problems, but bankruptcy may actually offer a solution to some of your problems. You may be on the brink of divorce because of your financial crisis. Our Firm sees this a lot. In some cases, you can put a stop to the family problem by filing for bankruptcy and getting a fresh, financial start.
Although filing for bankruptcy can be a very difficult decision in your life, the absence of all this stress may give your relationship a fighting chance.
Need more information about bankruptcy? Please at 281-888-5581. The road to financial freedom starts here.
Get Answers. Get Help.