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What is bankruptcy?
Bankruptcy is defined as a federal court procedure that is designed to aid businesses, as well as consumers to wipe out their debts, and structure to repay them under the protection of the bankruptcy court.
How common is bankruptcy in Canada?
In today's economy bankruptcy is very common, with bankruptcy on the rise. Statstic 2009 shows Canadian consumer bankruptcies were up 47% compared with the same month the previous year. Business bankruptcies were down by 0.4% compared with the same month the previous year. Proposals were up by 37% compared with the same month the previous year.
Why do people declare bankruptcy in Canada?
It can be due to sudden disasters: Majority of people in Canada file for bankruptcy due to lost of employement, illness, or increasing expenses. Loss Of Job is one of the most common reasons for people to file for bankruptcy in Canada. If a family goes from depending on two salaries month to month but all of a sudden it is reduced to one then bankruptcy is almost certain. Another reason can be to prevent your vehicle from being repossessed. If your vehicle has already been repossessed, filing for bankruptcy could force the creditor to return your vehicle. Another common reason is to stop the harassing phone calls. Many times creditors don't approach collecting debt the proper way. their abusive behavior is completely unnecessary and unethical. bankruptcy can put a hold on your account so that the inappropriate phone calls will a stop.
What are the different types of bankruptcies?
* There are three types of bankruptcies Chapter 7, Chapter11 and Chapter 13. However Chapter 7 and 13 are the most common types of bankruptcies.
Define Chapter 7 bankruptcy.
Chapter 7 bankruptcy is also known as a straight bankruptcy or liquidation. In this type of bankruptcy the debtors are allowed to keep certain type of property, this kind of asset is known as "exempt property" and the property they must give up is known as "non exempt property". When you file for Chapter 7 bankruptcy almost all your debts are discharged in exchange of certain property. In Chapter 7, all your "non exempt" property is handed over to the court appointed trustee who in turn sell some of these assets and distributes the cash to the creditors.
What is "Non exempt" property?
1. Pricey musical instruments assuming the debtor is not a professional musician.
2. Family heirlooms.
3. Collections of valuable items such as coins.
4. Bank accounts, bonds, cash and misc investments.
5. A non-primary or vacation home
6. A non-prmiary car or truck.
Exempt property include:
1. Household appliances, example: the dishwasher.
2. Primary vehicles, up to a certain value.
3. Reasonably priced requisite clothing.
4. Not luxury or expensive household goods and furnishings.
5. Jewelry, up to a certain value.
6. Pensions.
7. A part of unpaid but earned wages.
8. Equipments (up to a certain value) that are needed in the debtor’s profession.
9. Damages awarded for personal injury.
10. A part of equity in the debtor's home.
11. Public benefits, including social security, and unemployment compensation, public assistance (welfare) that is accumulated in a bank account.
What is Chapter 13 bankruptcy?
* Chapter 13 is also known as reorganization where you file a repayment plan with the bankruptcy court proposing how you will repay your defaults to your creditors.The amount of money you'll have to repay depends on how much you earn, the amount of debt you owe, the types of debt you have, and how much property you own. In a Chapter 13 bankruptcy, you don't have to hand over any of your assets to discharge your debts, but you must utilize your income to pay off your debts over the due course of time – it’s usually three to five years, depending on the amount of your debts and your income.
What are the reasons to file for Chapter 7 Bankruptcy?
* Usually a Chapter 7 bankruptcy case is opened and closed within four to six months. * Although you have to give up your non exempt property in Chapter 7 bankruptcy, but it lets you keep most of the necessities. Usually Chapter 7 is filed in cases where the debtor has no assets to lose.
What are the reasons to file for Chapter 13 bankruptcy?
* If you are having problems in paying off the secured loans (such as cars or houses) and need to catch up before foreclosure or repossession.
* It may also be appropriate if you have a tax obligation or a student loan that can not be discharged in Chapter 7. You can include these debts in the Chapter 13 repayment plan and pay them off over time.
* If you want to retain the non exempt property.
* If you have a co debtor on a personal loan. Filing for Chapter 7 bankruptcy will cause a big trouble for your co debtor (Incase you have a co debtor) on a personal debt. Your creditors will undoubtedly go after the co debtor for payment of the debts. If you file for Chapter 13 bankruptcy, the creditor will not disturb your co debtor for payments as long as you keep up with your repayment plan.
Who can file for bankruptcy?
Any individuals as well as businesses may file for bankruptcy.
In certain situations, a creditor who owes money through an involuntary procedure may be forced the filing of a bankruptcy proceeding. But, this is a very rare case.
Does Bankruptcy discharge all of your debts?
* When the individual files for bankruptcy it will discharge all your debts, so that no further legal action can be taken against you on those debts. But be aware, bankruptcy be it chapter 7 or 13, does not discharge all of your debts.