Preparing for personal bankruptcy | Biz Brain

Q. I had a failed company and I have three judgments against me personally. Could I get rid of them if I file for bankruptcy?
— Planning

A. It depends.

Assuming that you are otherwise eligible to receive a discharge in a bankruptcy case, a personal guaranty of business debt is, generally speaking, dischargeable, said Ilissa Churgin Hook, a bankruptcy attorney and member of Hook amp; Fatovich in Wayne.

She said most individuals seek relief either under Chapter 7 or Chapter 13 of the United States Bankruptcy Code.

Heres how it works.

Generally, in a Chapter 7 case, a debtor seeks a discharge from his or her debts in exchange for exposing his or her assets to an examination by a third party trustee, who acts as a fiduciary for creditors, Hook said.

Hook said one of the trustees obligations is to look for assets that have equity — after taking into account the costs of sale, any liens against the asset, and any relevant bankruptcy exemptions — and can be liquidated to pay creditors.

Chapter 13 is different. This filing is an option available to an individual or a married couple with regular income seeking to reorganize debts and retain assets, Hook said. A Chapter 13 case normally lasts three to five years and involves a payment plan that allows a debtor to repay debts over time.

So your first question is whether you are eligible for a bankruptcy discharge, and which chapter of the bankruptcy code you should use.

For example, Hook said, you may desire to wipe out your debts in a Chapter 7, but if you own an asset that has equity, such as a house, the filing of a Chapter 13 case in which you pay back part or all of your debts — including the judgment debts — in exchange for retaining your interest in your home may be more appropriate for you.

Hook said you may also fail to qualify as a Chapter 7 debtor if your household income is over a certain limit. This varies depending on the county in which you reside.

Further, she said, if there was any fraud involved in obtaining the underlying debt owed to the judgment creditors — for example, if you or your company submitted false financial information in order to obtain a loan — the creditor may object to your attempt to discharge that debt.

And, you may be barred from filing a bankruptcy petition for a certain period of time if you had a prior bankruptcy case, Hook said.

She said assuming that you qualify for a Chapter 7 discharge, you should be able to discharge, or wipe out, your personal liability on the judgment debt.

If the judgment creditor has filed a lien against your home, that lien can be avoided in your bankruptcy case if you file a bankruptcy petition within 90 days of the attachment of the lien, she said.

If however, the judgment lien is already more than 90 days old, a discharge in bankruptcy will relieve you of any personal liability to pay the judgment — meaning that the creditor cannot attempt to collect from you, seize a bank account, or garnish your paycheck — but the lien will survive the bankruptcy and remain a lien against your home even after your bankruptcy case is closed, she said.

You could file a motion in the state court one year after your discharge and request that the lien be removed as of record.

Sounds like its time for you to sit down with an attorney who specializes in bankruptcies to see if any of the options are right for you.

Email your questions to Ask@NJMoneyHelp.com.

Karin Price Mueller writes the Bamboozled column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. Find NJMoneyHelp on Facebook. Sign up for NJMoneyHelp.coms weekly e-newsletter.

The Legal Minute with Cooley Shrair: tuition clawbacks

CHICOPEE, Mass. (Mass Appeal) – In this Legal Minute with the Law Office of Cooley Shrair in Springfield, Attorney John Davis explained what an individual considering personal bankruptcy should know about tuition claw backs.

Cooley Shrair
1380 Main Street,Springfield

For more information call(413) 781 – 0750or visitwww.CooleyShrair.com.

About Cooley Shrair:
Cooley, Shrair PC, founded in 1946 by Judge Sidney M. Cooley and Attorney Edward B. Cooley, is a progressive law firm located in Springfield, MA. Cooley Shrair provides unequaled service to its clients. Our unparalleled response time to our clients’ needs is the foundation of our mission statement.

At Cooley Shrair, family and business have always had a way of blending together. We know the importance of balancing the boardroom and the courtroom with the living room from time to time. We listen carefully to understand our clients’ concerns and work vigorously with them to develop strategies for success. It’s not just business, it’s personal.

We pride ourselves in being the most responsive lawyers in the area, covering virtually every area of practice for individuals and multinational corporations across the United States and Canada. Cooley Shrair is recognized consistently for exceeding client expectations and providing competent, integrated, and cost-effective legal services.

Our attorneys are each distinguished in their respective areas of concentration and are complemented by a professional support staff. Cooley Shrair is a formidable opponent who fiercely advocates on behalf of our clients and we take pride in our commitment to provide unparalleled response and unparalleled solutions.

We’re a family, and to us, that’s very personal business.

Promotional Consideration Provided by: Cooley Shrair

Re-raising an argument previously dismissed on its merits – an abuse of process?

The Court of Appeal, in the case of Harvey v Dunbar Assets plc [2017] EWCA Civ 6, has held that it constitutes an abuse of process for a debtor to seek to set aside a second statutory demand on the basis of an argument previously raised and dismissed by the Court on its merits.

The background

In 2008, Mr Harvey gave a personal guarantee in favour of Dunbar Assets Plc (Dunbar) as security for the borrowing of a company. The guarantee was called in by Dunbar and a statutory demand accordingly served on Mr Harvey. Mr Harvey applied to set the statutory demand aside on the basis of a promissory estoppel argument to the effect that Dunbar had purportedly assured Mr Harvey that the guarantee would never be called in.

At first instance, the District Judge considered the argument but dismissed the application on its merits (or lack thereof). Mr Harvey was subsequently successful in his appeal against the dismissal of his application but his success at appeal stage was based on a completely separate argument relating to a technicality regarding the execution requirements of the guarantee. Mr Harvey’s promissory estoppel argument had been specifically abandoned.

Some years later, a second statutory demand was served on Mr Harvey for the same debt. Mr Harvey made an application to set aside this secondary statutory demand on the ground of the promissory estoppel argument which had previously been considered and dismissed by the Court. Mr Harvey’s application was dismissed at first instance, following which Mr Harvey appealed the decision to the High Court. In the High Court, Judge Kaye QC applied the principle laid down in the leading authority of Turner v Bank of Scotland plc [2000] BPIR 683 and held that where there had been a previous decision on the merits of an application, unless there had been a change of circumstances or other valid reasons to do so, the Court would not allow the debtor to re-raise arguments previously raised.

Mr Harvey was granted permission by Lewison LJ to appeal Judge Kaye QC ‘s decision to the Court of Appeal.

The Court of Appeal’s decision

The Court of Appeal upheld the decision made in the High Court and deemed it an abuse of process for a debtor to repeatedly dispute a debt through the course of a bankruptcy procedure where the debtor’s arguments had previously been considered and dismissed on their merits. For the Court to continually reconsider arguments previously heard and determined would be waste of the Court’s time and a waste of the parties’ money.

Henderson LJ also noted that during the course of a personal bankruptcy procedure, there are multiple stages at which a debtor has the opportunity to raise a dispute about his alleged indebtedness to the creditor. These stages include:

-An application to set aside the statutory demand;

-The bankruptcy petition hearing;

-An application under section 375 of the Insolvency Act 1986 to review, rescind or vary any order;

-An application to annul a bankruptcy order under section 282 of the Insolvency Act 1986.

In the circumstances of this case, the Court of Appeal upheld Judge Kaye QC’s finding that there were no special or exceptional circumstances which justified the re-opening or re-arguing of the promissory estoppel argument. Mr Harvey’s appeal was dismissed.

What we can learn from this

The Courts have now made it abundantly clear that barring any exceptional circumstances or a change in circumstances, they will not entertain an attempt by a debtor to raise arguments which have already been heard and dismissed on their merits, nor will they entertain an attempt by a debtor to raise arguments which should properly have been raised to the Court at an earlier stage.

This should be a sobering lesson to debtors who erroneously believe that the most effective method by which to put forward their position to the Court is to advance every argument available to them regardless of their prospects of success. Similarly, this case serves as a useful addition to a practitioner’s arsenal when faced with the possibility of re-litigating a point which has been raised (or should have been raised) previously.

Harvey v Dunbar Assets plc [2017] EWCA Civ 6

Do ‘No Money Down’ Bankruptcies Help or Hurt Debtors?

By
Diane Davis

The “no money down” bankruptcy, where debtors pay nothing in attorneys’ fees before
filing for Chapter 13 bankruptcy, is a nationwide phenomenon reshaping the consumer
bankruptcy system.

Chapter 7 bankruptcy, in contrast, requires the immediate payment of attorneys’ fees.

Though “no money down” might sound like a good idea to the broke consumer desperately
thinking about filing for bankruptcy, empirical data from a recent national study
suggests that “no money down” filers pay $2,000 more and have their cases dismissed
at a rate 18 times higher than if they had filed Chapter 7. That means they don’t
get the relief from the debt that prompted them to file bankruptcy in the first place.

Researchers who have been studying people who file Chapters 7 and 13 in a long-term
consumer bankruptcy research project recently released a
report entitled “‘No Money Down’ Bankruptcy.” Authors Pamela Foohey, Robert M. Lawless,
Katherine Porter and Deborah Thorne raise questions about how people access the bankruptcy
system and the extent of the benefits they get from it.

“The study is an important addition to a growing and persuasive body of research showing
that personal bankruptcy law is not race-neutral in application, even if individual
professionals have no express intent to discriminate,” Melissa Jacoby
, a law professor at University of North Carolina at Chapel Hill who teaches bankruptcy
law, told Bloomberg BNA March 13.

Jacoby was a co-principal investigator on a 2007 multi-researcher, long-term project
to understand the people who file bankruptcy and why, but had no role in the current
study.

The current study analyzes data from 2007, and 2013-2015, which allows for the collection
of data on a continuing basis and the creation of a database that “incrementally builds”
and will allow for comparisons over time, the report states.

“The authors and principal investigators are among the most careful demographers of
consumer bankruptcy working in the field today, and the model of collecting a national
random sample, as is done here, is imperative–particularly given that the government
sharply limits the demographic information it requires on bankruptcy petitions,” Jacoby
said.

Flaws in the System?

The “no money down” bankruptcy is a “buy now, pay later,” scheme that is “economically
inefficient”
but also affects consumers’ “access to justice,”
the report concludes. More than one million people file bankruptcy every year, according
to bankruptcy statistics from the Administrative Office of the US Courts.

The purpose of the report isn’t to criticize or point fingers at bankruptcy attorneys
who are the “gatekeepers”
to the system, but to “open up a conversation about what will make the bankruptcy
system more effective for the stakeholders in it,” Professor of Law Robert Lawless,
of the University of Illinois College of Law, Champaign, Ill., told Bloomberg BNA
March 8.

Stakeholders include attorneys, judges, advocates, trustees and debtors, he said.

The empirical data from the study is a national random sample and shows patterns across
the entire country, Lawless said.

The data reflects “the present world as it is,” Associate Professor of Law Pamela
Foohey, of the Indiana University Maurer School of Law, Bloomington, Ind., told Bloomberg
BNA March 10.

There has never been a national study on this topic, Foohey said. The study “goes
where the data takes you,”
she said.

The data shows that we have an inefficient bankruptcy system, Foohey said. “Money
is influencing access to the legal system that helps people deal with money problems,”
she said.

Choosing Which Chapter

In Chapter 7 bankruptcy, a debtor gets a quick discharge –his or her debt is wiped
out–but must give up assets that aren’t exempt. In Chapter 13 bankruptcy, a debtor
must make monthly payments to complete a three-to-five year repayment plan before
receiving a discharge, but most debtors can keep property like their homes and cars
as they make plan payments.

Typically, debtors pay an attorney an average of $1,229 up front before their attorney
files a Chapter 7 bankruptcy. Attorneys charge an average of $3,217 to file a Chapter
13 bankruptcy because it is more complicated than filing a Chapter 7 and takes longer,
but debtors can pay attorneys’ fees over time as part of their case.

More than 95 percent of people who file under Chapter 7 receive a discharge, whereas
only about one-third of debtors in Chapter 13 cases end in a completed repayment plan
so that they receive a discharge. Most Chapter 13 bankruptcies end without debt forgiveness,
according to the report.

Most people who need to file bankruptcy will hire an attorney. As a result, attorneys
play a significant role in determining which chapter of the Bankruptcy Code their
case is filed under.

The two most significant predictors of whether a consumer files a “no money down”
bankruptcy are a person’s place of residence and a person’s race, according to the
report. Debtors who live in judicial districts with high Chapter 13 filing rates are
more likely to file “no money down” cases, and African Americans are more likely to
file “no money down”
Chapter 13s than other debtors, the report says.

ABI’s New Commission

The timing of the research study coincides with the American Bankruptcy Institute’s
March 13 announcement of the creation of a commission to modernize the consumer bankruptcy
system “with practical and cost-effective recommendations.”

The commission, which will be co-chaired by retired bankruptcy Judges William Houston
Brown and Elizabeth Perris, will consist of 15 experts who represent various stakeholders
in the consumer bankruptcy system. One of the study’s authors, Robert Lawless, is
the commission’s reporter.

The commission expects to issue a final report in December 2018.

The “No Money Down” study is an “important empirical work” of “careful and fair scholarship,”
Prof. Angela Littwin, of The University of Texas School of Law, Austin, Tex., told
Bloomberg BNA March 13. Littwin studies bankruptcy, consumer and commercial law from
an empirical perspective. She was a principal investigator on the 2007 consumer bankruptcy
project but wasn’t involved in the current study.

The ABI’s commission will find the study useful and will take it “seriously” when
making their policy proposals, Littwin said.

Attorneys as Gatekeepers

Attorneys play an important role in bankruptcy as they are the “gatekeepers” to the
system, Lawless said.

Attorneys have a duty to advise clients which bankruptcy chapter to file under based
on the best interests of the client, Lawless said. The “no money down” Chapter 13
filing may be in the client’s best interests in that particular case, he said.

“No money down” Chapter 13s, however, create a “fundamental tension between attorneys’
and debtors’
interests, the report states. Attorneys may prefer that their clients file under Chapter
13 even if some debtors can pay attorneys’
fees up front. They spend more time on Chapter 13s than Chapter 7 cases, which allows
attorneys to charge their clients more money.

“‘No money down’ Chapter 13 simply is good business,” according to the report. Based
on the data, attorneys may be placing their business interests above their client’s
financial interests, the report states.

The report is important in “untangling race and Chapter 13s,” Littwin said. Based
on the report’s findings, attorney steering likely played a role in the large numbers
of African Americans filing Chapter 13 bankruptcy, she said.

In districts where there are higher rates of Chapter 13s filed, attorneys are expected
to put clients in Chapter 13, Littwin said. Filing Chapter 7 in those districts will
be challenged, she said.

Timing of Paying Fees

One solution to combat the effects of the “no money down” bankruptcy is to allow debtors
to pay bankruptcy attorneys’ fees in installments during their Chapter 7 cases, Foohey
said.

Eliminating the different treatment of attorneys’
fees in Chapter 7 and Chapter 13 should allow debtors to make the chapter choice based
on their needs, the report states.

It would also “align Chapters 7 and 13 on how consumer attorneys collect fees from
clients,” Foohey said.

This change would involve amending the Bankruptcy Code and would be the “cleanest”
solution, Lawless said. It would require congressional action though, which Lawless
said is unlikely at the moment.

Littwin agrees with the report’s conclusion that reforming the timing of when debtors
pay attorneys’ fees in Chapter 7 is the “superior approach.”

Revise Judge’s Standing Orders

Another possible reform would be to change the standing orders in bankruptcy courts
that typically set a “no look” attorneys’ fee for Chapter 13 cases, the report states.
These “no look” fees are for routine Chapter 13s and give attorneys assurance that
if they charge their clients no more than that amount, the bankruptcy court will approve
their fees.

The standing orders could be changed to provide that the “no look” fee will apply
only if the debtor has paid 25 percent or more in attorneys’ fees prior to filing,
the report states.

The “no look” fee could only apply in cases where the Chapter 13 plan contemplates
substantial repayment to creditors.

Revisions to standing orders are much more likely to happen and would require only
changes to local practice and the local rules in a district, Lawless said.

Publicizing this report and encouraging bankruptcy attorneys, trustees and judges
to take a look at their data is one way to get changes made to those standing orders,
Foohey said. Judges write those standing orders and they are more likely to give the
data consideration and change those orders, she said.

New Requirements for Ch. 13 Plans

The requirements for confirmation of Chapter 13 plans could also be modified to include
a condition that the plan must make a substantial repayment to creditors, Foohey said.
This would be the least likely revision to happen because it involves a substantial
change to the Bankruptcy Code, she said.

Under this proposal, bankruptcy judges could set a standard for “substantial” that
takes into account the debtor’s circumstances. The “substantial” requirement might
eliminate “fee only” Chapter 13 plans.

This change isn’t meant to “rule out the ability to do ‘fee only’ plans, but attorneys
should be aware that they will be targeted for more judicial scrutiny,”
Foohey said.

To contact the reporter on this story: Diane Davis in Washington at
DDavis@bna.com

To contact the editor responsible for this story:
Jay Horowitz at
JHorowitz@bna.com

More millennials grappling with high debt loads, says bankruptcy trustee

Rob Kilner gets a lot of visits from cash-strapped millennials. The Barrie, Ont.-based licensed insolvency trustee says there’s been a decided uptick – 20 per cent over the past five years – in the number of twenty- and thirtysomethings who are seeking solutions to their debt woes.

Many are homeowners.

“I’m seeing more and more [millennials]. It’s a substantial increase. Every time you see a millennial walk into your office – it’s disturbing,” he says.

Part of the problem, Mr. Kilner says, is how easy it is to borrow money these days. Credit cards are all-too-easy to obtain, and payday loans are just a click away. Those issues, combined with a lack of financial education and soaring housing costs, are laying the groundwork for a troublesome financial future, he says.

Millennials with part-time or contract work: We want to hear from you

Our tool: Is your mortgage leaving you house poor?

Research highlights this trend. Thirty-one per cent of millennial respondents feel it’s not a “big deal” if they carry a balance on their credit cards, according to a November, 2016, survey by Manulife Financial. The survey also showed that millennial homeowners, those between ages 20 and 34, report the lowest median amount of emergency funds among those surveyed at just $3,500.

According to the Bank of Canada, the steady inc rease in the country’s household debt has been driven by highly indebted households under the age of 45, which doubled to 8 per cent of all indebted households in 2012-14 from 4 per cent in 2005-07.

Mr. Kilner says the bulk of his younger clients come in after they have defaulted on a high-interest loan on a vehicle or on a payday loan. “Millennials are very susceptible to that – because theyve grown up [with debt].”

Although the Office of the Superintendent of Bankruptcy Canada doesn’t track millennials specifically, there was a 4.4-per-cent jump in the number of consumer debt-settlement proposals to creditors. Such appeals are made as a last resort before being forced to file for personal bankruptcy. Across Canada, that number increased to 125,907 proposals in September, 2015, from 120,261 a year earlier.

Trevor Pringle, a licensed insolvency trustee with Hamilton-based Spergel, says his clients typically have high levels of credit-card debt and student loans.

“People more readily carry debt,” says Mr. Pringle.

“The credit card companies grant them the credit cards, and they use them and they don’t have the means to pay them back,” he says. “They also have student loans that are not dischargeable, which complicates their situation,” he says, in reference to debts that are not eliminated by declaring bankruptcy.

Home buying: a whole new layer of debt

Dave Bryant, a Toronto-based mortgage broker, spends a lot of his time talking millennials out of buying homes. “It has cost me business,” he admits.

He says most of his younger clients have between $20,000 and $30,000 in student debt, have low-paying jobs or work on commission – which means their earnings can vary wildly year to year.

But despite being laden down with debt, many still aspire to home ownership. “Most millennials are looking to buy the preconstruction condos,” says Mr. Bryant, following the advice of a realtor who tells them it’s a good investment plan. Armed with a down payment from their parents, they then apply for a letter of preapproval for a mortgage.

And that’s where they run into trouble, he says.

“You actually have to qualify for that letter of pre-approval,” says Mr. Bryant, something that can’t happen if a person has only worked for six months to a year – a category many millennials fall into.

Plus, “they need to create that credit file,” says Mr. Bryant, adding that millennials need to demonstrate they have a solid credit history with a card of their own – not a joint account with a parent. He suggests establishing good credit by putting small purchases consistently on a credit card – and paying them off entirely each month.

Mr. Bryant also counsels millennials to pay their debt off before taking on the financial burden of a condo or house. “You need to pay that down,” he says. “[Debt from student assistance programs] is not going to go away.”

For those millennials who have taken the plunge and bought a home recently, the debt can quickly become insurmountable. “If we see a millennial and home owner -and they’re bought recently – these loans are very high,” says Mr. Kilner. “To own a house right now, there’s a very high mortgage. And the income stream hasn’t kept pace.”

He says many millennials are spending over half their take-home income on mortgages. But they still have to cover utilities, living expenses and food. That’s where the Visas and MasterCards come in. “They end up living off credit,” says Mr. Kilner.

Click here to see if you can afford a mortgage, and the rest of your real life expenses.

Mr. Pringle says that although he does see clients who are house-poor, “one of the reasons people have been able to avoid insolvency is that they’ve been able to leverage their equity in their houses with rising house prices.”

That situation likely won’t last. “At some point down the road, they’re going to be in a situation where house prices aren’t rising and they won’t be able to leverage that equity and they’re going to have to deal with it,” says Mr. Pringle.

Mr. Kilner is bracing for more clients when interest rates rise. Right now, he sees six to seven millennials a month – up from one every six months just a few years ago – who come in to file a consumer proposal, an appeal to creditors, or file for bankruptcy.

“As interest rates start to increase, that’s when we will see a lot more losing their houses,” he says.

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Anita Burroughs: Winners and losers in new health plan

Lets look at the winners.

This group includes young people who can stay on their parents policies until they are 26. This is a good thing in a region where so many people are working two or even three jobs to survive. And the AARP estimates that Americans ages 20-29 will save $700-$4,000 per year on their health insurance, also a positive development.

The losers in this new plan in our community include the elderly, as the new plan allows the insurance companies to charge these individuals at a higher rate. Older people will now pay approximately five times what younger people pay, rendering insurance out of reach for many seniors.

Lower-income individuals in our valley who rely on Medicaid will be in serious jeopardy, as this bill would end Medicaid as we currently know it. This includes children, who might have no recourse in the event of a serious illness.

The winners in the new health plan will be the wealthy, as health care tax credits will no longer be based on income. The new plan will make a priority of repealing substantially all the tax increases in Obamacare, most of which fall on people who make over $200,000 a year

Cancer is the largest cause of personal bankruptcy in our country for working Americans. The out of pocket (after insurance) costs to treat cancer can exceed $50,000-$100,000 per year, which will be prohibitive for those with or without insurance.

Another issue that has not gotten much attention in the media is that without health insurance, more and more people will be using their local hospitals emergency room for their medical care. This means that the cost of uninsured patients in our valley will shift to Memorial Hospital, which could over time seriously jeopardize this valued institutions financial viability. It also means that an abdominal cat scan with contrast, with an actual cost of approximately $295 to the hospital, will cost patients thousands of dollars.

In New Hampshire, the cost to the patient for this procedure ranges from $750 to $2,200. This is because community hospitals such as Memorial will be forced to subsidize the healthcare of those individuals who cannot afford insurance or who are unable or unwilling to pay their bill.

Lets for a moment forget about which side of the aisle you sit on … Democrat or Republican. Lets think about how our choices about health care will impact our neighbors, the elderly, the disabled, our children and our local hospital. This is a choice that will impact thousands of individuals in our own backyard. We are hopeful that there will be a consensus as to the importance of looking out for those of us who rely on affordable health insurance to live full and healthy lives.

Leonissa Langbehn-Abraham, North Conway
Anita Burroughs, Glen
Tom Dean, North Conway
Brenda Donnelly, Conway
Karla Ficker, Fryeburg
Suzie Laskin, Chatham
Stephanie Macomber, Conway
Virginia Moore, Conway
Sandi Poor, Jackson
Denise Sachse, Jackson
Allan Stam, Jr., MD, Jackson
Kathleen Stam, Jackson
Bert Weiss, Chatham

Credit Coach: Debunking some of the myths of personal bankruptcy

Debunking Some of the Myths of Personal Bankruptcy

Recently I wrote about the personal assignment in bankruptcy as a last-resort option for individuals facing an unsolvable debt situation. In this article I would like to write about some of the common misconceptions about filing a bankruptcy I hear day to day. Hopefully, debunking a few of these myths will remove the fears for those individuals who are afraid of the unknown and hesitant to reach out for help.

Myth: If I claim bankruptcy my credit rating will be ruined for seven years.

This is a common misconception about bankruptcy. When an individual files a personal bankruptcy they will work through what is usually a 9 to 21 month process. At the end of that time period, the process is usually complete. You will be discharged from the bankruptcy and likely most if not all your debt will be eliminated. The bankruptcy will appear in your credit file for several years after the date of discharge, however, once you have your discharge you can begin taking steps to repair your credit rating. There are a number of steps you can take to rebuild your credit. For example, a secured credit card is offered by many financial institutions for people in a bankruptcy or recently discharged. A secured credit card provides the flexibility, online security and convenience of a traditional credit card — the difference is that a secured card usually requires you to make a cash deposit up front which will be equal to your credit limit.

Myth: If I claim bankruptcy, I will lose all my assets.

As a Licensed Insolvency Trustee (LIT), I hear this common fear quite often. When you file a bankruptcy your property (or assets) do become subject to a seizure and sale. This means that your ownership in your assets basically transfers to the LIT, who will sell your assets and give the proceeds to your creditors. However, some assets are exempt, meaning you’ll be allowed to keep some of your possessions. The Bankruptcy and Insolvency Act has specific provisions — and most provinces have legislation — which exempts certain property from being seized.

The list of exemptions in Ontario includes one vehicle up to $6,600, all your clothing, and household furnishings, food and fuel valued up to $13,500. Exemptions exist for a portion of your RRSPs, pension funds, equity in your home, and tools of your trade. During your initial consultation, an LIT will review your assets and tell you more about what will happen with your property if you file a bankruptcy.

Myth: If I claim bankruptcy, my spouse, partner or family will affected

The answer to this question is not a simple one. In most cases, the answer is no, your spouse in not affected by your filing of a bankruptcy. Your credit rating, your assets that are in your name and your debts are what is largely in play. Your spouse’s property and credit rating are separate. However, the answer to this question can get difficult if you and your spouse have jointly-held property or have co-signed and/or co-mingled your debts. In this case, your best course of action is to speak to an LIT to determine what, if any, financial effect your bankruptcy will have on your spouse.

Myth: If I claim bankruptcy, everyone will know about it.

It is true that the filing of a bankruptcy is a matter of public record — it is registered with the federal government and sometimes the courts. However, bankruptcy is generally a relatively private action with little to no general public (mom and dad) knowledge. For the majority of bankruptcy filings, there is no requirement to put any notice in the newspaper. (A small number of bankruptcies require that the LIT advertises a meeting of creditors.) Can people find out that you filed for bankruptcy? Yes. Does the LIT have to share notice of your bankruptcy filing with your creditors? Yes. But we do not make up t-shirts and hats to hand out at the mall, disclosing the names and faces of the debtors we help on a daily basis.

There are many myths about filing an assignment in bankruptcy. That’s why it’s important to arm yourself with some knowledge about all debt solutions, including bankruptcy. The Office of the Superintendent of Bankruptcy (OSB) website offers a good, easy- to-understand overview of the bankruptcy process and the role of an LIT. I ask you please not to stew on something you heard from a friend who has a friend that had a pet dog that had to file bankruptcy and they said….well you know how that goes.

Jayson Stoppel is a Licensed Insolvency Trustee and Chartered Accountant with BDO First Call Debt Solutions. With over 15 years in practice, Jayson assists individuals, families and companies with financial difficulties in Thunder Bay and throughout Northwest Ontario. To reach Jayson by email: JStoppel@BDO.ca