Financial Articles

The new bankruptcy law took effect recently and significantly changed the rules of filing bankruptcy. If you’re not sure exactly what these changes mean for you, read this article which lays out the basics of the new bankruptcy law.

The new bankruptcy law has brought about a number of changes to the filing process. Here are the major ones:

Credit Counseling The new bankruptcy law dictates that anyone who wants to file bankruptcy must complete credit counseling with an agency approved by the United States Trustee’s office. After the bankruptcy case has ended, filers must attend yet another counseling session to learn more about personal financial management.

Restricted Eligibility In the past, it was possible to choose between filing Chapter 7 or Chapter 13 bankruptcy. Under the new bankruptcy law, eligibility for filing Chapter 7 is based on income. A filer’s average income for the six months prior to filing bankruptcy must be below their state’s median income.

Property Values Under old bankruptcy law, those who filed Chapter 7 bankruptcy were allowed to place a value on their personal property based on what they could sell it for at an auction. The new bankruptcy law requires that property now be valued at replacement value. This puts increased value on the property and ensures that more filers will have their property taken and sold by a trustee.

State Exemptions Under new bankruptcy law, your state’s exemptions will apply only if you have lived in the state for two years. If you have been in the state for less than two years, you will receive the exemptions from the state that you lived in previously.

If you are on the brink of filing bankruptcy and need a way out, there are other options that may be available to you. This article can offer more information and tips on what you can do to avoid filing bankruptcy.

If you can avoid filing bankruptcy, you should. A bankruptcy can seriously affect your ability to get loans and credit for the next seven to ten years. Here are a few other options worth exploring, as well as a few tips on avoiding bankruptcy.

Debt Consolidation If you are overrun by a number of bad debts, you may want to consider getting a debt consolidation loan. This loan can give you the money you need to consolidate all of your debt into one low monthly payment. This will make your bills much more manageable and allow you to start over with a relatively clean slate.

Credit Counseling When you get behind on your bills, it is easy to feel overwhelmed. Though filing for bankruptcy may seem like the easiest option, it may not be the best. If you want to avoid filing bankruptcy, try credit counseling instead. Professional credit counseling services can review your situation and give you advice to help you turn things around.

Tips on What You Can Do To Avoid Filing Bankruptcy In addition to debt consolidation and credit counseling, there are a few other things you can do to avoid filing bankruptcy:

· Try settling your debts. Some creditors may be willing to accept less than what you owe.
· Tighten your belt. Skip the morning coffee, disconnect the cable, clip coupons, and use any money you save to pay off your debts little by little.
· Filing for bankruptcy isn’t free. You’re going to need to save up or get an extra job. Consider using the money you have and the additional money you could earn to begin paying off the bills instead.

Throughout Ontario, and in fact everywhere in North America, people drive cars, and they worry that they will lose their car if they file for personal bankruptcy. The rules are different in every province and state, so this article only covers the law in Ontario, Canada. Consult your advisor for the rules in your area. In Ontario, if you go bankrupt, effective June 22, 2006 you are permitted to keep one motor vehicle worth up to $5,650.

If you owned, for example, a vehicle that had an appraised value of $6,650, you could pay $1,000 into your bankruptcy estate and keep your vehicle. (This example assumes that there are no liens against your vehicle; if you owe money against the vehicle, you would have to make pay the lender to keep the vehicle).

If you wanted to pay the $1,000 to keep the vehicle, the money could come from your earnings after you file bankruptcy, or you could borrow the money from friends or family (provided they understood that you were bankrupt). If you owned a vehicle worth $9,650, and you could not afford to pay to your trustee the $4,650 necessary to keep the vehicle, the trustee would sell the vehicle. However, according to the Ontario Executions Act, paragraph 3(3):

Where exemption is claimed for a motor vehicle that has a sale value in excess of the amount referred to in paragraph 6 of section 2 plus the costs of the sale, the motor vehicle is subject to seizure and sale under a writ of execution and the amount referred to in that paragraph shall be paid to the debtor out of the proceeds of the sale.

Therefore if you surrendered the vehicle and the trustee sold it, you would be entitled to receive the first $5,650 of the proceeds, and you could use that money to purchase another vehicle, because paragraph 4(4) of the Executions Act goes on to say that:

The sum to which a debtor is entitled under subsection 3 (1), (2) or (3) is exempt from attachment or seizure at the instance of a creditor.

Here’s a final thought. If you do own a valuable car, instead of going bankrupt and losing it, another option is to file a consumer proposal so that you can keep your car. Clearly this is a complicated area, so if you own a car and are considering filing for bankruptcy in Ontario, you should contact a trustee and arrange for a no-charge initial consultation before you make any decisions.